ii semester-marketing management

8/22/2019 II Semester-Marketing Management

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Marketing Management

MBA II Semester


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Marketing Management

Marketing Management is a business discipline which is focused on the practical application of

marketing techniques and the management of a firm's marketing resources and activities.

Strategy:The selected strategy may aim for any of a variety of specific objectives, including

optimizing short-term unit margins, revenue growth, market share, long-term profitability, or

other goals.

Customer relationship management (CRM)

CRM is a widely-implemented strategy for managing a companys interactions with customers,clients and sales prospects. It involves using technology to organize, automate, and synchronize

business processesprincipally sales activities, but also those for marketing, customer service,

and technical support. The overall goals are to find, attract, and win new clients, nurture and

retain those the company already has, entice former clients back into the fold, and reduce the

costs of marketing and client service. Customer relationship management describes a company-

wide business strategy including customer-interface departments as well as other departments


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The three phases in which CRM support the relationship between a business and its customers

are to:

Acquire: CRM can help a business acquire new customers through contact management, selling,

and fulfillment.[3] Enhance: web-enabled CRM combined with customer service tools offers customers service

from a team of sales and service specialists, which offers customers the convenience of one-stop

shopping.[3]

:Retain CRM software and databases enable a business to identify and reward its loyal customers

and further develop its targeted marketing and relationship marketing initiatives.[4


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Tasks summarized in the table below:

Marketing Task

Identify targetmarkets

Management has to identify those customers with whomthey want to trade. The choice of target

markets will beinfluenced by the wealth consumers hold and thebusiness' ability to serve themMarket research

Management have to collect information on the currentand potential needs of customers in themarkets theyhave chosen to supply. Areas to research include howcustomers buy (which marketingchannels are used) andwhat competitors are offering

Product development

Businesses must develop products and services that meet needs and wants sufficiently to attracttarget customers to wish and buy

Marketing mix

Having identified the target markets and developed relevant products, management must thendetermine the price, promotion and distribution for the product. The marketing mix is tailored tooffer value to customers, to communicate the offer and to make it accessible and convenient

Market monitoring

The objective in marketing is to first attract customers -and then (most importantly) retain themby building a relationship. In order to do this effectively, they need feedback on customersatisfaction. They also need to feed this back into product design and marketing mix as customerneeds and the competitive environment changes


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Value chain is a chain of activities that a firm operating in a specific industry performs in order

to deliver a valuable product or service for the market. The concept comes from business

management and was first described and popularized by Michael Porter in his 1985 best-seller,

Activities

The value chain categorizes the generic value-adding activities of an organization. The activitiesconsidered under this product/service enhancement process can be broadly categorized under

two major activity-sets.

Physical/traditional value chain: a physical-world activity performed in order to enhance a product

or a service. Such activities evolved over time by the experience people gained from their business

conduct. As the will to earn higher profit drives any business, professionals (trained/untrained)practice these to achieve their goal.

Virtual value chain: The advent of computer-based business-aided systems in the modern world

has led to a completely new horizon of market space in modern business-jargon - the cyber-

market space. Like any other field of computer application, here also we have tried to implement

our physical world's practices to improve this digital world. All activities of persistent physical

world's physical value-chain enhancement process, which we implement in the cyber-market, arein general terms referred to as a virtual value chain.


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Marketing Information System

The marketing information system is a management information system designed to supportmarketing decision making.

A system that analyzes and assesses marketing information, gathered continuously from sources

inside and outside an organization. Timely marketing information provides basis for decisionssuch as product development or improvement, pricing, packaging, distribution, media selection,

and promotion. See also market information system.


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Digitalization

Integration of digital technologies into everyday life by the digitization of everything that can be

digitized.

. Customization


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Changing marketing practices

HOW MARKETING PRACTICES ARE CHANGING:SETTING UP WEB SITES

Context: Layout and design

Content

: Text, pictures, sound, and video the site contains

Community

: How the site enables user-to-user communication

Customization

: Sites ability to tailor itself to different users toallow users to personalize the site

Communication

: How the site enables site-to-user, user-to-site,or two-way communication


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Connection

Degree that the site is linked to other sites.

