Thursday, 30 August 2012


Product: A product is any thing that can be offered to a market that might satisfy a want or need


Tangibility: It should be perceptible by touch, seen, or feeling.

Intangible attribute: The product may be intangible in the form of service like banking or insurance services.

Associated attribute: Product may have such attributes like brand, package, warranty.

Exchange value: It should have exchange value and must be capable of being exchanged between seller and buyer for mutually agreed price.

Customer satisfaction: Product should have the ability to offer value satisfaction to the consumer.


Core Product: It is the fundamental service or benefit that the customer is buying.
Eg: A hotel guest buys "rest and sleep"

Basic Product: It is the second level, the marketer turns core benefit into a basic product.
Eg: A hotel room includes a bed, bathroom, desk etc.

Expected Product: It is the third level, and a buyer normally expects a set of attributes and conditions when purchase product.

Augumented Product: The marketer prepares an augmented product that exceeds customer expectations i.e product containing additional features, services and benefits so that customers able to distinguish his product from competitors.

Eg: A hotel room may include TV with remote control, fresh flowers, and fine room service.

Potential Product: It includes all augmentation and transformation the product might undergo in the future.


A group of products that are closely related products, that function in a similar manner and are sold to the same customer groups, are marked through the same types of outlets.

For example :- Nike produces several lines of athletic shoes, Motorola produces several lines of telecommunications products and AT&T offers several lines of long distance telephone services.

Major product line decision is the product line length (number of items in the product line). Product line length is influenced by company objectives and resources.


Product Line Stretching: Product line stretching occurs by two ways i.e upward and downward stretch.

Downward Stretch: Company may stretch its product line at lower end by introducing product with low price (or economy) enabling the product accessible to majority of customers.

Upward Stretch: A company may stretch its line upward by introducing a premium product in order to increase its growth rate or higher margins.

Eg: Nirma initially launched Nirma yellow towards lower end, later launched  Nirma super for upper end customers.

Product Line Filling: A product line can be filled by adding additional product items. The strategy is followed to make more profits, to satisfy dealers, to use excess capacity etc.

Product Line Modernization: In some cases, company modifies or modernizes some of the products in terms of colors, shapes, sizes to make them attractive.  

Product Line Deletion/Pruning: Some times company's may delete or drop a product or entire product line when these products are not generating minimum sales. Then it decides to delete entire product line.

Eg: Gillette dropped its watches product line.


Product mix refers to set of all product lines and items that a particular seller offers for sale.

Avon's product mix consists of four major product lines. Cosmetics, Jewelry, fashions and household items. Each products line consists of several sub lines. For example, cosmetics breaks down into lipstick, eyeliner, powder and so on. Each line and sub line has many individual items.

Avon's product mix includes 1300 items. Kmart Stocks 15000 items, 3M markets more than 60,000 products and general electric manufactures as many as 2,50,000 items.

A company product mix has four important dimensions (i) width (ii) length (iii) depth and (iv) consistency.

(i) Product mix width refers to the no. of different product lines the co. Carries.
e.g. Procter & Gamble consisting of may product lines, paper, food, household, cleaning, medicinal, cosmetics and personal care products.

(ii) Product mix length refers to the total no. of items the Co. carries within its products lines. Procter & Gamble typically carries many bands with in each lines, for example, it sells eleven laundry detergent, eight hand soap, six shampoo and four dishwashing detergent.

(iii) Product mix depth refer to the no. of versions/variants, offered of each product in the line. Thus Procter & gamble's Crest Tooth Paste comes in three size and two formulation (paste & Gel)

(iv) Consistency of product mix refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.


Packaging is an activity of designing and producing the container or wrapper for a product. The container or wrapper is called the package. The package might include upto three levels of material. i.e primary, secondary and teritiary packaging

Functions of Packaging:

It must protect the contents of the product
It must perform the tasks for which it was designed
Communicate product information/company
Offer convenience to customers

Benefits of packaging:

Helps in identifying the product
Works as a Silent sales man
Increase sales and profits.
Provides information regarding product/company, usage, and instructions to handle.


Definition: Brand is a process of giving name, term, sign, symbol or special design or a combination of these which is used to identify the products/services of a seller/marketer. Branding helps to differentiate its product from the competing product. Branding gives several advantages to the seller. First, seller's brand name and trademark provide legal protection to unique product features, which would otherwise be copied by competitors.
Second, branding gives the seller the opportunity to attract a loyal and profitable set of customers. Brand loyalty given sellers some protection from competition and greater control in planning their marketing mix. Third, good brands help build corporate image. By carrying the company's name, the help advertise the quality and size of the company.

Branding Strategies:

Line stretching: it is one of the branding strategies in which an existing brand name is been extended to another product variants in the same product line:

Eg: Extending Rexona (75gm) brand name to another variant ie 40gm soap

Brand Extension: In this strategy, an already existing brand in one product line is extended to another product or new product which may falls into different product category.

Eg: Extending Rexona bath soap brand to deodorants

Multiple Brands/New Brand: In this strategy, marketer gives entirely new brand name to new product which falls into the same product line.

Eg: P&G offers 9 different brands of detergent bars.


NEW PRODUCT DEVELOPMENT PROCESS:.  New products can be developed through many ie product modifications, product improvements, and entirely new products. The new product development process involves following stages

Idea generation: The new product development process starts with searching for innovative ideas. New product ideas can be obtained from customers, competitors, scientists,company sales force, dealers/retailers and top management. Ideas can also be generated from techniques like brainstorming, forced relationship, synectics, attribute listing and problem analysis.

