assignment # 1

1 0561 Marketing Theory Muhammad Naeem

Q. 1 Internal databases always give information about opportunities and problems help to plan marketing programs and evaluate performance, being a Marketing Manager of any Fast Moving Consuming Goods (FMCG), what information would you like to have in your internal database? How this information would be used?

INTRODUCTION:

The term FMCG refers to those retail goods that are generally replaced or fully used up over a short period of days, weeks, or months, and within one year. This contrasts with durable goods or major appliances such as kitchen appliances, which are generally replaced over a period of several years.

FMCGs have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs – such as meat, fruits and vegetables, dairy products and baked goods – are highly perishable. Other goods such as alcohol, toiletries, pre-packaged foods, soft drinks and cleaning products have high turnover rates.The following as the typical characteristics of FMCGs:

From the consumers' perspective:

Frequent purchaseLow involvement (little or no effort to choose the item -- products with strong brand loyalty are exceptions to this rule)Low price

From the marketers' angle:

High volumesLow marginsExtensive distribution networksHigh stock turnover

ROLE OF MARKETING MANAGER:

By itself information has no worth its value come from its uses in many cases information will do a little in changing managers decisions or the cost of the information may exceeds the returns from the improved decision marketers should not assume that the information should always be worth obtaining rather they should always weigh carefully the cost of getting more information against the benefits resulting from it .Marketing manager can obtain the needed information from:

Internal data Marketing intelligence Marketing research.


INTERNAL DATABASE

"Electronic collection of consumer and market information obtained from data source within the company network" Many companies build extensive internal database ,electronic collections of consumer and market information obtained from that sources within the company network marketing manager can readily access and work with information in the database to identify marketing opportunities and problems plan programs and evaluate performance information in the database come from many sources .the accounting department prepare a financial statement and keep a detailed record of cash flow statements sales and cost operations report on production schedule shipment and inventories ,the sales force report on reseller reactions and competitors activities .the marketing department furnishes information on customer demographics psychographics and buying behavior and the customer services department keep the record of customers satisfaction or services problems research studies done for one department provides use full information for several others.

EXAMPLE:

Pizza hut's database contains detailed customer data on 40 million U.S. households, gleaned from phone orders, online orders, and point-of-sale transactions at its more than 7,500 restaurants around the nation. The company can slice and dice the data by favorite toppings what you ordered last, and whether you buy a salad with your cheese and pepperoni pizza. It then uses all this data to enhance customer relationships. For example, based on extensive analysis of several years of purchase transactions, pizza Hut designed a VIP (very into pizza) program to retain its best customers. It invites these customers to join the VIP program for $14.95 and receive a free large pizza. Then, for every two pizza ordered each month, VIP customers atomically earn a coupon for another free large pizza. Pizza Hut tracks VIP purchases and targets member with additional email offers. In all, the campaign not only retained pizza Hut's top customers but attracted new customers as well. The program also generated a lot of online buzz. Says one blogger, "so who is always on my mind when I feel like pizza? Who is sending me coupons and free things that make me want to get pizza rather than make dinner? You got it, pizza Hut. They had me buy in and now they'll have my loyalty. They make it so easy that I wouldn't want to bother getting it any where else."

Internal database usually can be accessed more quickly and cheaply than other information sources but they also present some problems because internal information was often collected for other purposes, it may be incomplete or in the wrong form for making marketing decisions. For example, sales and cost data used by the accounting department for preparing financial statements must be adapted for use in evaluating the value of a specific customer segment, sales force, or channel performance. Data also ages quickly; keeping the database current requires a major efforts.

MARKETING INTELLIGENCE:

"The systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketing environment"Marketing intelligence is the systematic collection and analysis of publicly available information about customers, competitors, and developments in the marketplace. The goal of


marketing intelligence is to improve strategic decision making by understanding the consumer environment, assessing and tracking competitors' actions, and providing early warnings of opportunities and threats. marketing intelligence gathering has grown dramatically as more and more companies are now busily eavesdropping on the market place and shopping on their competitors .good marketing intelligence can help marketers to gain insights into how consumers talk about and connect with their brands .many companies send out team of trained observers to mix and mingle with customers as they use and talk about the company's products.

MARKETING RESEARCH:

"The systematic design collection analysis and reporting of data relevant to a specific marketing situation facing an organization."

In addition to marketing intelligence information about general consumer competitors and market place, happening marketers often needs formal studies that provide customer and market insight for specific marketing situation and decisions marketing mangers use marketing research in a wide variety of situations

EXAMPLE:

Marketing research give market insights into customer motivations purchase behavior and satisfaction it can help them to access market potential and market share or to measure the effectiveness of pricing product distribution and promotion activities.some large companies have their on research departments that work with marketing managers on marketing research projects this is how Procter and gamble , and many other corporate giants handle marketing research .it has four steps .which are as follows:

DEFINING THE PROBLEM AND RESEARCH OBJECTIVES:

Marketing managers and researchers must work closely together to define the problem and agree on research objectives the managers best understand the decisions for which information is needed the research best understands marketing research and how to obtain the information defining the problem and research objectives is often the harder step in the research process the manager my know that something wrong without knowing the specific cause after the problem has been define carefully the managers and the workers must set the research objectives .

DEVELOPING THE RESERCH PLAN: Once the research problems and objective has been define researchers must determined the exact information needed, developed a plan for gathering it efficiently and present the plan to the management .the research plan outline source of existing data and spell out the specific research approaches contact method, sapling plans and instruments that researchers will use to gather ideas .research objective must be translated into specific information needs.

IMPLEMENTING THE RESEARCH PLAN:


The researchers next put the marketing research plan into action this involves collecting analyzing and processing the information data collection can be carried out by the company's marketing research staff or by outside firm's that collection phase of the marketing research process is generally the most expensive and the most subjects to errors researchers should watch closely to make sure that the plan is implemented correctly. INTERPRETING AND REPORTING THE FINDINGS:

The market researchers must now interpret the findings draw conclusion and report them to the management researchers should not try to overwhelm the managers with numbers and fancy statistical techniques rather the researchers should present important findings and insights that are useful in the major decisions faced by the management thus management and researchers must work together closely when interpreting research work and both must share responsibility or the research process and the resulting decision.

CONCLUSION:

It is concluded from the above discussion that the marketing manager can obtain the needed information from internal data marketing intelligence and marketing research.


Q. 2 (a) What is the difference between a product and service? How service marketing is different from product marketing? Also describe why marketing of services is difficult than marketing of goods. Answer with support of examples.

PRODUCT:

"Anything that can be offered to a market for attention acquisition use or consumption that might satisfy a want or need"

SERVICE:

"Any activity or benefit that one part can offer to another that is essentially intangible and does not result in the ownership of anything"

DIFFERNCE BETWEEN PRODUCT AND SERVICES

The difference between product and services is that can products are tangible it includes car ,computer or cell phones product also includes services ,event person places ideas or mixes of these on the other hand services are form of product that consist of activities benefit or satisfactions offered for sale that re essentially intangible . e.g. banking hotel airline home repair services. The ownership between products and services is different.

You can count products in the same way as you can count your money (or have your service you this information). A service is not countable, but is "leveled;" better than the best service is not possible. There is a limit in what a service can offer.

A product is produced by a manufacturing process. A service is offered by the utility element of companies; you subscribe to a service in the same way that you subscribe to your gas and electricity supplier

Products will have a long storage life and are mostly non perishable. Whereas services are delivered at that moment and do not have a long life or cannot be stored for repeat use.

Products are tangible, and transferable while the services are intangible and non transferable

Products are separable, and non – perishable while services are inseparable.

Products are homogeneous while services are heterogeneous.