Commerce

Sites capabilities to enable commercial transactions


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From building brands through advertising to building brands through performance

From focusing on customer acquisition to focusing on customer retention

From no customer satisfaction measurement to in-depth customer satisfaction measurement

From over-promise, under-deliver to under-promise, over-deliver

Shift from E-business to E-commerce

Brick - Mortar Companies

Brick - Click Companies

Pure - Click Companies


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CONTEXT FACTORS

Attracting and Keeping Visitors

How can we get more prospects to know and visit our site? How can we use marketing to spread

word-of-mouth? How can we convert visitors into repeaters?How do we make our site more

experiential and real? How can we build a strong relationship with our customers? How can we

build a customer community? How can we capture and exploit customer data for up-sellingandcross-selling?How much should we spend on building and marketing our site.

Reducing the rate of customer defection.

Increasing the longevity of the customer relationship.

Enhancing the growth potential of each customer throughshare-of-wallet, cross-selling and up-

selling.

Making low-profit customers more profitable or terminating them.

Focusing disproportionate effort on high value customers.

Identify your prospects and customers. Do not go after everyone


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Marketing Information System


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The market environment is a marketing term and refers to all of the forces outside of

marketing that affect marketing managements ability to build and maintain successful

relationships with target customers. The market environment consists of both themacroenvironment and the microenvironment.

The microenvironment refers to the forces that are close to the company and affect its ability toserve its customers. It includes the company itself, its suppliers, marketing intermediaries,

customer markets, competitors, and publics.

The company aspect of microenvironment refers to the internal environment of the company.

This includes all departments, such as management, finance, research and development,

purchasing, operations and accounting. Each of these departments has an impact on marketing

decisions. For example, research and development have input as to the features a product can

perform and accounting approves the financial side of marketing plans and budgets


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The macroenvironment refers to all forces that are part of the larger society and affect the

microenvironment. It includes concepts such as demography, economy, natural forces, technology,politics, and culture.

2. Consumer Markets and Buying behaviour

Consumer is a broad label for any individuals or households that use goods and services

generated within the economy. The concept of a consumer occurs in different contexts, so that

the usage and significance of the term may vary

Buying behaviour

A marketing firm must ascertain the nature of the customers buying behaviour, if it is to market

its product properly. In order to entice and persuade a consumer to buy a product, marketers try

to determine the behavioural process of how a given product is purchased. Buying behaviour isusually split in two prime strands, whether selling to the consumer, known as business-to-

consumer (B2C) or another business, similarly known as business-to-business (B2B


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B2C buying behaviour

Example

This mode of behaviour concerns consumers, in the purchase of a given product. As an example,

if one pictures a pair of sneakers, the desire for a pair of sneakers would be followed by an

information search on available types/brands. This may include perusing media outlets, but mostcommonly consists of information gathered from family and friends.If the information search isinsufficient, the consumer may search for alternative means to satisfy the need/want. In this case,

this may be buying leather shoes, sandals, etc. The purchase decision is then made, in which the

consumer actually buys the product. Following this stage, a post-purchase evaluation is often

conducted, comprising an appraisal of the value/utility brought by the purchase of the sneakers.

If the value/utility is high, then a repeat purchase may be bought. This could then develop intoconsumer loyalty, for the firm producing the pair of sneakers.


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Market segmentation is a concept in economics and marketing. A market segment is a sub-set

of a market made up of people or organizations with one or more characteristics that cause them

to demand similar product and/or services based on qualities of those products such as price or

function. These can broadly be viewed as 'positive' and 'negative' applications of the same idea,splitting up the market into smaller groups.

Examples:

Gender

Price

Interests


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Marketing Mix

Product Price Place Promotion, People, Process and Physical Evidence

(C1): Corporation and competitor : The core of 4Cs is corporation and organization, while thecore of 4Ps is customers who are the targets for attacks or defenses.

