Evolving views of marketing

• Attracting customers Todays customers are

smarter, more price conscious,more demanding
and approached by more players
• The challenge is not to produce satisfied
customers but to produce delighted and loyal
customers
• Companies seeking to expand their profits and
sales have to spend time and resources leading
to suspects,prospects and sales effort
• Computing the cost of lost customers-First the
company must define and measure its retention rate
• Second the company must distingush the causes of
customer attrition and identify those can be managed
better
• Third,the company needs to estimate how much
profit it loses while losing customers,the lost profit is
equal to the customers life time value
• Fourth, the company needs to figure out how much it
would cost to reduce the defection rate, and finally
nothing beats listening to customers
• The need for customer retention-A company
would be wise to measure customer
satisfaction regularly as its the key toretention
• A highly satisfied customer stays loyal longer
buys more as the company introduces new
products,less bothered by competition,pricing
• Companies think they are getting a sense of
customer satisfaction by tallying complaints
• Measuring customer life time value- describes
the present value of the stream of future profits
expected over the customers lifetime
• The company must subtract from expected
revenues the expected costs of attracting,
selling and serving that customer
• Of course,a company needs,in addition to an
average customer estimate,a way ofestimating
CLV for each individual customer
• Customer relationship management,the key-
The aim of CRM is to produce high customer
equity
• CRM is the process of managing detailed
information about individual customers and
care fully managing all customer touch points
• There are three drivers of customer equity;
value equity,brand equity and relationship
equity
• Value equity is the customers objective
assesment of the utility of an offering based on
the perceptions of its benefits
• Brand equity is the customers subjective and
intangible assesment of the brand,above its
perceived value
• Relationship equity is the customers tendency
to stick with the brand above and beyond all
objective and subjective assesments
• Customer relationship management- is perhaps
the most important concept of modern marketing
• It involves managing detailed iformation of
individual customers and carefully managing
customer touch points to maximise loyalty
• More recently CRM is the overall process of
building and maintaining profitable customer
relationships by superior value and satisfaction
• Customer value- Attracting and retaining
customers can be a difficult task
• Customers have a big line of products and
services to chose from
• A customer buys from the firm that offers highest
perceived value
• The difference between all the benefits and cost
of marketing offer compared to other offers eg:
Federal express
• Customer satisfaction- Depends on the
products perceived performance relative to a
buyers expectations
• If the product performance falls short of
expectations the customer is disastisfied
• If performance matches expectations,the
customer is satisfied and if the performance
exceeds expectations there iscustomer delight
• Oustanding marketing companies go out of
their way to keep important customers
satisfied
• Highly satisfied customers repeat purchases
and also constitute to good word of mouth
• Smart companies aim to delight customers by
promising only what they can deliver and then
delivering more than they promise
 Customer relationship levels and tools
• At one extreme,a company with many low-margin
customers may seek to develop basic relationships
with them
• P&G does not call and talk to all tide customer
instead they do brand building,get to
promotions,toll free no. and website
• At the other extreme in markets with few customers
and high margins sellers want to create full
partnership with key customers
• Eg:P&G work closely with walmart&boeing with
airline service providers
• Today most of the leading companies are
offering customer loyalty and retention
programs beyond consistent quality
• Marketers use specific marketing tools like
frequency marketing programs to reward
regular buyers like flierprograms,hotel upgrad
• Club marketing programmes and communities
• Harley- davidsons Harley owners group(HOG)
Types of buying decision behaviour
• Complex buying behaviour-undertake this
behaviour ,they are highly involved inpurchase
perceive significant difference among brands
• Consumers may be highly involved when the
product is expensive,risky,purchased
infrequently and highly self expressive
• Typically the consumer has to learn about the
product category,for eg: a PC buyer may not
know what attributes to consider
• Dissonance –reducing buying behaviour -occurs
customers are highly involved in infrequent purchase
but see little difference among brands
• For eg:Customers buying carpeting may face a high
involvement decision because carpeting is expensive