Idea screening: involves reducing the number of ideas by screening. In this stage, poor ideas eliminated and only those ideas which are good allowed to move into the next stage of product development. Before this, all good ideas are rated on factors like target market, competion, market size, product price, costs and rate of return.

Concept development and selection:  A 'product idea' is a possible product/ mere thought, but product concept is an elaborated version of product which can be explained in meaningful consumer terms. That means a product concept answers questions like  who is to buy, what benefits it offers, what occasions it has to be taken. A product concept can be translated in to many concepts. Later these concepts are tested with target consumers to select the concept which has got strongest potential and appeal.   

Business Analysis: The next step after concept development and selection is to evaluate the attractiveness of the new product proposal. Generally evaluation is done based on estimates of sales, costs, profits, and rate of return to determine whether it meets company objectives.   

Product development & Test marketing: In this stage a physical products or prototype are developed with help of R&D / engineering department. The stage answers the technical and commercial feasibility of the product. Later the product is test marketed to know the consumers reactions about the new product. In this manufacturer selects some potential customers in a location and are agreed to use the product and gives feedback which helps them in modifying the product accordingly.

Product Launch/Commercialization: Test marketing gives significant information to top management to take decision on product launch. Product launch has to answer question like when to launch (timing) where to launch (location, region, national), whom (target market) and How to launch (marketing plan)


The Product Life Cycle (PLC) is an important concept in marketing that provides insights into a product competitive dynamics.

The product life cycle portrays distinct stages in the sales history of a product. PLC portrays four things

  • Product have a limited life.
  • Product sales pass through distinct stages, each posing different challenges to the seller.
  • Profits rise and fall at different stages of the product life cycle.
  • Product requires different marketing, financial, manufacturing, purchasing and personnel strategies in each stage of their product life cycle.

A typical PLC follows an S-Shaped curve. This curve is typically divided into four stages, known as introduction, growth, maturity and decline.

Introduction:- A period of slow sales growth as the product is introduced in the market. Profits are non-existent in this stage because of heavy expenses of product introduction.

Growth:- a period of rapid market acceptance and substantial profit movement.

Maturity:- A period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased marketing out lays to defend the product against competition.

Decline:- The period when sales show a downward drift and profit erode.


Price is the only element in the marketing mix that produce revenue; the other elements produce cost. Price is the amount of money that customers have to pay for the product. There are six step procedure for price setting.
1.      Selecting the pricing objectives b) determining demand c) estimating costs d) analyzing competitors price and offers e) selecting a pricing method f) selecting the final price
A) Selecting the pricing Objectives: A company can pursue any six major objectives through its pricing
i) Survival- Companies pursue survival as their major objective if plagued with overcapacity, intense competition, or consumer wants. To keep the plant going and inventories turning over, they will often cut prices. Profits are less important than cut prices. Profits are less important than survival. However, survival is only a short run objectives.
ii) Maximum current Profit- Many companies try to set the price that will maximize current profits. They estimate the cost and demand associated with alternative prices and choose the price that produces maximum current profit, cash flow or rate of return on investment.
iii) maximum current Revenue- some companies will set a price to maximize sales revenue. Revenue maximization requires only estimating the demand function.
Many managers believe that revenue maximization will lead to long-run profit maximization and market share growth.
iv) Maximum Sales Growth: Some companies want to maximize unit sales. They believe that a higher sales volume will lead to lower unit costs and higher long run profit. They set the lowest price, assuming the market is price sensitive. This is called market penetration pricing.
v) Maximum Market skimming: Many Companies favour setting high prices to skim to the market. If estimates the highest price it can charge given the comparative benefits of its new product versus the available substitutes. Each time sales slow down, it lowers the price to draw in the next price sensitive layer of customers.
vi) Product-Quality Leadership:- A company might aim to be the product-quality leader in the market.
vii) Determining Demand: Each price that the company might charge will lead to a different level of demand and will therefore, have a different impact of its marketing objectives. In normal case, demand and price are inversely related , that is, the higher the price, the lower the demand.


Market Penetration Strategy: In this strategy, firm sets lowest price to gain maximum market share, that lead to lower unit cost and higher long run profits.
Market Skimming Strategy: In this it sets high prices to maximize skimming. Later over a period of time prices are slowly lowered.


A company can select any of the following pricing method:
Mark-up Pricing: is an elementary pricing method which adds a standard markup to the product's cost. It works only when it brings expected levels of sales. This pricing is fairer to both buyers and sellers.
Target-return Pricing: It is the price that would yield its target rate of return on investment (ROI).
Target return rice: Unit cost  +  desired return+ investment capital
                                                              unit sales
Perceived value pricing: it is the pricing based on the customer perceived value. Perceived value is made up of several elements such as buyers image of product performance, channel deliverables, the warranty, quality, customer support, supplier repuration, trust worthiness and esteem. Firm must deliver the promised, and firm used marketing mix elements to communicate and enhance perceived value in the minds of buyer's .
Going rate Pricing: Firms bases its price on the competitors pricing . the firm charges the same, more or less than major competitor.
Eg: steel, fertilizer, paper.
The pricing is popular when costs are difficult to measure or competitive response is uncertain.
Select-bid Pricing: goods are sold in auction. Most of the agri output or produce like spices, coffee, teas, crops, minerals and exotic art materials, and antiques are sold in auction.


A channel of distribution is a set of independent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. (Philip kotler)

Importance of channels

Distribution channel plays important role in marketing as they move the products from factory to customer in right time, right quantity and at right place. A company with effective and well managed channel gives competitive edge to companies.   