Product marketing

"Product marketing deals with the first of the "4P"'s of marketing, which are Product, Pricing, Place, and Promotion. It deals with marketing the product to prospects, customers, and others."

Services marketing

"Services marketing is marketing based on relationship and value. It may be used to market a service or a product".

DIFFERENCE BETWEEN PRODUCT AND SERVICE MARKETING:

It may be commonly perceived by many people that there is a world of difference between


product and service marketing. They could not be further from the truth because in fact there is hardly any difference. This may be because most people are not given to purchasing products and services. Instead, what makes them buy a product or service is the usefulness of the product or service and how it will benefit them.

The product or service that people purchase is meant to be a solution to some problem, which may be simple or it could be serious problem. The job of marketing is to give to the customer something that is wanted and it may require attracting people to seek a particular solution that is a product or service. There must also be consistent follow-up action that will keep the customer informed about the benefits of the product or service being marketed.

Thus, the main difference between marketing products or services is that there is much more personal contact required when marketing a service as compared with marketing products. Marketing services may require meeting the customer in a face-to-face basis, or it may mean contacting prospective customers over the telephone. Once your marketing efforts get you good prospective clients who are coupled with follow-up action, the chances of converting a good percentage of these prospective customers into paying customers will greatly improve and there will be no real perceivable difference between marketing a product or service except perhaps the amount of personal contact made with the customer while marketing your product or service.

WHY MARKETING OF SERVICE IS DIFFICULT THAN MAKETING OF GOODS

Marketing any type of product or service presents its own unique group of challenges. Both types of marketing can be very successful, but both require you to gain sufficient knowledge in your field before you can expect to find success. So before you start marketing your product or service, you should learn the difference between marketing a product or service.

When you market a service instead of a product, you should realize that services are intangible, and therefore may be a bit more difficult to market. When you buy a product, you have something that you can actually put your hand on, something that you can physically see and even test out before you commit to buying it. You can purchase a product, pay for it and expect to have it within a few days. Services, on the other hand, are much more customized. They are more tailored to your customers' needs. You may have to make adjustments to your service, depending on the needs and wants of your customers. With a service, your customer may make an agreement with you to get certain things, and then ask you to fix a problem that was not originally included in your agreement. Services can have an adjustable amount of profit and can last for many years.

When marketing a product, you realize that you can sell a product to basically anyone. Yes, you need to be sure that you have the correct demographic group, but after that point, anyone who can afford to buy your product can be included in your marketing group. But with a service, you must be more selective when choosing your potential customers. A service may be more expensive for customers in the long run because it can be used over time. Services require you to build a relationship with people and continue to develop it. When marketing products, you don't have to get to know your customer. . When marketing a product, you can usually pick a set budget and stick to it. It's usually pretty easy to calculate. But with a service, you may have to re-negotiate your marketing costs. In general, services are more difficult to price and so in the initial stages of your marketing campaign you will need to spend extra time and money determining just how you're going to divide up the prices of your


service. Marketing a service is not a difficult thing. But it does require a slightly different set of marketing ideas. Learning these differences can make marketing your service a hundred times easier in the long run.

EXAMPLE:

we’re a marketing company, so we deal with creating strategic marketing plans and implementing campaigns. Occasionally, we get prospects who see us solely as a graphic design firm and submit projects that are so tightly regulated that no strategy or creativity is involved – in other words, prospects who want to micromanage every step of the way – even if they have no marketing experience what so ever. If you’ve been in your industry for any length of time, I’m sure you’ve run across 1-2 ‘difficult’ prospects or clients who are just not happy with anything you do. Perhaps the job you quoted was not exactly what your client thought it was going to be or perhaps your client kept adding additional elements into the project (scope creep)… regardless, with services, you have a number of business issues that you don’t often find if you were just dealing with taking a product order, filling it, and shipping it to the client

(b) How companies can position their products for competitive advantage in the marketplace? Discuss.

Product Positioning is very important in the marketing world. Think about a product, let's say a car. Now try thinking about a clothing brand or a certain food. What came to your mind? The reason those products came to your mind is because of those product's positioning. For some reason those products stuck with you, and that is because of the marketing strategies behind the products.

Why is Product Positioning Important?

It is important for long-term success for your company because it will make your product memorable and also make your product desired by your market segments. A company will position a product, which means that they are trying to create an image or an identity in their targeted market's mind. This can be done for their product, brand or organization. The company creates what they want their market to think and feel about the product, which establishes their perception of the brand image. Businesses do this so their segments become familiar with the product and recognize it based off of the position. This goes hand and hand with brand image because through positioning a company is creating a brand's image. However, the hard part is that a company needs to try to create a desired position. If this is achieved then the company has the position that is desired by the target market, which will most likely increase the success of the company. But if a company fails to create the desired position then the target market will not value the image and the product, and this could lead to losing consumers to a competitor that has a valued image.

How company can position their product?


A company needs to create a desired position for their product, brand or organization. This can be achieved through perceptual mapping. Perceptual mapping is a method marketers use to visually display and measure the perceptions of consumers or potential consumers to develop a product's position. In general, the product's position is displayed comparative to their competition. This is an important technique that should be used by marketers when deciding a product's position. It is important because it identifies what the competition is doing, what consumers' perceptions are of that market, and how one could successfully fit in that market to become desired by consumers.

Although the research needed for perceptual mapping might be extensive and time consuming, it is worth it. A successful product position could create long-term success for a company and produces continual desire for the product by consumers.

Why some companies lose their competitive advantage

Loss of focus and inability to change and adapt are the two main reasons why companies fade away or lose their competitive advantage in this ever-changing world. With the culture changing daily and becoming more and more dependent on faster, newer, and better, companies need to remain flexible and maintain the ability to "roll with the punches". If the desire to change remains, a lot of time the inefficiency and lack of focus from the management can lead to a downturn in business or loss of competitive advantage. Management turnover, lack of focus, or lack of motivation all lead to inefficiency in companies. The inability to change, adapt, and grow in the particular industry is the major dilemma facing failing companies today. With the newer generations always wanting their products in higher quantity, bigger, and faster, companies cannot afford to rest on their previous achievements and not strive to grow or expand. If companies want to stay competitive and continue to be major players in their prospective industries, the officers and managements of said companies must be willing to evaluate, adjust, and remain focused on remaining profitable and keeping the competitive edge.

CONCLUSION:

From the above discussion it is clear that product marketing differs from the services marketing, thus, the main difference between marketing products or services is that there is much more personal contact required when marketing a service as compared with marketing products. When you market a service instead of a product, you should realize that services are intangible, and therefore may be a bit more difficult to market.


Q. 3 Examine product life cycle and answer the following questions? What stage you think is: Most critical Most risky Most profitable Most negativeYour answer must be based on logical arguments.

PRODUCT LIFE CYCLE:

"A new product progresses through a number of stages from introduction to growth maturity and decline. This sequence is known as product life cycle".

EXPLANATION:

Product Life – Cycle The course of a products sales and profits over its lifetime. It involves five distinct stages.

1. Product Development 2. Introduction 3. Growth 4. Maturity 5. Decline

After launching the new product, management wants the product to enjoy a long and happy life. Although it does not expect the product to sell forever, the company wants to earn a decent profit to cover all effort and risk that went into launching it, Management is aware that each Product will have a life cycle, although the exact shape and length is not known in advance.

1. Product development:-

Begins when the company finds and develops a new product idea. During product development, sales are zero and the company’s investment costs mount.

2. Introduction Stage:-

The introduction stage starts when the new products in first launched. In which the new product is first distributed and made available for purchase.

In this stage as compared to other stages profits are negative or low because of the low sales and high distribution and promotion expenses. Much money is needed to attract distributors and built their inventors.

3. Growth Stage:-


The product life cycle stage in which a product’s sales start climbing quickly.