and self expressive
• Yet buyers may consider most carpet brands in the
given price range to be the same
• After purchase the customer might experience post
purchase dissonance as they notice disadvantages in
the purchased prod or adv.in the non-purchased
• Habitual buying behaviour- occurs under conditions
of consumers low involvement and a little significant
brand difference
• For eg:Common salt,the consumers simply go to a
store and search for a brand
• If they reach out the brand in future its out of habit
rather than strong brand loyalty
• Because they are not committed to any brands
marketers use price and sales promotions to stimulate
product trial
• Variety seeking buying behaviour- is undertaken
by consumers in situations of low involvement
but significant brand differences
• In such cases consumer often do a lot of brand
switching
• For eg; When buying cookies consumer may
hold some beliefs,choose a cookie without
much evaluation,evaluate during consumption
• But next time the customer may pick another
brand just for a variety not due to disatifaction
 The buyer decision process
• Need recognition- the first stage of buyer
decision process in which the consumer
recognises a problem or need eg:ad of a car
• Information search- The stage of buyer decision
process in which the consumer is keen to search
for more information
• Evaluation of alternatives-At this stage the
consumer uses the information available to
evaluate the alternate brands
• Purchase decision- Generally the consumers
purchase decision will go in favour of the most
preferred brand
• Influence of others and unexpected situational
factors can come in between the decision
• Post puchase behaviour – After purchasing the
product,the consumer will be satisfied or
dissatisfied and will engage in post purchase
behaviour
 Business markets
• Business markets fetch more business and
money than consumer markets
• Take an eg:of a tyre co (good year),various
suppliers sell goodyearrubber,steel,equipment
and other goods to produce tyres
• Good year sells this to retailers who inturn
sells it to the conumers,they sell it to the
OEMs,and sell to fleet owners for repalcement
Charecteristics of business markets
• Market structure and demand-the business
marketer deals with fewer buyers than consumer
marketer
• For eg:the good year sells replacement tyres to
final customers,its potential customers are lot of
vehicle owners
• But the companys fate lies in an order from an
auto maker&placing in key retailers
• Business markets are geographically
concentrated and business demand is derived
demand
• B-to-B marketers sometimes promote the
products to the final customer to increase
business demand
• Many business have inelastic demand not
directly related to price changes&business
markets have fluctuating demand
 Participants in the buying process
• The decision making unit of an organisation is
called the buying centre
• This group includes the actual users of the
product or service,those who make the buying
decision,who do the actual buying etc.
• The buying centre includes all members of the
organisation who play 5 roles in the purchase
decision process
• Users- are members of the organisation who
will use the product or service
• In many cases users initiate the buying
proposal and help define product
specifications
• Influencers- provide information for evaluating
alternatives,technical personnel are
particularly important influencers
• Buyers- have formal authority to select the
supplier and arrange terms of purchase
• Buyers may help shape product
specifications,but major role is selecting
vendors and negotiating
• In more complex puchases buyers may include
high level officers participating in negotiations
• Deciders- have formal or informal power to
select or approve final suppliers
• In routine buying the buyers are often
deciders or at least approvers
• Gate keepers- control the flow of information
to others
• Examples are technical personnel or even
personnel secretaries
 Market segmentation
• Market consists of buyers and buyers differ in
one or more ways
• They may differ in their wants,resources,
attitudes and buying practices
• Through market segmentation, the companies
divide large heterogeneous markets in to smaller
segments t reach more efficiently
• A marketer has to try different segmentation
variables in consumer markets
• Geographic segmentation- calls for dividing
the market in to different geographical units
like nation,state,district etc
• A company may operate in one area or few
areas or operate in all possible areas but pay
attention to geographical differences in needs
• Companies are going for untapped territories
and mini stores in high density urban areas
• Demographic segmentation- divides the
market in to groups based on variables such as
age,gender,family size,income,occupation,relig
• These are the most popular basis for
segmenting customer groups
• A major reason is that the customer
needs,wants,and usage rates vary with
demographic variables
• Psychographic segmentation- divides buyers in