Provide market information: about customer likes, dislikes, and their expectations
Physical distributions: transportation, warehousing, processing bills
Promotion: communicate about product/services, window  & POP displays, offers
Breaking bulk: purchases in bulk and distribute in small quantities to their customers
Supply in assortments: offers variety of products/assortments eg: not only soaps, other products also
Price negotiation: on behalf of manufacturer, negotiate about price and makes agreements
Risk taking: taking risks such as product failure, low or no sales
Financing: gives credit to their customers for a specific time period. Eg; wholesaler to retailers, retailer to customer
Selling: another task is selling
Title: the actual transfer of ownership from one organization or person to Another.

I. DISTRIBUTION CHANNELS IN CONSUMER PRODUCTS: level channel or direct selling:      Mfr---------------consumer

2. One level channel:  Mfr-----------------  Retailer  ----------------- consumer

3. Two level channel: Mfr----------  wholesaler--------- Retailer  ----------  consumer  

4. Three level channel: Mfr--------  wholesaler----  Jobber -----  Retailer  -------  consumer                                  

II. DISTRIBUTION CHANNELS IN INDUSTRIAL PRODUCTS: level channel:      Mfr-----------  Industrial customer

2. One level channel:  Mfr------------  Industrial distributor ----------  Industrial customer

3. Two level channel: Mfr--------  Mfr's sales office--------  Industrial distributor ---------  -------  Industrial customer  

Channels Based On Number Of Intermediaries:

Selective distribution: It involves appointing few dealers but not many dealers. This type of channel is preferred by appliance manufacturers.
Eg: dealers of televisions, washing machines, pressure cookers

Exclusive distribution:  limited number of dealers granted exclusive rights of distributions and selling in a territory.
Eg: dealers of Hynduai, or Maruthi cars

Intensive distribution: appointing more number of intermediaries or stocking products in as many outlets as possible. This strategy is preferred in convenience goods or FMCG's
Eg: toothpaste, soap, shampoos


  1. Analysing customer needs
  2. Establish channel objectives
  3. Identifying major channel alternatives
  4. Evaluating the major channel alternatives

1. Analysing Customer Needs: Designing channel starts with finding what target customers want from channel like wether they want to buy in single unit or bulk, buy from nearby location or willing to travel different locations, wether they want to buy in person or through internet. Wether they value breadth of product assortment or prefer specialization, or wether they like add on services like delivery, repairs, installation etc. or will they obtain elsewhere. However, providing fastest delivery, great assosrtment, may not be possible or practical. More over providing these higher levels of services result in higher prices for consumer and higher costs for the channel. Hence company must balance consumer desired services against feasibility and cost of meeting these needs but also against customer price preference.   

2.   Establish Channel Objectives

            channel objectives should be stated in terms of desired service level of target consumers. Usually a company can identify several segments wanting different levels of channel service. Then company should decide which segments  to sere and the best channels to use in each case. In each segment, the company wants to minimize the total channel's cost by meeting customer service requirements.

            The company channel objectives are mainly influenced by the nature of company, type of products offered, marketing intermediaries, competitors and environment. For example the company's size and financial situation determine which marketing functions it can handle itself and which it must give to intermediaries. Companies selling perishable goods require direct marketing to avoid delays and too much handling. In some company want to compete with competitors product. In some cases companies avoid channels preferred by competitors.

3. Identifying major channel alternatives:

After a company has defined its target market and desired positioning it should identify its channel by three elements:-
1.      The type of business intermediaries
2.      The number of intermediaries and
3.      Terms and responsibilities of each channel participants.
1.      Types of intermediaries:-
The firm has following channel alternatives-
Company Sales force:- Expend the company's direct sales force. Assign to contact all prospects in the area. Or develop separate sales force for different products.
Manufacture's Agency:- Hire agencies in different regions sell the equipment.
Industrial Distributors:- Find distributors in the different regions who will buy and carry device. Give them exclusive distribution adequate margins and promotional support.
2.      The number of intermediaries:-
Company has to decide on the number of middlemen to use at each channel level. Three strategies are available.
  • Intensive Distribution:- Producers of convenience goods etc. typically seek intensive distribution that is stocking their product in numerous outlets. These goods must have place utility.
  • Exclusive Distribution:- Some producers limit the number of intermediaries handling their products. Through exclusive distribution the manufacturer hopes to obtain more aggressive and knowledgeable selling and more control over intermediaries polices on prices, promotion, credit and various activities.
3.      Terms and responsibilities of channel members:- The producer must determine the conditions and responsibilities of the participating channel members. The main elements in the trade relation mix are price policies, conditions of sale, territorial rights and specific service to be performed by each party.


Each channel alternative needs to be evaluated against economic, control and adaptive criteria.
Economic criteria:- Each channel alternative will produce a different level of sales and cost. Company sales representatives concentrate entirely on the company's products; they are better trained to sell the company's products, they are more aggressive because their future depends on the company's success on the other hand, sales agency could economically sell more than a company sales force. The sales agency has more number of sales representatives and secondly, sales agency has better knowledge of the geographical area in which he is operating
Control criteria:- Channel evolution has to include control issues. Using a sales agency poses a control problem. A sales agency is an independent business firm seeking to maximize its profits. The agents may concentrate on the customers who buy the most, not necessarily of the manufactures goods. Further, the agent might not master the technical details of the company's product or handle its promotion materials effectively.
Adaptive Criteria:- Each channel involves some duration of commitment and loss of flexibility. A manufactures seeking a sales agency might have to offer a five year contact. During this period, other means of selling such as direct mail might become more effective, but the manufactures is not free to drop the sales agency. A channel required a long commitment needs to be greatly superior on economic or control grounds to be considered.