If the new product satisfied the market, it will enter a growth stage, in which sales will start climbing quickly. The early adopters will continue to buy and later buyers will start following their lead, especially if they hear favourable word of mouth

4. Maturity Stage:-

The stage in the product life cycle in which sales growth slows or levels off.

At some point, a products sales growth will slow down, and the product will enter a maturity stage. This maturity stage normally lasts longer them the previous stages, and it possess strong challenges to marketing management. Most products are in the maturity stage of the life cycle. And therefore, most of marketing management deals with the mature product.

5. Decline Stage:-

The product life cycle stages in which a product’s Sales decline the sales of most product forms and brands eventually dip. The decline may be slow, as in the case of oatmeal cereal. As in the case of phonographs records.

Sales may plunge to zero. Or they may drop to a low level where they continue for many years. This is the decline stage.

Not all product follow this product life cycle. Some products are introduced and die quickly, other stay in the mature stage for along, long time some enter the decline stage and are then cycled back into the growth through strong promotion or repositioning.

MOST CRITICAL:- The most critical stage in the product life cycle is product development because it shows whether the product idea can be turned into a workable product .it is stage where there is a large jump in investment .this stage is characterized by zero sales, the firm bearing the costs of such development, typically resulting in negative profitability.


MOST RISKY: The most risky stage in the product life cycle is the introduction stage. it is because in this stage s compared to the other stages ,profit are negative or low because of the low sales and high distribution and promotion expense in this stage much money is needed to attract distributors and built their inventories. In the introduction process firm focus their selling on those buyers who are the most ready to buy.

MOST PROFITABLE: Growth and maturity are the most profitable stage in product life cycle because at this stage sales will start climbing quickly\ profits start to increase during this period, they do not match the growth in sales. This is because the awareness of the new product and growth in product sales make the market for the product more attractive to potential new entrants and competitors. During this period of high sales growth, many competitors may choose to enter the market, reducing the company's relative market share and, in the process, its profitability. As the sales volume increases, the manufacturing and promotional spend per unit decreases, which also helps to increase profitability.

On the other hand maturity stage is also consider as the most profitable stage in the life cycle because, Typically, the growth in sales decreases quite significantly and manufacturer's over-capacity (that is, larger than required inventories) results in a reaction by the firm and its competitors to slash prices the slow down in sales growth result in many producers with many products to sell .Ultimately, the maturity stage becomes the key turning point for companies because at some point during this period, sales will start to decrease and potentially never experience positive growth again.

MOST NEGATIVE: Declining stage is the most negative stage in the product life cycle this is because of the reason, at this stage sales of the most product form and brands eventually dips at the declining stage sales may plunge to zero because of the many reasons including technological advancement shift in consumer tastes and increased competition as the sales and profit declines some firms withdraw from the market.

CONCLUSION: It is very clear from the above whole discussion that Understanding the Product Life Cycle (PLC) is of critical importance to a firm launching a new product. It helps a firm to manage the risk of launching a new product more effectively, whilst simultaneously maximizing the sales and profits that could be achieved throughout the product's life cycle.


Q. 4 Select three different products of your own choice and explain the factors (including demand, competition, costs, and other marketing mix) that have influenced its price?

What is price?

In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of having or using the product or service.

Price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also one of the most flexible elements of the marketing mix. Unlike product features and channel commitments, price can be changed quickly. At the same time, pricing and price competition is the number one problem facing many marketing executive. Yet, many companies do not handle pricing well.

Factors to Consider When Setting Prices:

A company’s pricing decisions are affected by both internal and external environmental factors.

Internal Factors Affecting Pricing Decisions:

Internal factors affecting pricing include the company’s marketing objectives, marketing strategy, costs and organizational considerations.

Marketing Objectives:

Before setting a price, the company must decide on its strategy for the product. If the company has selected its target market and positioning carefully, then its marketing mix strategy, including price, will be fairly straightforward. For example, when Honda and Toyota decided to develop their Acura and Lexus brands to compete with European luxury-performance cars in the higher income segment, this required charging a high price. Pricing strategy, thus, largely determined by decisions on market positioning.

At the same time, the company may seek additional objectives. Common objectives include survival, current profit maximization, market share leadership, and product quality leadership. Companies set survival as their major objectives if they are troubled by too much capacity, heavy competition, or changing consumer wants. To keep a plant going, a company may set a low price, hoping to increase demand. In the long run, however, the firm must learn how to add value that consumers will pay for or face extinction.

Many companies use current profit maximization as their pricing goal. They estimate demand and costs will be at different prices and choose the price that will produce the maximum current profit, cash flow, or return on investment. Other companies want to obtain market share leadership. To become the market share leader, these firms set prices as low as possible.


A company might decide that it wants to achieve product quality leadership. This normally calls for charging a high price to cover higher performance quality and high cost of R&D. Fort example, Caterpillar charges 20 percent to 30 percent more than competitors for its heavy construction equipment based on superior product and service.

A company might also use price to attain other, more specific objectives. It can set prices low to prevent competitors from entering the market or set prices at competitors’ level to stabilize the market. Prices can be set to keep the loyalty and support of resellers or to avoid government intervention. Prices can be reduced temporarily to create excitement for a product or to draw more customers into retail store. One product may be priced to help the sales of other products in the company’s line. Thus, pricing may play an important role in helping to accomplish the company’s objectives at many levels.

Not-for-profit and public organizations may adopt a number of other pricing objectives. A university aims for partial cost recovery, knowing that it must rely on private gifts and public grants, to cover the remaining costs. A not-for-profit hospitals may aim for full cost recovery in its pricing. A not-for-profit theatre company may price its production to fill the maximum number of theatre seats. A social service agency may set a social pricing geared to the varying income situations of different clients.

Marketing Mix Strategy:

Price is only one of the marketing mix tools that a company uses to achieve its marketing objectives. Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective marketing program. Decisions made for other marketing mix variables may affect pricing decisions. For example, producers using many resellers who are expected to support and promote their products may have to build larger reseller margins into their prices. The decision to position the product on high-performance quality will mean that the seller must charge a higher price to cover higher cost.

Costs:

Costs set the floor for the price that the company can charge. The company wants to charge a price that both covers all its cost for producing, distributing, and selling the product and delivers a fair rate of return for its effort and risk. A company’s costs may be an important element in its pricing strategy. Many companies, such as Southwest Airlines, Wal-Mart, and Union Carbide, work to become the “low-cost producers” in their industries. Companies with lower costs can set lower price that result in greater sales and profits.

Organizational Considerations:

Management must decide who within the organization should set prices. Companies handle pricing in a variety of ways. In small companies, prices are often set by top management rather then by the marketing or sales departments. In large companies, price is typically handled by divisional or product line managers. In industrial markets, salespeople may be allowed to negotiate with customers with a certain price ranges. Even so, top management


sets the pricing objective and policies, and often approves the prices proposed by lower-level-management or salespeople.

In industries in which pricing is a key factor (aerospace, steel, railroad, oil companies), companies often have a pricing departments to set the best prices or help others in setting them. This department reports to the marketing department or top management. Others who have an influence on pricing include sales manager, production managers, fiancé managers and accountants.

External Factors Affecting Pricing Decisions:

External factors that affect pricing decisions include the nature of market and demand, competition, and other environmental factors.

The Market and Demand:

The seller’s freedom varies with different types of markets. Economists recognize four types of markets, each presenting a different pricing challenge.

Under pure competition, the market consists of many buyers and sellers trading in a uniform commodity such as wheat, copper of financial securities. No single buyer or seller has much effect on the going market price. A seller cannot charge more than the going price, because buyers can obtain as much as they need at the going price.

Under monopolistic competition, the market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers. Either the physical product can be varied in quality, features, or style or the accompanying services can be varied. Buyers see differences in sellers’ products and will pay different prices for them.