to different groups based on social class,
lifesyle or personality charecteristics
• People in the same demographic group can
have very different psychographic makeups
• Eg:the marketing for Honda appears to target
the 20 plus guys but its actually aimed at a
much broader personality group
• Behavioral segmentation- divides buyers in to
groups based on their knowledge,attitudes, users
or responses to a product
• Marketers believe that behaviour variables are the
best starting point for building market segments
• Ocassions- buyers can be grouped according to
ocassions when they get the idea to buy actually
make the purchase or use a purchased item
• Benefits sought- a powerful form of segmentation is
to group buyers according to the different benefits
they seek from it
• User status- markets can be segmented in to groups
of non-users,ex-users,potential users,first –time
users &regular users
• Usage rate- light,medium and heavy users
• User status- non-users,ex-users,potential users,first
time users&regular users
• Loyalty status- A market can also be segmented by
consumer loyalty
 Target marketing
• Once the segmentation is done,the firm has to
evaluate the various segments and decide
which segments it can serve best
• Evaluating the market segments- a firm must
look at three facts; segment size and growth,
segmentstructural attractiveness&coresources
• Selecting target market segments- a target
market consists of a set of buyers who share
common needs that the co needs to serve
• Undifferentiated marketing- using a mass
marketing strategy a firm ignores the segment
differences and targets the whole market
• Differentiated marketing- here a firm decides to
target several market segments and designs
separate offers for each
• Concentrated marketing-isespecially appealing
when company resources are limited,instead of
going for a small share in a large market
• Micromarketing- is the practice of tailoring
products and marketing programs to meet the
needs of various market segments and niches
• Choosing a target market strategy- best
depends on the companys resources
• Socially responsible target marketing- biggest
issues usually involve the targetting of
vulnerable or disadvantaged consumers
 Positioning
• A products position is the way the product is
defined by consumers on important attributes
place the product occupies in consumers mind
• Positioning involves implanting the brands
unique benefits and differentiation in customers
minds
• Positioning maps- show consumer perception of
brands vs competitors in important buying
dimensions(price,orientation,performance)
Choosing a positioning strategy
• identifying possible competitive advantages- to
understand customer needs better than
competitors and deliver more value
• Choosing right competitive advantages- if a
company has multiple competitive advantages the
best which will build its positioning strategy
• Selecting the overall positioning strategy- to
position the brands on the key benefits that they
offer relative to competing brands
 The product development process
Involves eight stages,they are
1.Idea generation- starts with the search for ideas,the
management should decide the products and markets to
emphasise
• The new product objective also should be stated whether
cash flow or market domination
• 2.Idea screening-this stage is idea pruning or reducing by
screening,the company must avoid drop-error,ie permitting
a poor idea further or dropping a good one
• Idea rating is done by describing the product,the target
market and the competition
3.Concept development and testing- surviving ideas
must be now developed into product concepts
• A product idea is an idea of a possible product the
company can see offering to the market
4.Marketing strategy development-consists of 3stages
first describing the size,strucuture and behaviour
• The second part outlines the products planned
pricing and distribution strategy and the third part
says about the long-run and profit goals
5.Business analysis- the management must review
the sales,cost and profit projections to determine
whether they satisfy the objectives
• If they do, the product concept can move to the
product development stage
6.Product development- if the product concept
passes the business test,it moves to the R&D and
the engineering department for developing
• This stage will answer whether the product idea
can be translated in to a technically and
commercially feasible product
7.Test marketing- once the management is satisfied
with the products functional performance,the
product is ready with a brand name
• The purpose of test marketing is to learn how
consumers and dealers react to handling,using and
repurchasing the actual product
8.Commercialisation- test marketing gives
management enough information to make a final
decision regarding the decision regarding launch
• In launching a product,the company should decide
when,were to whom and how
 The product life cycle
• The PLC is the course of a products sales
history and profits over its life- time
• It involves 5 distinct stages- product