After a company has chosen a channel alternative, individual middlemen must be selected, trained, motivated and evaluated.

Selecting channel members:  while selecting the channel members, the company must consider their experience in business, product lines carried or handled, growth and profit record, financial strength, their cooperation and business reputation.

Training channel members: After selecting the channel members, the company must plan and organize adequate training program for the members i.e distributors or dealers.
Company training includes: on the job field training, class room training, special meeting for launch of new product, training on submission and maintaining records.

Motivating channel members: channel motivation is done in order to improve their performance and behaviour. Company's elicits cooperation from the channel members through coercive power, rewards, legitimate and referent power.

Evaluating channel members: The next step is to evaluate channel members performance against predetermined standards. This is very important related to decisions like retention, training, motivation. Evaluation gives information wether a channel member is to be retained or to drop.

The general evaluation criteria includes sales volume and value, profitability, selling and marketing capabilities, quality of service provided to customers, willingness to keep commitments, attitude, and personal capability.


  1. Advertising
  2. Sales promotion
  3. Publicity and public relation
  4. Personal selling
  5. Direct marketing

Advertising: Any paid form of nonpersonal presentation and promotion of ideas , goods, or services by an identified sponsor.

Sales promotion: A variety of short term incentives offered to encourage trial or purchase of product or service.

Publicity and public relation:  a variety of programs designed to promote or protect a company's image or its individual product.

Personal selling: It involves face to face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions and procuring orders.

Direct marketing: Use of mail, telephone, fax, e-mail, or internet to communicate directly with or solicit response or dialogue from specific customers and prospects.

Tuesday, 21 August 2012

Market Segmentation-II


Definition: Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, taste, and preferences. The purpose is to design a marketing mix strategy that more precisely matches the needs of individuals in a selected market segment(s).

Benefits of Market Segmentation:

1) Helps organization to identify new marketing opportunities, as it better understands customer needs in each segment

2) Helps to build competency and establishes effective marketing systems

3) Optimizes return on investment in each segment

4) The organization fine tunes product and service offerings to the marketing appeals used for each segment.

5) Helps to gain competitive advantage


Geographic Segmentation: Market can be divided into different geographical units such as nations, countries, regions, states, and cities. Companies may decide to operate in one or more geographical regions, or states. Today, most of the companies are customizing the products, advertising and promotion according to needs and wants of peoples.

Demographic Segmentation: The Market is divided into groups based on demographic variables such as age, gender, income, occupation, education, religion, race and nationality. It is the most popular bases for segmenting consumer markets, because consumer needs and wants vary with demographic factors.

Psychographic Segmentation: Market can be divided into different groups based on social class, life style, or personality characteristics.

Social class:- Lower class, middle class, and upper class

Life style:– achievers, survivors and strivers etc

Personality:– ambitious, adventurous

Behavioral Segmentation: This divides the market in to buyer groups based their knowledge, uses and attitudes towards products. Marketer believes that behavioral segmentation is the best bases for dividing the market into groups of buyers.

Usage rate: light, medium, heavy user

User Status: potential user, first time user, regular user

Attitude: positive, negative

Benefits: Quality, service, economy, convenience, speed

Occasion: Regular, occasional


Business markets be segmented based on the variables used in consumer markets. Business markets can be segmented geographically, demographically or by benefits, user status, usage rate and loyalty status.

Demographic: Type of industry, Company size; Location

Based on operating variables: Technology, user/non user status

Purchasing approaches: centralized or decentralized

Purchase policies, and purchasing power structure

Situational factors: urgency, specific application, size of order

Personal characteristics: attitude towards risk, loyalty, buyer seller similarity

After a firm has identified its market segment opportunities, it must decide which ones to target. Market targeting is the selection of a set of buyers sharing common needs orcharacteristics that the company decides to serve.


Measurable: The segment must be measurable in size and purchasing power of the members
Accessible:The segment must be effectively served and reached
Actionable: Effective programs can be formulated for attracting and serving the segments Substantial: The segment should be large and profitable enough to serve
Differentiable: The segment should be distinguishable.

Approaches to selecting markets :

Undifferentiated Marketing Approach (Total Market Approach): It uses single marketing mix for the entire market. All consumers have similar needs for a specific kind of product (Homogeneous market). The company designs a product that appeals to a majority of buyers and relies on mass distribution and advertising.

Differentiated approach(Market segmentation): The firm operates in several market segments and designs different products for each segment.

2) Single segment concentration; involves concentrating in one market segment. The firm gains a strong knowledge of the segment’s needs and achieves a strong market presence. It may also enjoy operating economies through specializing its production, distribution and promotion. The disadvantage is that a competitor may invade the segment or customer’s tastes may change.

3) Selective specialization; the firm may select a number of attractive segments which are potentially profitable. Such a strategy has the advantage of diversifying a firm’s risks.

4) Product specialization; The firm makes a certain product which it sells to several segments e.g. a paper manufacturer who sells to schools, the government and commercial dealers.

5) Market specialization; the firm concentrates on serving many needs of a particular customer group e.g. a firm that sells an assortment of products only to hospitals.

6) Full market coverage; the firm attempts to serve all customer groups with the products they might need. A company can do this by covering a whole market in two broad ways:


 Definition: Positioning is the place the product occupies in the consumers minds relative to competing products.