Under oligopolistic competition, the market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. The product can be uniform (steel, aluminum) or non-uniform (computers, cars). There are few sellers because it is difficult for new sellers to enter the market. Each seller is alert to competitors’ strategies and moves. If a steel company slashes its price by 10 percent, buyers will quickly switch to this supplier.

In a pure monopoly, the market consists of one seller. The seller may be a government monopoly (the US postal service), a private regulated monopoly (a power company), or a private non-regulated monopoly. Pricing is handled differently in each case. A government monopoly can pursue a variety of pricing objectives.

In a regulated monopoly, the government permits the company to set rates that will yield a “fair return”, one that will let the company maintain and expand its competitors as needed. Nonregulated monopolies are free to price at what the market will bear.


However, they do not always charge the full price for a number of reasons; a desire to attract competition, a desire to penetrate the marker faster with a low price, or a fear of government regulation.

Consumer Perception of Price and Value:

In the end, the consumer will decide whether a product’s price is right. Pricing decisions, like other marketing mix decisions, must be buyer-oriented. When consumers buy a product, they exchange something of value (the price) to get something of value (the benefits of having or using the product). Effective, buyer-oriented pricing involves understanding how much value consumers place on the benefits they receive from the product and setting a price that fits this value.

Competitors’ Costs, Prices, and offers:

Another external factor affecting the company’s pricing decisions is competitors’ cost and prices and possible competitor reactions to the company’s own pricing moves. A consumer who is considering the purchase of a Canon camera will evaluate Canon’s price and value against the prices and values of comparable products made by Nikon, Minolta,

Pentax, and others. If canon follows a high-price, high -margin strategy, it may attract competition. A low-price, low-margin strategy, however, may stop competitors or drive them out of the market.

Canon needs to benchmark its costs against its competitors’ costs to learn whether it is operating at a cost advantage or disadvantage. It also needs to learn the price and quality of each competitor’s offer. Once canon is aware of competitors’ price and offers, it can use them as starting point for its pricing. If Canon’s cameras are similar to Nikon’s, it will have to price close to Nikon or lose sales. If Canon’s cameras are not as good as Nikon’s, the firm will not be able to charge as much. If Canon’s products are better than Nikon’s, it can charge more. Basically, Canon will use price to position its offer to the competition.

Other External Factors:

When setting prices, the company also must consider other factors in its external environment. Economic conditions can have a strong impact on the firm’s pricing strategies. Economic factors such as boom or recession, inflation, and interest rates affect pricing decisions because they affect both the cost of producing a product and consumer perception of the product’s price and value. The company must also consider what impact its prices will have on other parties in its environment. How willrese ller react to various prices? The company should set prices that give resellers a fair profit, encourage their support, and help them to sell the product effectively. The government is another important external influence on pricing decisions. Finally, social concerns may have to be taken into account. In setting prices, a company’s short-term sales, market share, and profit goals may have to be tempered by broader social considerations.

General Pricing Approaches:


The price the company charges will be somewhere between one that is too low to produce a profit and one that is too high to produce demand. Product costs set a floor to the price; consumer perceptions of the product’s value set the ceiling. The company must consider competitors’ prices, and other external and internal factors to find the best price between these two extremes.

Companies set prices by selecting a general pricing approach that includes one or more of these three set of factors. The three approaches are: the cost based approach cost-plus pricing, break- even analysis, and target profit pricing), the buyer based approach (value- based approach), and the competition based pricing.

Cost-Based pricing:

The simplest method is cost-plus pricing-adding a standard markup to the cost of the product. Construction companies, for example, submit job bids by estimating the total project cost and adding a standard markup for profit.

To illustrate mark up pricing, suppose a toaster manufacturer has the following costs and expected sales:

Variable cost: $10, Fixed costs: $ 300,000, and Expected unit sales : 50,000

Here unit cost is $16= Variable cost +Fixed cost / unit sales.

Now suppose the manufacturer wants to earn a 20 percent mark up on sales. The manufacturer’s mark up price is given by:

Markup price= unit cost / 1- Desired Return on Sales = $16/ 1-.2= $ 20

Break-Even Analysis and Target Profit Pricing:

Another cost-oriented pricing approach is break-even or a variation called target profit pricing. The firm tries to determine the price at which it will break even or make the target profit it is seeking.

Break-Even Volume: Fixed cost /selling price- variable cost. If a company has fixed cost of $ 30,000 and Variable cost $ 10 and selling price per unit is $ 20, then its Break- Even Volume is= $ 30,000/$20-$10= $ 30,000. The company’s sales must be above Break-even sales to earn a profit.

Value-Based Pricing:

An increasing number of companies are basing their prices on the product’s perceived value. Value-based pricing use buyers’ perception of values, not the seller’s cost, as the key to pricing.


Cost -based pricing:

Product------------- Cost---------------Price--------------------Value------------customers.

Value-based Pricing:

Customers------------Value-------------------Price---------------Cost-----------------Product.

Competition-Based pricing:

Consumers will base their judgment of a product’s value on the prices that competitors charge for similar products. One form of competition-based is going –rate pricing, in which a firm base its pricing largely on competitors’ prices, with less attention to its own costs or to demand.

Competition-based pricing is also used bids for jobs. Using sealed –bid pricing, a firm bases its price on how it thinks competitors will price rather on its own cost or on the demand. The firm wants to win a contract, and winning the contract requires pricing less than other firms.

Pricing Strategies: New- Product Pricing Strategies:

Pricing strategies usually change as the market passes through its life cycle. The introductory stage is especially challenging. Companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two broad strategies: Market-skimming pricing and market -penetration pricing.

Market-skimming pricing: many companies that invent new product initially set high prices to “skim” revenues layer by layer from the market. Sony frequently uses this strategy, called market-skimming pricing. When Sony introduced the world’s first high- definition (HDTV) to the Japanese market in 1990, the high-tech set costs $ 43,000. In 1993, a 28 inch HDTV by only $ 6,000 and in 2001 a 40-inch HDTV was sold only for $ 2,000.

Market –Penetration Pricing:

The market penetration pricing is normally adopted by companies who try penetrate a market. They set a low initial price in order to penetrate the market quickly and deeply- to attract a large number of buyers quickly and win a large, market share. Companies like Dell used penetration pricing to enter the highly competitive market.

Product Mix Pricing Strategies:

The strategy for setting a product’s price often has to be changed when the product is part of a product mix. In this case, the firm looks for a set of prices that maximizes the profits on the total product mix. Pricing is difficult because the various related demand and costs and face different degrees of competition. We now take a closer look at five product mix pricing


actions: product line pricing, optional-product pricing, captive-product pricing, by-product pricing, and product bundle pricing.

Product Line Pricing:

Setting the price steps between various products in a product line based on cost differences between the products, customer evaluation of different features, and competitors’ prices. SONY sets different pricing for different models of TVs, DVDs. Optional-Product Pricing: The pricing of optional or accessory products along with a main product. The original product is offered with an optional product with some special price.

Captive-Product Pricing:

Setting a price for products that must be used along with a main product such as blades for a razor, and a film for a camera. The original product is offered at as low as possible and charge a premium price for the captive product. Gillette sells low priced razors but makes money on the replacement cartridge.

By-Product Pricing:

Setting a price for by –products in order to make the main product’s price more competitive. In producing processed meats, petroleum products, chemicals and other products, there are often by-products. The company can charge a price of these by-products that allow the firm to cover the storing and delivering costs and this certainly gives the firm a competitive advantage in selling the original product.

Product Bundle Pricing:

Using product bundle pricing, sellers often combines several of their products and offer the bundle at a reduced price. Thus, theaters and sports teams sell season tickets at less than the cost of single tickets, hotels sell specially priced packages that include room, meals, and entertainment.