development,introduction,growth,maturity
and decline
1. Product development- product development
begins when the company finds and develops
a new product idea
• 2.introduction stage- starts when the product is
launched commercially and made available for
purchase
• High level of promotion is needed to 1,inform
the potential customers2, induce trial and 3,
secure distribution in retail outlets
• Marketing strategies- considering the price and
promotion the marketing dept can pursue
multiple strategies
• Rapid skimming strategy-launching new product at
a high price and high promotion level
• Slow skimming strategy- launching the new product
at a high price and low promotion
• Rapid penetration strategy- launching the new
product at a low price and spending heavily on
promotion
• Slow penetration strategy- consists of launching the
new products at a low price and low level of
promotion
• 3,Growth stage- the growth stage is marked by a
rapid climb in sales
• New competitors enter the market,attracted by
the opportunities for large scale production and
profit
• They introduce new product features and this
further expands the market
• The increased number of competitors leads to an
increase in the number of outlets and production
• Marketing strategies- the strategies will try to
sustain the market as long as possible
• a, the firm improves product quality and adds new
product features and models
• b,it enters new market segments
• c,it enters new distribution channels
• d,it shifts some advertising from building product
awareness to bringing about product conviction
• e,it lowers prices at the right time to attract the
price-sensitive buyers
• 4,Maturity stage- a products rate of growth will
slow down and the product will enter a stage of
relative maturity
• The stage lasts longer than previous stages and
pose formidable challenges to the marketing
department
• Most products are in the maturity stage of the
life cycle and most marketers deal with mature
markets
• The maturity stage is divided in to 3 phases
• The first phase of growth maturity the sales growth
rate starts to decline because of distribution
saturation
• The second phase,stable maturity,sales become
level on a percapita basis because of market
saturation
• In the third phase ,decaying maturity the absolute
level of sales starts to decline and customers move
towards other products and substitutes
• Marketing strategies-
• a,market modification- the company should seek to
expand the market for its brand by working with the
twofactors-no. of users& usage rate per user
• b,product modification- in a way that will attract the
new users and more usage from current users
• c,Market mix modification- stimulate sales through
modifying one or more marketing mix elements like
price,distribution,advertising,sales promotion etc
• 5.Decline stage- the sales of most firms and brands
eventually decline,the decline may be slow or rapid
• Sales may plunge to zero or they may be at a lower
level and continue for so many years
• Sales decline for a number of reasons like
technological advances,consumer shift in tastes and
increased domestic and foregin cmpetition
• As sales and profits decline some products are
withdrawn from the market and remaining reduce
the no.of offerings and even promotion and prices
• Marketing strategies- A company faces
number of tasks and decisions to handle its
ageing products
• They must decide whether to maintain
product without change,harvest the product
or drop the products
• If the product is to continue special marketing
strategies have to be evolved
 Types of distribution channels
• 1.Intensive distribution- stocking products in as
many outlets as possible,producers of convenience
goods like toothpastes,soaps etc use this strategy
• 2.Exclusive distribution- only limited number of
dealers are granted exclusive rights of distribution
in a territory
• Selective distribution- appointing more than one,
but less than all the dealers willing to carry a
product eg; TV,fridge,washing machine
 Selection of a channel
• In the process of designing channels, companies
have to study and compromise between the ideal
and practicable
• The different steps involved in the channel design
process are
• 1.Determining the channel objectives- effective
channel planning starts with the determination of
what is to be achieved using it
• The objectives include effective coverage of the
target market,efficient and cost effective
distribution,making products available near etc
• 2.Identifying functions- Out of the various functions
like providing information,promotion,contact,
breaking bulk etc
• Out of all of these the function expected of the
channel has to be decided
• 3.Matching channel design to product attributes-
Products differ from each other and hence require
different channel systems
• The channel system that is suitable for that
particular product should be selected
• 4. Evaluating legal aspects and distribution – the
distribution environment in the country or territtory
has to be considered while deciding on the channel
• The proposed channel should be compatible with