Positioning involves implanting the brands unique benefits and differentiation in the market. Positioning is the way consumer defines a product on some important attributes. It is the complex set of perceptions, impressions and feelings that consumers hold for the product in comparison with competing products. Positioning helps to gain competitive advantage through differentiation.


Positioning on specific product feature or attribute:
Eg: Tide-as powerful detergent, Nirma-economy bar

Positioning based on Benefits, problem solution or needs:
Eg: Head & Shoulder shampoo- removes dandruff

Specific usage occasions or application:
Eg: vicks vaporub- for cold, Burnol-for cut wounds

User category:
Eg; Johnson & Johnson soaps, shampoos- for children

Against competition:
eg: pepsi vs coke

Eg: Surf excel detergent powder – high price, high quality, Nirma detergent powder – low price, low quality

Steps In Market Positioning/positioning strategy:

1) Identifying competitive advantages
2) Selecting the right competitive advantage
3) Effectively communicating the chosen position

The steps are explained below;
1) Identifying competitive advantages:
A competitive advantage is an advantage over competitors gained by offering consumers greater value either through lower prices or by providing more benefits that justify higher prices. This can be achieved through various forms of differentiation.

Product differentiation; This is based on dimensions such as;
Product features not provided by competitors (e.g. safety features and design of Volvo)
Product performance e.g. cleaner, faster etc.
Style; such as the extra-ordinary look of the jaguar car, etc.
Product durability, reliability etc.
Service differentiation; (delivery, installation, repair, etc) i.e. differentiating the services
that accompany a product- gaining competitive advantage through speedy, reliable or careful delivery.
Personnel differentiation; gaining competitive advantage by hiring and training better people than competitors and by having customer- contact people who are competent in the following areas;
- possess the required skills & knowledge
-courteous, friendly and considerate
-understand customers, communicate clearly with them and respond quickly to customer
requests and problems.
Image differentiation; even when companies offer the same products and accompanying services, buyers may perceive a difference based on company or brand images established through a company’s public relations and social responsibility activities. This is common in the service industry.

2) Selecting the right competitive advantage
A company must decide how many differences to promote of its product or brands. It may aggressively promote only one or a combination of benefits to the target market. Each of the company’s brands may promote itself as “number one” on an attribute such as; Best price, best service, lowest price, best value, e.t.c. A competitive advantage on which the company bases its differentiation should have the following characteristics;

important; the difference should deliver an important benefit to target buyers.
Distinctive; competitors should not be offering the difference.
Superior; the difference should be superior to other alternatives.
Pre-emptive; competitors should not be able to easily copy the difference.
Affordable; buyers should afford to pay the difference.

3) Communicating and delivering the chosen position
The company must deliver and communicate the desired position to target consumers through the marketing mix. Hence a firm that desires to position on high quality must produce high quality products, charge a high price, distribute through high class dealers and advertise in high quality media


Demand: Demand is the consumer willingness to purchase a product backed by purchasing power. The study of predicting or estimating the demand is called demand forecasting

 Market Demand:

•Market Demand for a product is the total volume that would be bought by a
•defined customer group in a
•defined geographical area in a
•defined time period in a
•defined marketing environment under a
•defined marketing program

Company Demand:

It is the company’s estimated share of market demand (at alternative levels of company marketing effort at a given time period).

Company Sales Forecast:

It is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment.

Necessity for Demand Forecasting:

Accurate demand forecasting is essential for a firm to enable it to produce the required quantities at the right time and arrange well in advance for the various factors of production, viz., raw materials, equipment, machine accessories, labor, buildings, etc

Benefits of short-term demand forecasting:

Appropriate production scheduling
Reduces cost of purchasing raw materials
Forecast financial requirements
Determining appropriate price policy
Setting sales targets and establishing controls and incentives
To plan sales force to achieve the sales targets
Evolving a suitable advertising and promotional campaign

Benefits of long term forecasting:

Planning of a new unit or expansion of an existing unit.
Planning long term financial requirements


Current demand can be estimated by the following ways:
1) Total Market Potential
2) Area Market Potential
3) Estimating industry sales market shares

1)Total Market Potential

The maximum amount of sales that would be available to all the firms in an industry in a given time period under a given level of industrial marketing efforts and environmental conditions.
(Estimate the potential number of buyers and then eliminate the groups that will not buy the product)
TMP = Potential Number of buyers * Average Quantity Purchased by a buyer * The Price

2) Area Market Potential: For estimating area market potential, two methods are used.

a) Market Build Up Method: Identify all the potential buyers in each market and estimate their potential purchases.
b) Multiple Factor Index Method: Customers for consumer products are numerous. Hence predicting demand will be a problem. Hence such companies use existing indices for various products, and estimates are made.

3) Estimating industry sales market shares
a) identifying competitors b) estimating their sales


A sales forecast is an estimate of the possible sales of a company’s brand or product in units or value terms, during a specific period, in a specific market under specific marketing plan and environment.


Opinion of executives: it is the traditional method of sales forecast, in which one or more top executives forecast future sales based on personal knowledge and market information. But this method lacks validity.

Survey of Buyer’s Intentions: In this method, customers are requested to communicate their buying intentions for coming period. The method suitable for industrial products. Sales forecasts based on the method will be accurate if customers expectations are accurate.

Sales force composite method: sales forecasts are based on the estimates given by salesmen who are having direct contact with customers and also know future buying intentions about the products/services. The data given by the sales personnel is consolidated by sales manager. Some salesmen were too optimistic and too pessimistic about sales forecasts.