Table Showing Product Mix Pricing StrategiesStrategy Description*Product Line pricing Setting prices between production liner items*Optional-product pricing

Pricing optional or accessory products sold with the main product

*Captive-product pricing Pricing products that must be used with the main product*By-product pricing Pricing low-value by-products to get rid of them*Product bundle pricing Pricing bundles of products sold together

Price Adjustment Strategies:

Companies usually adjust their basic prices to account for various customer differences and changing situations. Here is six price adjustment strategies: discount and allowance pricing, segmented pricing, promotional pricing, geographical pricing, and international pricing.


Discount and Allowance Pricing:

A straight reduction in price on purchases during a stated period of time. A cash discount, a price reduction to buyers who pay their bills promptly. A typical example is, “2/10, net 30,” which means that although payment is due within 30 days, the buyer can deduct 2 percent bill if the bill is paid within 10 days.

A quantity discount is a price reduction to buyers who buy large volumes. A typical example might be “ $ 10 per unit for less than 100 units, $ 9 per unit for volume for 100 or more units.”

A functional discount (also called a trade discount) is offered by the sellers to trade- channel members who perform certain functions, such as selling, storing, record keeping.

A seasonal discount is a price reduction to buyers who buy merchandise or services out of season. For example, lawn and garden equipment manufacturers offer seasonal discounts to retailers during the fall and winter months to encourage early ordering in anticipation of the heavy spring and summer selling seasons.

Allowances are another type of reduction from the list price. For example, trade- allowances are price reduction given for turning in an old item when buying a new one.

Segmented Pricing:

Companies will often adjust their basic prices to allow for differences in customers, products and locations. In segmented pricing, the company sells a product or service at two or more prices, even though the difference in prices is not based on difference costs. Segmented pricing takes several forms. Under customer-segment pricing, different customers pay different prices for the same product or service. For example, people who buy the product of a particular company through CREDI CARD may get a special discount. Under product-form pricing, different versions of the product are priced differently but not according differences in their costs. Using a location pricing, a company charges different prices for different locations, even though the cost of offering each location the same. Universities offer different pricing for students outside the host. Country.

Psychological Pricing:

A pricing approach that considers the psychology of the prices and not simply the economics; the price is used to say something about the product. In buying a product that is highly psychological, price is considered to be the most important factor for buying or not buying the company’s product. When a company reduces the price, customer will hesitate to have a product of their preference.

Reference Prices:

Prices that buyers carry in their minds and refer to when they look at a given product.


Promotional Pricing: With promotional pricing, companies will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency. Promotional pricing takes several forms. A loss leader is to attract customers to the store in the hop e that they will buy other items at normal markups. Special -event pricing in certain seasons to draw more customers. Thus, Linens are promotionally priced every January to attract weary shoppers back into stores.

Geographical Pricing: A company must also decide how to price its products for customers located in different parts of the country or world FOB-origin pricing- a geographical pricing strategy in which goods are placed on board a carrier, the customers pays the freight from the factory to destinations. Customers pay the freight depending on their locations. Uniform-delivered pricing: A geographical pricing strategy in which the company charges same price plus freight to all customers, regardless of their locations. Zone Pricing: A geographical pricing strategy in which the company sets up two or more zones. All customers within a zone pay the same total price; the more distance the zone, the higher the price. Basing-point pricing: A geographical pricing strategy in which the seller designates some city as basing point and charges all customers the freight cost from that city to customer.

Freight- absorption pricing: A geographical pricing strategy in which the seller absorbs all or part of the freight charges in order to get the desired business.

International Pricing: Companies that market their products intentionally must decide what prices to charge in the different countries in which they operate. In some cases, a company can set a uniform worldwide price. For example, Boeing sells its jetliners at about the same price everywhere, whether in the United States, Europe, or a third-world country.

The price that a company should charge in a specific country depends on many factors, including economic conditions, competitive situations, laws and regulations, and development of the wholesaling and retailing system. Consumers’ perceptions and preferences also may vary from country to country, calling for different prices. Or the company may have different marketing objectives in various world markets, which require changes in pricing strategy. For example, Panasonic might introduce a new product into a mature market in highly developed countries with the goal of quickly gaining mass-market share- this would call for a penetration-pricing strategy. In contrast, it might enter a less developed market by targeting smaller, less price sensitive segments; in this case, market-skimming pricing make sense.


Q. 5 Direct marketing is the practice of delivering promotional messages directly to potential customers on an individual bases. Obtain information from any commercial organization (such as Dawlance, Acer, and LG etc) and answer the following questions:

1. What kind of direct marketing efforts they apply?2. How do they make it easy to order their product?3. How are their products different from competitors?4. What are their competitive advantages and disadvantages?

DIRECT MARKETING

Direct marketing is a communication between seller and buyer directly. No intermediary media is used. No distractions come between hopefully. Direct marketing is generally visual and sometimes auditory. It is also, to an extent sensual and olfactory. That is, impressions are obtained from feel and smell that affect the communication. It is direct communication but with a marketing purpose. It is most often in text format. Layout and delivery (both the form and the timing) have an impact on the acceptability of the communication. Research shows that a combination of brochure and Internet works, persuading people to buy – the Internet needs the brochure’s reassuring feel and existence, giving an Internet site substance.

The Direct Marketing Association (DMA) defines direct marketing as ‘communications where data are used systematically to achieve quantifiable marketing objectives and where direct contact is made, or invited, between a company and its customers and prospective customers’.

Direct Marketing Tools

Direct marketing includes a number of different marketing tools that require you to buy now. These marketing tools may be emails, sales letters, telesales, or other tools.

Direct Marketing Emails

Emails may be a form of direct marketing or they can be e- newsletters. The difference between direct marketing emails and other emails is that they require an action now that can be tracked and measured. The email may, for example, be a description of a product and at the end give the person the call to “buy it now” by visiting your website. You will be able to track how many people clicked on the link and bought your product using online tracking software. When writing direct marketing emails though you need to be aware that you cannot write them in the same way you would write other direct marketing materials as this will probably get them caught in spam filters so try to disguise your direct marketing message while still giving a powerful call to action.


Telesales Who hasn’t received those telephone calls trying to sell you something? This form of direct marketing is telesales and although many customers don’t like it, it can still bring results and so businesses still use it. In order to get the best results from telesales you should target your lists and try a two-call system whereby you first of all call to find out the customer’s needs and then phone back later for the direct marketing call

Sales Letters Direct marketing sales letters, such as those seen on websites and in magazines are another form of direct marketing. They have compelling copy that calls people to take action now and usually repeats this call a number of times throughout the letter. The trick with achieving success at sales letters is to write compelling copy that appeals to your target market’s perceived needs and desires and tells them how your product can help them fulfill these.

Infomercials are direct marketing on the television. Notice how many times during an infomercial you are encouraged to contact the company to purchase their products. Infomercials need to be professionally done, use celebrities or scientists to create credibility and usually come with many bonuses or a money back guarantee.

There are a number of different tools that are used in direct marketing but the most important aim of these tools is to get the person to act immediately and not wait. This is done differently depending on the tool used and it is important to know how to use each of these tools for direct marketing.

FITTING DIRECT MARKETING INTO THE INTEGRATED MARKETING ENVIRONMENT

Marketing purpose Direct marketing is no different from other forms of marketing in that it is trying to achieve a marketing purpose. The marketing purpose is to meet a marketing objective; the direct marketing activities may be in support of other marketing activities or as one of a sequence of direct marketing activities – often called a campaign. Direct marketing achieves the purpose directly. The fact that direct marketing is a one-to-one communication allows the communication to be special and tailored to the recipient. If you do not use its special characteristics and its individual capability, you are missing a trick and the true benefit of direct marketing.