(C2) : Commodity, (C3) : Cost, (C4) : Channel, (C5) : Communication

(C6) : Consumer (Needle of compass to Consumer)

The factors related to customers can be explained by the first character of four directions marked

on the compass model: N = Needs, W = Wants, S = Security and E = Education (consumer

education). (C7) : Circumstances (Needle of compass to Circumstances )

A formal approach to this customer-focused marketing mix is known as Four Cs (Commodity,Cost, Channel, Communication) in 7Cs compass model. Koichi Shimizu proposed a four Cs

classification in 1973
http://en.wikipedia.org/wiki/Four_Cshttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Four_Cshttp://en.wikipedia.org/wiki/Four_Cshttp://en.wikipedia.org/wiki/Four_Cs


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Product Decision-Concept

Product : It is the bundle of utilities that can satisfy the customer.

Product mix is a combination of products manufactured or traded by the same business house to

reinforce their presence in the market, increase market share and increase the turnover for more

profitability


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Product Mix Decisions

Often firms take decisions to change their product mix. These decisions are dictated by the above

factors and also by the changes occurring in the market place. Like the changing life-styles of

Indian consumers led BPL-Sanyo to launch an entire range of white goods like refrigerators ,washing machines, and microwave ovens .It also motivate the firm to launch other entertainmentelectronics. Rahejas, a well-known builders firm in Bombay, took a major decision to convert one

of its theatre buildings in the western suburbs of Bombay into a large garments and accessories

store for men ,women and children, perhaps the first of its kind in India to have almost all

products required by these customer groups Competition from low priced washing powders

(mainly Nirma) forced Hindustan Levers to launch different brands of detergent powder at

different price levels positioned at different market segments .Customer preferences for herbs,mainly shikakai motivated Lever to launch black Sunsilk Shampoo ,which has shikakai .Also ,low

purchasing power. and cultural bias against shampoo market made Hindustan Lever consider

smaller packaging mainly sachets , for single use .So, it is the changes or anticipated changes in the

market place that motivates a firm to consider changes in its product mix.


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New Product Development Strategies

The process

Idea Generation is often called the "fuzzy front end" of the NPD process

Ideas for new products can be obtained from basic research using a SWOT analysis

(Strengths, Weaknesses, Opportunities & Threats), Market and consumer trends, company's

R&D department, competitors, focus groups, employees, salespeople, corporate spies, trade

shows, or Ethnographic discovery methods (searching for user patterns and habits) may also

be used to get an insight into new product lines or product features.

Idea Screening

The object is to eliminate unsound concepts prior to devoting resources to them.

The screeners should ask several questions:

Will the customer in the target market benefit from the product?

What is the size and growth forecasts of the market segment/target market?

What is the current or expected competitive pressure for the product idea?

What are the industry sales and market trends the product idea is based on?

Is it technically feasible to manufacture the product?

Will the product be profitable when manufactured and delivered to the customer at thetarget price?


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Concept Development and Testing

Develop the marketing and engineering details

Investigate intellectual property issues and search patent data bases

Who is the target market and who is the decision maker in the purchasing process?

What product features must the product incorporate?

What benefits will the product provide?

How will consumers react to the product?

How will the product be produced most cost effectively?

Prove feasibility through virtual computer aided rendering, and rapid prototyping

What will it cost to produce it?

Testing the Concept by asking a sample of prospective customers what they think of the

idea. Usually via Choice Modelling.