features of the distribution environment
• 5. Assessing competitors channel design- the channel
partners of competitors should be evaluated before
deciding on channel design
• The strength and weaknesses of competitors
channels have to be assessed in order to get an edge
over them
• 6. Assessing company resources and matching
channel design to it-
• Company with limited resources may opt for
conventional channels and those with larger
resources will opt for wider distribution channels
• 7.Final selection of best design- after the various
alternatives are evaluated,the company choses the
best among them
• Each alternative needs are to be evaluated against
economic,control and adaptive criteria
 Channel management decisions
• After a company has chosen a channel
alternative,individual intermediaries must be
selected,trained ,motivated and evaluated
• Channel arrangements must be modified over time
• 1.Selecting channel members-Companies need to
select their channel members carefully
• To customers the channels are the company and
any unpleasant and inefficient behaviour from the
channel will get a negative impression of the
company
• Producers vary in their ability to attract qualified
intermediaries eg:Epson corporation
• Whether producers find it easy or difficult to find
intermediaries, they should distingush the
charecters of best intermediaries
• They should evaluate the number of years in
business,other lines carried,growth and profit
record,financial strength and co-operation
• The size and quality of the sales force is also taken
in to account
• 2.Training channel members- Companies need
to plan and implement careful training
programs for intermediaries
• This is because they will be viewed as the
company by end users
• Microsoft requires third party service engineers
to take complete a set of courses
• The passing out people are formally recognised
as MCP and they can use this desgnation to
promote business
• 3.Motivating channel members- A company needs
to view its intermediaries in the same way it views it
end users
• The co. should provide training programs, market
research programs and other capabiity building
programs to improve the performance
• The company must constantly communiacte that
the intermediaries are partners in a joint effort to
satisfy end users of the product
• 4.Evaluating channel members- producers must
periodically evaluate intermediaries performance
against standards such as sales targets,delivery time
• The producer will ocassionally discover that its
paying too much to certain intermediaries for what
they are actually doing
• Under performers must be counselled,remotivated
or else terminated
• 5.Modifying channel arrangements- A producer
must periodically modify its channel
arrangements
• When the distribution channel is not working as
planned consumer patterns change,market
expands and new competition arise
• Also innovative distribution channels emerge
and the product moves in to the later stages in
the life cycle
 Channel conflicts
• Diasgreement among channel members on goals
and roles leads to channel conflicts
• The ideal condition is to work smoothly
understanding their roles and goals
• Horizontal conflict can happen with dealers in
the same level of the channel
• For eg; some fertilizer dealers may complain that
others are selling at a discount or they are selling
outside their territory
• Vertical conflict is conflicts between different
levels of the same channel
• Dealer of Hyundai may complain if the
company gets in to a direct outlet
• Multichannel conflict exists when the
manuafctuer has established two or more
channels to sell to the same market
 Causes of channel conflict
• One major cause is goal incompatibility,for eg; a
manufacturer wants a low pricing penetrating
strategy whereas the dealer looks for more margins
• Conflict can also stem from diffrences in perception,
for eg; a manuafcturer wants to have a higher level of
inventory but the dealer is pessimistic about it
• Conflict can also occur by the channel partners over
dependence on the manuafacturer
• The product and pricing decisions for eg create
conflicts in auto dealers
 Managing channel conflict
• There are several mechanisms for effective conflict
management
• 1.Adoption of superordinate goals- channel
members come to an agreement on the
fundamental goal they are jointly seeking
• It could be survival,market share,high quality or
customer satisfaction
• 2.Another useful step is to exchange persons
between two or more channel levels
• In this case the company executives may work some
time in dealerships too
• 3. Co-optation is effort by one organisation to win
the support of the leaders of another organisation
• This is possible by including them in advisory
councils,boards of directors etc
• 4.Much can be accomplished by encouraging joint
membership in and between trade associations
• This could be grocery marketing association,food
marketing institute etc
• 5.When conflict is chronic or acute, the parties have
to resort to diplomacy,mediation or arbitration