The old business-orientated way of operating Marketing In marketing, in the last decades of the 20th century, the basic marketing effort was managed as a three-part exercise for the benefit of the business, often by separate operations, first trying to generate leads (the old marketing bit), secondly to process sales (the task of the sales force to close sales) and finally to retain the customer (the domain of customer service). Separation of the three parts no longer really works. However carefully people are told to join together as a team to support a customer, if they belong to different parts of a business they are likely to retain in-house rivalries. It is a human condition. Integration means working as one, probably achievable only under one leader.

An integrated marketer is aware of four factors: the recent customer research on consistency of message (the customer shies away from purchase if the message is inconsistent); the


discerning nature of customers, reflecting a greater maturity; the customer only believing messages that are supported by reality; finally, the pace of life itself is moving customers to bond with a brand that delivers what they need because they do not have the time to waste re-examining the marketplace every time they make a repeat purchase. (Tesco is the consumer model here with 43 per cent of their high value customers 100 per cent bonded to the brand – that is, they do not shop anywhere else. Viking is an equivalent good example on the business-to-business side.) The wise marketer now looks at the whole approach from product and service (concept) awareness to demonstrating relevance and performance, to showing clear advantage of the concept and finally bonding, that is, from the viewpoint of the customer, creating a seamless consistent view, which persuades the customer not to even consider or think of buying from anyone else. The newer integrated marketing purpose

The marketing purpose for an integrated marketer must be the whole approach of the customer seen from the customer’s viewpoint. That is:

■ The delivery of an advantageous marketing proposition to put forward a marketing proposition. This is a proposal somehow conveying advantage – it may be information about special purchasing opportunities, it may be an entreaty to purchase. It is, however, entirely persuasive and conducive to a customer’s purchase. The marketing proposition meets the needs of the customer -communicated from their perspective, best expressed by the six Cs. It also uses a sales process that matches the buying process preferred by the customer. Two blinding flashes of the obvious here. First the six Cs are the marketing mix elements but seen from the customer viewpoint – cost, convenience, communication, customer relations, concept and consistency. The marketer implants this information as favourable and complete messages in the mind of the customer in a form that is customer digestible. Second the buying process has to be discovered and the sales process then designed and matched to it.

■ The customer bonding with the brand to increase a customer bondwith a brand, by imparting specific messages that strengthen that bond and building long-term relationships for repeat or further sales. Customers, if approached correctly, bond in a way that is much stronger than any loyalty scheme. It requires continuing confirmation of the excellence of the customer decision to bond and must continue to demonstrate advantage. The result, if achieved though, is repeat purchase and ongoing business. This bonding is so effective it is now being used as a measure of future share value prediction. It is in consequence a CEO deliverable. Again direct marketing is particularly

suited to achieve customer bonding with a brand. It will often require more than one direct marketing activity – a campaign – over a period of time. The need to build relationships is important. Building relationships is a marketing activity and direct marketing is the superior implementation method for this. For relatively small effort, a large number of repeat sales can be achieved. Direct marketing is good at cementing relationships with customers to achieve sales. In business-to- business where costs of advertising in the specialist press seem profligate and in any case marketing budgets are more limited and seeming wastage is unwelcome, direct marketing is an ideal tool. Indeed customers can be readily persuaded to share in the saving of cost by ordering online and allowing automated systems to cut out the usual business interfaces – intermediary persons, firms or organizations. Airline and some rail


ticketing can and now do save on cost for consumers. It is particularly important to make contact with those who have bought before, both in an appropriate and a timely fashion. It is important to establish re-order frequency and match a contact call or letter to that period. Some advocate a 90- day period between contacts. This is no longer subtle enough.

From experience, a buying pattern can be established. Customers can even be asked how frequently they want to be contacted; for a professional firm seeking new business it is even possible to ask how frequently contact should be made. It can then be made into a process with a contact plan for each client. That is, persons in the team are tasked with maintaining contact at set frequencies and the type of that contact decided. The process can be managed centrally using a database. For example, the car dealer mentioned before, should ascertain the buying period between car purchases of customers – even asking the customer to say when they had previous cars and for how long. The period in between purchases should build a relationship – perhaps seeking assistance with new product development, finding out the customer preference and demonstrating how the new products will meet those preferences. Then in the pre-purchase period, really putting forward the sell, based on the knowledge of the customer.

When to use direct marketing

Direct marketing is most appropriate in a number of situations. The following paragraphs list some of these and, of course, the reverse where direct marketing is inappropriate.

Obtaining a list of customers for direct mail or telemarketing activitiesFirst, there is some obvious logic (blinding flash of the obvious): to carry out some direct marketing activities (eg e-mail, direct mail, catalogue) you need to know your customers by name and address, or e- mail address or telephone number. Only if you have customers can you carry out those direct marketing activities. But if you do not have those customers, then you do have the following direct marketing alternatives:

■ Advertise for customers.Carry out direct response marketing activities first , to achieve sufficient numbers of customers’ details to carry out direct marketing as part of a campaign. Make the ones you want an offer they cannot refuse. Of course, you do not necessarily want the whole population, so it must be targeted. (For example, Jaguar offering an X-typefor the weekend if you leave your BMW or Mercedes with them, thus targeting the wealthy 30+ age group.) Non-direct response advertising can produce customers but may well be much slower, as you require the customer to take action unprompted and unless your advertising persuades and/or makes an incredible offer that has customers putting in effort to seek out purchase outlets, a lot of potential customers may not bite.

■ Use PRThis is probably riskier than non-direct response advertising as you do not control the channel. You could use some high profile concept (product/service) launch that captures sufficient media interest for journalists, commentators and editors to publish and promote your concept. Beware, they may do so, but not always in ways you can imagine.


■ Buy potential customer names.Technically, you hire the names for each time you use the list, which comes in a database format. The database, the list, needs to match the profile of your target. Legally, you need to ensure that the database is properly used – that the customers listed have sanctioned your communicating with them on this topic.

■ Non-names direct marketing.The direct marketing activities that do not depend on knowing the customers’ names, addresses, etc, are: direct response (inserts, tip ons, pop ups), piggy back, door-to-door, leaflets and handouts.

■ Field marketing.Field marketing encompasses face-to-face direct marketing . Generally this is a relatively expensive form of direct marketing as you are paying for people’s time to undertake direct marketing and they are usually only in contact with one or a few customers at any time.

Start-upsAs a start-up business you do not have any customers, so why not use someone else’s? Piggy back may offer the perfect solution, providing you select the right partner who has lots of the right type of customers. So just after you have arrived and set up in an area and do not know the locals, pick a piggy back partner who has customers with a concept that has an affinity with yours.

Commodity productsClearly for an item in general use such as a commodity (cosmetic/personal hygiene, food, cleaning materials) you do not need a name and address and door-to-door (see Chapter 9) is an easy and cheap way of delivering a marketing message to households. It is quite possible to target households fairly accurately by the type of persons living there. A number of organizations offer profiles of household types by area or street. A commodity cannot yet be sent over TV or radio or poster, though you can stick on samples to other printed media. Complex propositions Direct marketing is comfortable with complex propositions. You cannot deliver the small print in a TV advertisement or a poster or even really in a press advertisement (where the amount of reading is less suited to newsprint than in a printed brochure). Also, financial services are a personal matter suited to direct mail, which is a one-to-one medium, versus a newspaper, which is impersonal.

The recognized uses for direct marketing Drayton Bird (2000) considers there are five major activities that can be applied singly, in stages or over time, which develop arelationship for direct marketing to persuade the recipient to:

■ buy through the post;

■ ask for catalogues;

■ request a demonstration;

■ visit a retail establishment;


■ take part in some action.