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Business Analysis

Estimate likely selling price based upon competition and customer feedback

Estimate sales volume based upon size of market and such tools as the Fourt-Woodlockequation

Estimate profitability and breakeven point Beta Testing and Market Testing

Produce a physical prototype or mock-up

Test the product (and its packaging) in typical usage situations

Conduct focus group customer interviews or introduce at trade show

Make adjustments where necessary

Produce an initial run of the product and sell it in a test market area to determine customer

acceptance


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Technical Implementation

New program initiation Finalize Quality management system

Resource estimation

Requirement publication

Publish technical communications such as data sheets Engineering operations planning

Department scheduling

Supplier collaboration

Logistics plan

Resource plan publication

Program review and monitoring

Contingencies - what-if planning

Commercialization (often considered post-NPD)

Launch the product

Produce and place advertisements and other promotions

Fill the distribution pipeline with product

Critical path analysis is most useful at this stage

New Product Pricing Impact of new product on the entire product portfolio

Value Analysis (internal & external)

Competition and alternative competitive technologies

Differing value segments (price, value, and need)

Product Costs (fixed & variable)

Forecast of unit volumes, revenue, and profit


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Product life cycle management (or PLCM) is the succession of strategies used by business

management as a product goes through its life cycle. The conditions in which a product is sold

(advertising, saturation) changes over time and must be managed as it moves through itssuccession of stages.

To say that a product has a life cycle is to assert four things: that products have a limited life,

product sales pass through distinct stages, each posing different challenges, opportunities, and

problems to the seller,

profits rise and fall at different stages of product life cycle, and

products require different marketing, financial, manufacturing, purchasing, and human resource

strategies in each life cycle stage. Four Stages of Product Life cycle are:

1.Market Introduction Stage

costs are high

slow sales volumes to start

little or no competition

demand has to be created

customers have to be prompted to try the product

makes no money at this stage


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2 Growth Stage

costs reduced due to economies of scale

sales volume increases significantly

profitability begins to rise

public awareness increases

competition begins to increase with a few new players in establishing market

increased competition leads to price decreases

3. Maturity Stage

costs are lowered as a result of production volumes increasing and experience curve effects

sales volume peaks and market saturation is reached

increase in competitors entering the market

prices tend to drop due to the proliferation of competing products

brand differentiation and feature diversification is emphasized to maintain or increase market

share

Industrial profits go down


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4. Saturation Stage

costs become counter-optimal

sales volume decline or stabilize

prices, profitability diminish

profit becomes more a challenge of production/distribution efficiency than increased sales

Request for deviation

In the process of building a product following defined procedure, an RFD is a request for

authorization, grantedprior to the manufacture of an item, to depart from a particular

performance or design requirement of a specification, drawing or other document, for a specific

number of units or a specific period of time.

Market identification

Termination is not always the end of the cycle; it can be the end of a micro-entrant within the

grander scope of a macro-environment. The auto industry, fast-food industry, petro-chemical

industry, are just a few that demonstrate a macro-environment that overall has not terminated

even while micro-entrants over time have come and gone.


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Pricing Decisions

Pricing strategies

Pricing exercise

Ten ways to increase prices without increasing price - Winkler

Pricing Strategies

Premium pricing

Uses a high price, but gives a good product/service exchange e.g.Concorde, The Ritz Hotel

Penetration pricing

offers low price to gain market share - then increases price

e.g. France Telecom - to attract new corporate clients (or Telewest cable)

Economy pricing placed at no frills, low price

e.g. Soups, spaghetti, beans - economy brands


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Price skimming

where prices are high - usually during introduction

e.g new albums or films on release

ultimately prices will reduce to the parity Psychological pricing

to get a customer to respond on an emotional, rather than rational basis

.e.g 99p not 1.01 price point perspective

Product line pricing

rationale of a product range

e.g. MARS 32p, Four-pack 99p, Bite-size 1.29

Pricing variations

off-peak pricing, early booking discounts,etc

e.g Grundig offers a cash back incentive for expensive goods


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Geographical pricing

different prices for customers in different parts of the world

e.g.Include shipping costs, or place onPLC

Value pricing

usually during difficult economic conditions

e.g. Value menus at McDonalds


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Low High

Low

High

Economy

Strategy

e.g. Tesco

spaghetti

Penetration

e.g. Telewest

cable phones

Skimming

e.g. New film or

album

Premium

e.g. BA first

class

Price

Quality


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Ten ways to increase prices without increasing price Winkler

Revise the discount structure

Change the minimum order size

Charge for delivery and special services Invoice for repairs on serviced equipment