Sampling: sample results are used to make sales estimates. In this method, survey is conducted in selected geographic territory, and the resultant data related to the sample is extended to total population.

Time series analysis: This method is based on past sales data. In this method, sales forecast are made with mathematical formula with the help of past sales data. An analysis of seasonal, cyclical variations, sales trends, and irregular variations is to be done in projecting sales estimates.

Delphi Technique: This method is mainly used in making futuristic estimates. In this method, a group of experts are interviewed and their reactions and opinions are recorded. Final sales estimates were made based on the data.

Correlation Analysis: Correlation Analysis is done when there is close relationship exists between two variables. So this analysis is useful in making sales estimates of one variable based on the degree of relationship with other variable.

Eg: sales of petrol/diesel are related automobile sales.

Test marketing: A firm markets its product in a limited geographic area, measures sales, and then projects the company’s sales over a larger area.

Market-factor analysis: demand for a product is assumed to be related to the behavior of certain sales activity.

Friday, 17 August 2012


Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging of products of value with others.(kotler)

The art and science of choosing target markets and getting, keeping, rowing customers through creating, delivering and communicating superior customer value.

Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

Market: Traditionally, market was a physical place where buyers and sellers gather to buy and sell goods.

According to economists, market is collection of buyers and sellers who transact over a particular product or product class ( grain market, fruit market)

Meta Market: is a cluster of complementary products and services that are closely related in the minds of consumer but are spread across a diverse set of industries.

Eg: Automobile meta market consists of automobile manufactures, new and used car dealers, finance companies, insurance company, mechanics, spare par dealers, service shops, auto magazines.


The Marketing Mix is also known as the 4 P’s, can be used by marketers as a tool to assist in implementing the Marketing strategy. This method is used to generate the optimal response in the target market by blending 4 variables in an optimal way. These four P’s controllable variables. These 4p’s are adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the Marketing environment.

Product: A product is customer solutions and firms must define the characteristics of product or service that meet the needs of customers

Price: It is the amount the customers willing to pay for the product. And firms must be conscious in deciding the price of the product as customers are very sensible to it.

Place: Making the product available at right time, right place in right quantities.

Promotion: Its all about how chosen target markets are informed about organizations products and services and includes tools like advertising, sales promotion, publicity, public relations and direct marketing


The 7-Ps model is more useful for services industries and also for knowledge-intensive environments.

5. People: All people directly or indirectly involved in the consumption of a service are an important part of the extended marketing mix. Knowledge Workers, Employees, Management and other Consumers often add significant value to the total product or service offering.

6. Process: Procedure, mechanisms and flow of activities by which services are consumed (customer management processes) are an essential element of the marketing strategy.

7. Physical Evidence: The ability and environment in which the service is delivered, both tangible goods that help to communicate and perform the service and intangible experience of existing customers and the ability of the business to relay that customer satisfaction to potential customers.


Marketing offers 10 types of entities that include goods, services, experiences, events persons, places, properties, organizations, information, and ideas.

Goods: All physical goods are marketed by marketing people like cars, trucks, Tv’s machine tools, machines, industrial chemicals, watches cosmetics and others.

Services: In modern economy, most of the services are marketed that includes airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, accountants, bankers, lawyers, engineers, doctors software programmers and management consultants

Experiences: experiences are also be marketed eg: rides in amusement or water park

Events: Events like trade shows, artistic performances world cups or Olympics are aggressively promoted by companies.

Persons: Celebrity marketing is a major business today. Film stars and sports personalities are increasingly endorsed with many brands to promote them.

Places: Even cities, states, region, and whole nations can attract tourists, factories, companies and new residents.

Properties: Properties like real estate, stocks and bonds also requires marketing.

Organizations: Companies, universities, museums performing arts organizations all use marketing to boost their image and compete with others.

Information: Information can be produced and marketed as a product.

Ideas: Product or service ideas can also be marketed well in advance.

CORE CONCEPTS OF MARKETING (Needs, Wants, And Demands)

Needs are the basic human requirements. People need food, air, water, clothing, and shelter to survive. People also have strong needs for creation, education, and entertainment.

The above needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want a hamburger, French fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by one's society.

Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one.

Companies must measure not only how many people want their product but also how many would actually be willing and able to buy it.

Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. Consider the customer who says he wants an "inexpensive car.". The marketer must probe further. We can distinguish among five types of needs:

1. Stated needs (the customer wants an inexpensive car).

2. Real needs (the customer wants a car who operating cost, not its initial price, is low).

3. Unstated needs (the customer expects good service from the dealer).

4. Delight needs (the customer would like the dealer to include an onboard navigation system).

5. Secret needs (the customer wants to be seen by friends as a savvy consumer).

Target Markets, Positioning, And Segmentation: segmentation means dividing the total market in to groups of consumers with similar needs, wants, and preferences. Positioning is to place the company’s products in the minds of target buyers. Target market is the group of potential customers to whom the marketers offer their products.

Offering And Brands: An offering can be a combination of product, services, information and experiences. Brand is an offering from a known source that carries many associations in the minds of people (brand image)

Value And Satisfaction: Value reflects the perceived tangible and intangible benefits and costs to customers. Value is a combination of quality, service and price (customer value triad). Value increases with quality, service and decreases with price.

Marketing Channels: Channels helps to reach target customers. Communication channels deliver and receive message or feed back from their customers, whereas distribution channels enables deliver of physical products.

Competition: Competition includes all actual and potential rival offering and substitutes that a buyer might consider.