ADVANTAGES OF DIRECT MARKETING

- Direct marketing offers the advantage of reaching large number of well-defined target customers and almost eliminates waste coverage. - Good quality databases are available from independent suppliers and the marketer can segment customer groups with considerable precision.- Direct marketer can personalise the message.- Direct marketing can deliver almost perfect offers to customers.- Marketer can build desired frequency level based on media.- Direct marketing offers creative flexibility in different media.- Direct marketer can quickly develop a list of specific profiles for direct mail. - Direct marketing is more effective in building customer relationship.- It is very cost effective considering the sale generated per contact.- The results can be measured most accurately.

WHY LG FOLLOWED DIRECT MARKETING STRATEGY FOR MICROWAVES?

- People were Unaware of Usage and Utility of MWOs- To Research Regarding Consumer Buying Behavior Pattern- Customized MWOs Launched According To Geographic Segmentation - Home Demonstration And Health Platform as USP- Post Purchase Costumer Satisfaction - Market Research For Consumer Buying Behavior Pattern- Spreading Awareness About MWOs in People- Customization of Product as Per Consumer Preference- H o m e D e m o n s t r a t i o n a n d P o s t P u r c h a s e S e r v i c e

MARKETING STRATEGIES OF DAWLANCE AND LG

Comparative Study.

The study is based on the comparison of marketing strategies applied in LG. and Dawlance. In this study, the main focus to see the effectiveness of the marketing strategies applied by both the companies — Dawlance and LG, for selling their products particularly Refrigerators.

Just to understand the marketing strategies in general and refrigeration market in particular, one should know that what marketing strategies ought to be? Who are the main players in the market? What kind of other products do they produce? How do they promote and supply their products? What type of competition is going on in the market? And finally what are the marketing strategies being applied by both the companies? These are the questions to be addressed, but the main theme is the marketing strategies of Dawlance and LG Refrigerators. This paper is mainly divided in to four sections.

The first section deals with the marketing strategies in general. The second section focuses on the main players of Refrigerators in the Pakistan market. The third section sheds light upon


the marketing strategies of Dawlance and L.G. Though the marketing strategies of all the products may be the same. But mainly it has been focused on the refrigerator marketing strategies here. Finally, the paper is concluded in the last section.

All the information that is presented in this paper has been acquired and extracted from various primary and secondary sources. In this study, best possible efforts have been made to collect the correct and uncovered information. For this, the information has been collected by both primary and secondary sources. Primary data is based on the interviews from the top officials of both the companies based on the semi-structured questionnaire. The secondary data is based on the published reports and Internet.

MARKETING STRATEGIES IN GENERAL

Fluctuating customer requirements and competitive forces are putting more pressure on marketing and are demanding superior marketing strategy and tactical execution. The cycle time from product creation, to product launch, for a winning go-to-market strategy, leaves no margin for error.

Marketing puts the customer at the center of the organization. The organizations, which do so, reap the profits. The idle marketing ought to be or the key steps to a successful strategy can be summarized as:

BE CLEAR ABOUT MISSION

The common, customer-orientated thread running through all the activities of the organization and how we define the kind of market oriented organization we want to be.

MEASURE AGAINST STANDARDS AND CONTROL.

Main Players of the Refrigerators in Pakistan Market

Just to understand the refrigeration market, first of all we should know who the main players in the market are? Actually there are two types of marketers: those who manufacture refrigerators locally and those who import and market the same in Pakistan.

Local Manufacturers of Refrigerators are: Dawlance, Waves, Pel and Singer. These manufacturers roughly cater 80% need of the market.

Imported Manufacturers of Refrigerators are: LG, Super, General, Hair, Sam Sung, Indesit, Semins,

Parties import refrigerators from their principal and market the same in Pakistan. In-fact these all parties contribute only 20% of the market requirement. The above all are direct competitors of Dawlance and LG. electronics.

"Marketing Strategies of Dawlance and L.G Refrigerator"

Before discussing the marketing strategies of Dawlance and L.G, first we will go through the profiles of the companies in brief.


DAWLANCE:

Dawlance United Refrigeration Industries Ltd. was established in 1980. It is the Largest Company in Pakistan engaged in appliance business. Dawlance stands for durable & reliable household appliances. Its refrigerator Factory is located in Hyderabad. The main Objectives are to provide dependable and reliable product at reasonable price to majority of Pakistanis and to enhance their quality of Life. Present Market Share of Dawlance product is: refrigerators 65%, Washing Machines 35%, Microwave Oven 40%, Chest Freezers 45%, Air Conditioners 15%,

L.G.

Haniska International is a multinational company, located in Korea. LG is an agent of Haniska International in Pakistan market. LG is an importer of home appliances in Pakistan. It imports Refrigerators, Air Conditioners, Washing Machines & Microwave Ovens from Korea and China. LG has got around 300 dealers all over the country. Marketing objectives of L.G are: to provide world class product to upper and upper middle class to enjoy real luxury in their life. Present Market Share of L.G product is: Refrigerators 4%, Washing Machines 2%, Microwave Oven 3%, Chest Freezers nil, Air Conditioners 25%.

MARKETING STRATEGIES

The marketing mix is the organization's overall offer, or value, to the customer. 'The basic marketing mix is often nick named "the 4Ps" (product, place/distribution, pricing, promotion); these are elements in the marketers armory — aspects that can be manipulated to keep ahead of the competition'. Here I've explored the marketing strategies of Dawlance in terms of marketing mix have been explored.

PRODUCT STRATEGY

The object of Dawlance is to provide refrigerator to all people who fall in lower middle, middle, and upper middle class in this country such that most of the families should have refrigerators in their home because they enhance better quality of life. Dawlance has got products, which are as per international standards and carry all the basic features, which need in any such type of appliances.

Dawlance believe that whatever they provide to their customers should be durable and reliable. All the products, which Dawlance market, are durable enough and customer can keep on using them for quite many years without any problem. It provides its refrigerators, 3 years compressor guarantee and 1 year chest freezer, and free service in spare parts under normal use.

Whereas, LG's objective is to provide world class product to upper class and upper middle class to enjoy real luxury in their life. Since LG is a Korean brand and being imported from


Korea, it has very advanced features, which are normally demanded by in developed countries.

LG also insures that whatever product they market should be durable enough which last quite many years and give trouble free service to their customers. It provides its refrigerators, five years compressor guarantee and one year free service in spare parts under normal use.

PRICING STRATEGY

Dawlance has got around 52 models in their refrigerator product line. From the price list and discussion had with their management, it appears that they have position their product pricing in such a way that their main focus is middle and upper middle class. However, they have some selected range for upper class as well. Product-wise price list enclosed in appendix for reference.

Dawlance has got a policy that their all product price should be the same in all cities and town in Pakistan market. Dawlance bear freight cost and make their product available to their dealers irrespective of where they are located. For this, they give uniform margin to their dealers irrespective of whether he is big or small.

Dawlance consider pricing as one of an important element of marketing mix. It believes that their retail prices should be uniform all over the country irrespective of whether customers buy from Peshawar or Karachi. In order to maintain a uniform price all over the country, Dawlance bear transportation charges and make the product available at cost price at dealer premises.

Whereas the LG pricing strategy is cost + fixed mark up to cover their GP. Since they cater to upper middle and upper class, therefore their 90% dealers are in big cities only. Product-wise price list enclosed in appendix for reference. LG follows pricing policy in which their normal formula is import cost + reasonable gross profit to cover their marketing expenses and also give them reasonable profit.

PROMOTION STRATEGY

Dawlance promotion budget is around 1.75% of their turnover. 40% spending of their budget is Print Media, 20% goes on TV, 20% on Out door activity and balance 20% on Sales Promotion activity. They believe that print media and out door activity help them to reach to their target customer. Due to satellite transmission and having multi-channels, it does not pay one unless you have very huge budget to spend on this media. On promotion, their spending is more on consumer incentive schemes. Since it pay them and there is direct relationship between sales and consumer. Further, it gives customer a direct benefit in shape of price reduction.