Charge for engineering, installation

Charge for overtime on rushed orders

Collect interest on overdue accounts

Produce less of the lower margin models in the line

Write penalty clauses into contracts

Change the physical characteristics of the product


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Pricing Objectives

Pricing objectives or goals give direction to the whole pricing process. Determining what

your objectives are is the first step in pricing. When deciding on pricing objectives you must

consider: 1) the overall financial, marketing, and strategic objectives of the company; 2) theobjectives of your product or brand; 3) consumer price elasticity and price points; and 4) the

resources you have available.

maximize long-run profit

maximize short-run profit

increase sales volume (quantity)

increase monetary sales increase market share

obtain a target rate of return on investment (ROI)

obtain a target rate of return on sales

stabilize market or stabilize market price: an objective to stabilize price means that the

marketing manager attempts to keep prices stable in the marketplace and to compete on non-

price considerations. Stabilization of margin is basically a cost-plus approach in which themanager attempts to maintain the same margin regardless of changes in cost.

company growth

maintain price leadership


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Pricing Policies and Constraints

Standard Procedure used by a firm to set wholesale and retail pricesfor its products or

services.

Different Pricing Methods

Cost-plus pricing :

Set the price at your production cost, including both cost of goods and fixed costs at your

current volume, plus a certain profit margin

Example: The Cost $20 in raw materials and production costs, and at current sales volume(or anticipated initial sales volume), your fixed costs come to $30 per unit. Your total cost is$50 per unit.


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Target return pricing

Set your price to achieve a target return-on-investment (ROI).

For example, let's use the same situation as above, and assume that you have $10,000

invested in the company. Your expected sales volume is 1,000 units in the first year. Youwant to recoup all your investment in the first year, so you need to make $10,000 profit on

1,000 units, or $10 profit per unit, giving you again a price of $60 per unit.Value-based pricing

Price your product based on the value it creates for the customer. This is usually the most

profitable form of pricing, if you can achieve it. The most extreme variation on this is "pay

for performance" pricing for services, in which you charge on a variable scale according to

the results you achieve.

Example: Let's say that your widget above saves the typical customer $1,000 a year in, say,energy costs. In that case, $60 seems like a bargain - maybe even too cheap. If your product

reliably produced that kind of cost savings, you could easily charge $200, $300 or more for

it, and customers would gladly pay it, since they would get their money back in a matter of

months


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Psychological pricing

Ultimately, you must take into consideration the consumer's perception of your price,

figuring things like:

Positioning - If you want to be the "low-cost leader", you must be priced lower than your

competition. If you want to signal high quality, you should probably be priced higher than

most of your competition.

Popular price points - There are certain "price points" (specific prices) at which people

become much more willing to buy a certain type of product. For example, "under $100" is a

popular price point. "Enough under $20 to be under $20 with sales tax" is another popular

price point, because it's "one bill" that people commonly carry. Meals under $5 are still a

popular price point, as are entree or snack items under $1 (notice how many fast-foodplaces have a $0.99 "value menu"). Dropping your price to a popular price point might

mean a lower margin, but more than enough increase in sales to offset it.

Fair pricing - Sometimes it simply doesn't matter what the value of the product is, even if

you don't have any direct competition

There is simply a limit to what consumers perceive as "fair". If it's obvious that your

product only cost $20 to manufacture, even if it delivered $10,000 in value, you'd have ahard time charging two or three thousand dollars for it


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Product Line Pricing

Product line pricing is a pricing strategy that uses one product with various class

distinctions.

ExampleAn example would be a car model that has various model types that change with

performance and quality. This pricing process is evaluated through consumer valueperception, production costs of upgrades, and other cost and demand factors.

New Product Pricing

Impact of new product on the entire product portfolio

Value Analysis (internal & external)

Competition and alternative competitive technologies

Differing value segments (price, value, and need)

Product Costs (fixed & variable)

Forecast of unit volumes, revenue, and profit

ii semester-marketing management

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