Marketing Environment: It includes both micro and macro environment factors that influence a company performance. The Microenvironment consists of the following factors close to the company that affect its ability to serve its customers.The company, Suppliers, Marketing intermediaries, Customer, Competitors, and Public. The macroenvironment factors include political, cultural, technological and demographical factors.


What philosophies should guide the marketing efforts. There six alternative concepts under which organization carryout their marketing strategies.

Production Concept: The concept is of the idea that consumers will favor those products which are widely available and highly affordable. Therefore, management should focus on production and distribution efficiency.

Product Concept: The product concept hold that consumer will favor a product that offers Most quality, performance and innovative feature. So under this, marketing strategy focuses on product improvement through design, packaging and price.

Selling Concept: The concepts hold that consumers will not buy the products unless aggressive marketing efforts are pursued. This concept is mainly applicable incase of unsought goods (like insurance).

Marketing Concept: The concept holds that achieving goals depends o knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors. The concept mainly focuses on customer.

Holistic Marketing Concept: is an integrated perspective that is based on the development, design, and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. It contains four components that include relationship marketing, integrated marketing, internal marketing, and social responsibility marketing.

Relationship Marketing: It aims at building mutually satisfying long-term relationships with key parties that includes customers, suppliers, distributors and other marketing partners in order to earn and retain their business.

Integrated Marketing: the marketer’s task is to design marketing activities and integrated marketing programs to create, communicate and deliver value for consumers.

Internal Marketing: It ensures that everyone in the organization holds appropriate marketing principles. The main task of internal marketing is hiring, training and motivating able employees who want to serve customers well.

Social Responsibility Marketing Concepts holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserve or enhances the consumer’s and society’s well-being.


Developing Marketing Plan and Strategies: The first step is to identify the potential long run opportunities and core competencies of the company, and to devise marketing plans and strategy and can move forwards.

Capturing Marketing Insights: Every company needs reliable marketing information to understand what is happening inside and outside the company.(marketing environment). MIS also includes marketing research, an important tool, which assess buyer wants and behaviour, actual and potential market size.

Connecting With Customers: Marketing management must also consider how to best create value for its chosen target customers and develop, strong profitable, long run relationship with customers.

Building Strong Brands: Every company must understand the strength and weakness of the brands with customers. Companies must initiate new product development based on their product positioning that helps build strong brands. At the same time they must think about life cycle stages and competition and other activities.

Shape Market offerings: Firms offers variety of products to cater the needs of customers. And product is the heart for any marketing program that includes product quality, design, features, packaging and also provides support services which gives competitive advantage over the competition. Pricing is the one of the critical decision, and it must based on their product perceived value.

Delivering Value: Every company must properly deliver value embodied in products through careful identification and selection of channel intermediaries who performs channel activities. It must also understand the various types of middleman like retailers, wholesalers and physical distribution firms and how they make decisions.

Communicating Value: Firms need to communicate the value in products/services. Marketing communication are the means by which firms attempt to inform, persuade and remind customers directly or indirectly about the products or brands. One can opt for mass communication or personal communication channels or integrated communication.

Creating Long-term Profits: Another important task of marketing is to have long-term view of its products and profitability. Companies must continuously search for changing global opportunities and develop new products to meet the changing needs of consumers.


A company’s marketing environment consists of the factors and forces outside marketing that affect the marketing management ability to develop and maintain successful transactions with its target customers(Kotler & Armstrong ).

Marketing Environment is composed of a micro environment and macroenvironment. The Microenvironment consists of the following factors close to the company that affect its ability to serve its customers.

1) The company
2) Suppliers
3) Marketing intermediaries
4) Customer
5) Competitors
6) Publics

Company: Marketing mangers while formulating the marketing program and plans must consider other groups such top management, R&D, production and purchasing and accounting and think about consumers and work in harmony

Suppliers: Suppliers are very important in value delivering system who provides resources for the company to achieve its goals. Any change in the suppliers environment such as price change, labour strike, supply shortage can impact marketing operations seriously.

Marketing intermediaries: Marketing intermediaries are the firms engaged in selling and distributing the goods/services to end users. These include middlemen, physical distribution firms, marketing service agencies, and financial intermediaries. Middlemen include retailers, wholesales, dealers, and agents

Customers: The organization must know customers needs and wants, what they require and their characteristics. Customers may come from consumer market, business, resellers, and government markets.

Competitors: Marketing must try to gain strategic advantage over its competitors through proper positioning of their offer in the consumer minds. While designing and implementing marketing strategies, one has to track the competitors activities and strategies.

Publics: The company’s marketing environment includes various groups such financial, media government, citizen, and general public.


Economic environment: Marketer requires to study the buying power of people. Changes in income and spending pattern would influence marketing environment. So marketer has to study income levels and distribution.

Political Factor: Most of marketing decisions are strongly affected by development in the political environment. This environment includes government agencies and other pressure groups that influence organizations.

Cultural Factors: The cultural environment is made of up institutions and other forces that affect society’s basic values, perceptions, preferences and behavior. Marketer must focus on the cultural shifts.

Technological factors: The major impact on the society is the technological advancement and changes in product that effect on consumers. Technology will be advanced further and consumer demands better and sophisticated product and services. These factors effect the company and consumers.

Deomographic Environment: Demography means the study of human population in terms of age, sex, occupation, income and other statistics. Any change in demographic environment would impact business organizations. So, marketing manager has to identify the changes in these factors that would affect businesses.