As far as Advertising strategy of LG is concerned, it is being planned and executed by LG, Korea through their Pakistan Office keeping in view their global approach and theme line. Local Agent of LG simply gives advice and coordinate in its implementation. Since LG is a multi-national brand, their spending on advertising is in such a way that their all product get promoted. Although for different product they have got different agent; like for TV, New Electronics/Karachi. For computer monitor, Vision Computer. For mobile phone, Chimera.


It was not possible to get the exact advertising budget of LG, but it appears from their spending and the figures collected from Pakistan Advertising Association and from some other sources that their spending is around 6/7 per cent of their sales in Pakistan territory. Due to being a multi-national company and as a part of their global Strategy they, most of the time, divert their funds from strong market and spend more on weak or under developed markets.

Further, as far as Sales Promotion strategy is concerned, it is being designed and implemented by their respective agent of each product in Pakistan. For the promotion of Home Appliances products: Hanaska International designs their own strategy. Their major approach and emphasis on promotion through trade. They offer very handsome incentives to their dealers, who in return push their product among the customer and thus they get their desired volumes in Pakistan. It has been noted that due to being import base product they are always high price vis-a-vis other brands in the market and it is one of the reason why they give so much emphasis on the motivation of dealers.

DISTRIBUTION STRATEGY

Dawlance has got around 800 dealers all over the country. Dawlance ensures that its refrigerators are available almost in all appliances markets of Pakistan. They have got 80% penetration in dealer sector. One can get very easily their product in any city or small town of Pakistan.

Dawlance has got various types of dealers according to their potential. Around 25% of dealers are "A-class" dealers who sell over 1000 units and above per year. "B-class" dealers are those dealers who sell from 400 units up to 999 units per year. They are around 50% in total dealer and the rest are in best 25% of "C-class" dealers sell from 200 up to 399 units per year.

In order to provide quick and timely delivery to their dealers: they have got big warehouses located in almost all big cities and towns. Whenever they get order from the dealer they try to provide supplies to their dealer from closest warehouse. In case stock is not available in the warehouse then it is delivered directly from Hyderabad Factory. The maximum delivery time incase stock is delivered from Hyderabad Factory is four (4) days. However if supply is given from closest warehouse then hardly it takes 2-3 hours time. They believe that, timely delivery of their product to the dealer, is one of an important element in their success in Pakistan.

As it has already been stated in earlier that LG refrigerators are imported. Mostly they import from Korea and some of the models are imported from China as well. LG relatively don't maintain loose stock at their end. Simply based on historical forecast and feedback of their dealer about the possible demand, they import from their principal.

They ask their dealer to maintain sufficient stock at-least 4-6 week at their end. Rather they believe in replenishment of dealer stock based on their sales. It means dealers stock always remain in within a limit, doesn't exceed beyond 6 week level.

As mentioned above, they have only 300 dealers mostly in big cities and some in small towns. They also have got a policy that retail price all over the country should be uniformed for the customers, whether he/she buy from Karachi, Islamabad, or Peshawar.


They also bear transportation cost and thus provide supplies at uniform rate to their dealers. They have got three big warehouses in Karachi, Lahore and in Islamabad. From these warehouses they feed their product to their dealers and thus they make their product available to them.

PRODUCT LIFE CYCLE

Dawlance is an ISO 9000 certified company and among its mission statement. It is one of their missions to provide quality product to their customers. Therefore, they ensure that every product, which is delivered from their factory, must go through rigorous quality check. So that only perfect product, free from any defect is delivered to their customers.

Since LG is an international name in home appliances, therefore LG ensures that their product must meet their rigorous quality standard. So, when it is delivered to the customer, it must meet customer's expectations.

AFTER SALES SERVICES

Dawlance believes that after sales service is one of the most important elements of marketing mix and thus give due emphasize in providing quality after sale service to its refrigerator customers. Dawlance has got qualified foreign-trained engineers in its team of after sale service and also properly trained technicians and supervisors who look after service centers and provide reliable quality after sales service to its customers.

Dawlance has got 17 its own service centers in different parts of country. Besides, they have got 34 franchise workshops to cover remote areas, where its service center doesn't exist. These are service centers and franchise workshops cover almost 99% market of Pakistan. Wherever Dawlance dealer is, there you'll find Dawlance workshop or either franchise workshop to take care of service need.

In order to provide satisfactory after-sales service, Dawlance ensures that in all of its service centers sufficient inventory of spare parts is maintained, even these are available with franchise workshops.

Dawlance has got the policy first of all to carryout repair, if required at customer place. Incase if refrigerator problem is not diagnosed at customer premises then it is taken to its workshop. Whenever they get any complain, they prepare job sheets and puts its record in computer and whenever at later date if complain is repeated, in that case they also have a history with them of such product in their data bank. Even after five years if you want to find out from Dawlance service center that how many times there refrigerators have been referred on account of technical problem to their center, they can dig out from their computer record. In nutshell, we can say that Dalliance's after sales service workshops are very well properly organized and they work according to international service standard. As far as service charges are concerned Dawlance consider that it is not a profit center rather it's a support center for sales.

As it has been mentioned earlier that LG has got market of refrigerators only in big cities and some of its big towns in Pakistan. Therefore, they have got relatively lesser number of service centers as compared to Dawlance. At present LG has got only eight after sales service centers


in Pakistan. From these service centers LG provides after sales service to each customers. They also maintain spare parts of serviceable items. Since their product is 100% imported, the souring of spare parts is only import based.

Relatively LG refrigerator's parts are expensive comparative to locally made because LG imports spare parts from Korea and various other LG production centers. One of the reasons for being these parts expensive is that LG's local agent has to pay almost 70% of the product cost towards import duty, sales tax and other import cost.

We can say that LG also believe in quality, after sale service to its customers and also considers after sales service as one of the important element of marketing mix.

CONCLUSION

From the above information, it has been analyzed that there is no comparison between Dawlance and LG. There are several reasons behind it. For example: Dawlance is a big local manufacturer of refrigeration industry in Pakistan. It has got all engineering capabilities and very good finance and of course technical know-how to produce internationally accepted quality refrigerators locally. On the other hand L.G is a multinational company and has got different agents in some of the big cities of Pakistan. It is simply an importer and imports refrigerator from Korea and markets the same in Pakistan.

Since Dawlance has very strong industrial base as well as deep-rooted marketing network in Pakistan, they don't feel any threat from any of their competitors, either local or from importers. In the contrary L.G refrigerator is an import-based activity. Every year due to weakness of Pak Rupee, US $ cost of import is going up and thus LG refrigerator is becoming costlier day by day. Therefore, they have a big challenge before them to maintain their market share and also to maintain their reasonable growth against local manufacturers.

All Dawlance products are made for middle, upper-middle and upper class. While LG products are made for upper-middle and upper class. Present market share of Dawlance refrigerators is 65% while L.G's present market share for refrigerators is 4%.

In the light of above evidences, it could be said that Dawlance is a leading company as compared to LG, due to its dominance in the market, lower prices, and availability of spare parts and after sale service, etc. Hence people prefer to buy their products. Dawlance is dominant in the Pakistan market because not of its marketing strategies but least competition by L.G. L.G being a foreign company suffers because of government policies by paying heavy import taxes. It means, it is not only the marketing strategies of any company which plays a dominant role but it the success of product lies in the marketing strategies as well as the policies of the Government i.e favorable or unfavorable. As far as the case of L.G is concerned, it is suggested that instead of depending on import it should install its plant in Pakistan so that it may lessen its burden on taxes.