Why the study of marketing environment is important for a marketer?
The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers and target customers. Includes in the supplier group are – material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation and telecommunication companies. Included with distributors and dealers are agents, brokers and others who facilitate finding and selling to customers.

The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment and social-cultural environment. these environments contain forces that can have major impact on the actors in the task environment.

The major responsibility for identifying significant market place changes falls to the company’s marketers. More than any other group in the company, they must be the trend trackers and opportunity sectors.

Marketers are keenly interested in the size and growth rate of population in cities, regions and nations; age distribution etc. Exposure population growth has major implications for business. A growing population does not mean growing markets unless these markets have sufficient power nonetheless the companies that carefully analyse their markets and find major opportunities.

National populations vary in their age mix. At one extreme is Mexico a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk diapers, school supplies and toys would be important products in Mexico. Japan’s population would consume many more adult products. A population can be sub divided into six age groups – pre-school, school-age children, teens, young, adults age 25 to 40, middle-aged adults aged 40 to 65 and older adults aged 65 and up. For marketers, the most populous age groups shape up the marketing environment.

Marketing require purchasing power as well as people. The available purchasing power in an economic depends on current income, prices, saving, debt and credit availability. Marketers must pay close attention to major trends in income and consumer-spending patterns because they can have a strong impact on business especially for companies whose products are geared to high income price-sensitive consumers.

The deterioration of the natural environment is a major global concern. Steel companies and public utilities have hard to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels marketers need to be aware of the threats and opportunities associated with four trends in the natural environment, the storage of raw materials especially the water, the increased cost of energy, increased pollution levels and the changing rate of the governments.


A Global Firm is one that, in operating in more than one country, captures R&D, production, logistical, marketing and financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate and coordinate their activities on a world wide basis.

Each national market has unique features that must be grasped. A global firm has to take into account economic, political – legal and cultural factors of target country while planning its expansion programmes.

Economic Environment:

Three characteristics reflect a country’s attractiveness as an export market.

  1. Size of country’s population: Large countries are more attractive to exporters than small markets.

  2. Country’s industrial structures, four types of industrial structures can be distinguished: -

    • Subsistence Economics: - In Subsistence economics the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few opportunities for exporters.

    • Raw Material Exporting Economics: - These economics are rich in one or more natural recourses but poor in other respects. Much of their revenue comes from exporting these resources Examples are Chile (tin and copper); Zaire (rubber). These countries are good markets for extracting equipment, tools and supplies, materials handling equipment and trucks. Depending on the number of foreign residents and wealthy native rulers and landlords, they are also a market for western – style commodities and luxury goods.

    • Industrializing Economies: - In an industrializing economy, manufacturing begins to account for between 10 and 20 percent of the country’s grogs national product. Examples include India, Egypt etc. As manufacturing increases, the country relies more on imports of textile raw materials, steel and heavy machinery and less on imports of finished textiles, papers products and automobiles. The industrialization creates a new rich class and small but growing middle class, both demanding new types of goods, some of which can be satisfied only by imports.

    • Industrial Economies: - Industrial economies are major exporters of manufactured goods and investment founds. They trade manufactured goods among themselves and also export them to other type of economies in exchange of raw materials and semi-finished goods. The large and varied manufacturing activities of these industrial nations and their sizable middle class make them rich markets for all sorts of goods.
Economic characteristics of the country: characters like income distribution. Income distribution is related to a country’s industrial structure but is also offered by the political system.

Political – Legal Environment

A company should consider four factors in deciding whether to do business in a particular country.

  1. Attitude towards International Buying: - Some nations are very receptive, indeed encouraging to foreign firms and others are very protectionist. For example, Mexico for a number of years has been attracting foreign investment by offering investment incentives, while India in the post required the exporter to cope with import quotes, blocked currencies and so on.

  2. Political Stability: - Government in some countries changes hands, sometimes quite violently. And with changes in government foreign trade policies also change. The foreign company’s property might be expropriated, or its currency holdings might be blocked. In such conditions international marketers might prefer export marketing to direct foreign investment. They will convert their currency rapidly. As a result, the people in the host country pay higher prices, have fewer jobs and get less satisfactory products.

  3. Monetary Regulation: - Sellers want to realize profits in a currency of value to them. Foreign firms want payments in hand currency with profit repatriation rights, but that may not be available in many markets.

  4. Government Bureaucracy: - A fourth factor is the extent to which the host government runs an efficient system for assisting foreign companies: quick licensing procedures, efficient custom handling adequate market information and other factors conductive to doing business.

Cultural Environment: - Each nation has its own values, customs and taboos. Foreign business people, if they are to be effective, must drop their ethnocentrism and try to understand the culture and business practices of their hosts, who often out on different concepts of time, space and etiquette. The way foreign consumers perceive and use certain products must be checked out by the seller before planning the marketing programme.
Short Notes:

Marketing Strategy:

Marketing strategy combines product development, promotion, distribution, and pricing approach, identifies the firm's marketing goals, and explains how they will be achieved within a stated timeframe. Marketing strategy determines the choice of target market segment, positioning, marketing mix, and allocation of resources. It is usually a part of company’s corporate plan.

Marketing Program:

Once marketing plan is completed and is being implemented, it is referred to as marketing program, a term that holds all the activities associated with implementation and control of the individual elements of the marketing mix.

Marketing Myopia:

Short sightedness and inward looking approach to marketing that focuses on the needs of the firm instead of defining its products in terms of the customers' needs and wants. Such firms fail to adjust to the changes in the market and will disappear later.