Principles and Practice of Marketing (DSCM II) Notes

PRINCIPLES AND PRACTICE OF MARKETING (DSCM MODULE II)
PRINCIPLES AND PRACTICE OF

MARKETING
DIPLOMA IN SUPPLIES CHAIN

MANAGEMENT
MODULE II
COURSE OUTLINE:
principles and practices of marketing notes: prepared and compiled by

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Mr. Kang’ethe Humphrey
COURSE UNIT: PRINCIPLES AND PRACTICE OF MARKETING

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Objectives a) Apply the principals, concepts and marketing tools in performing

supply management activities.
b) Identify the factors that influence consumer behavior in business
supply activities.
c) Co-ordinate the elements of the marketing mix in the marketing
process.
d) Explain the concept of frontline role in customer service provision.
Course content
Topic: Sub-topic
Nature and scope of sales
marketing. i. Meaning of marketing
ii. The marketing process
iii. Goals of marketing
iv. Marketing philosophies
v. Historical development of marketing
vi. Role of marketing in economic development
Marketing environment
i. Meaning of marketing environment
ii. Micro-environmental factors
iii. Macro-environmental factors
iv. Effects of environmental factors on marketing
Market segmentation and i. Meaning of market segmentation and targeting
targeting ii. Importance of market segmentation and targeting
iii. Basis of market segmentation
iv. Process of market segmentation and targeting
v. Benefits of market segmentation and targeting
vi. Limitations of market segmentation and targeting
Consumer behavior
i. Meaning of consumer market and organizational market
ii. Importance of studying consumer behaviour
iii. Factors influencing consumer and organizational buying behaviour
iv. Buying decision making process for consumer and organizational
markets
v. Role players in the buying decision process for consumer and
organization markets
Market mix
i. Definition of marketing mix
ii. Elements of the marketing mix
iii. Importance of the marketing mix elements
iv. Factors affecting the marketing mix elements
product
i. Meaning of product/service
ii. Classification of products

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iii. Product decisions

iv. New product development process
v. Product adoption process
vi. Product life cycle (PLC)
Price
i. Meaning of price
ii. Importance of price
iii. Price objectives
iv. Methods used in pricing products
v. Factors affecting pricing
Place/distribution
i. Meaning of place
ii. Importance of place/distribution
iii. Channels of distribution
iv. Functions performed by distribution channel members
v. Role of information communication technology (ICT) in distribution.
promotion
i. Meaning of promotion
ii. Importance of promotion
iii. Promotion elements
Customer care
i. Meaning of customer care
ii. Role of customer care
iii. Areas of customer care services
iv. Sources of customer complaints
Emerging trends and

issues in marketing i. Emerging trends and issues in marketing
ii. Challenges posed by the emerging trends and issues in marketing
iii. Ways of coping with the challenges posed by emerging trends and
issues in marketing.
NATURE AND SCOPE OF SALES AND MARKETING

DEFINATION OF MARKETING:

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Marketing is defined by the American Marketing Association as “the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large.”
If you read the definition closely, you see that there are four activities, or components, of marketing:
1. Creating. The process of collaborating with suppliers and customers to create offerings that have
value.
2. Communicating. Broadly, describing those offerings, as well as learning from customers.
3. Delivering. Getting those offerings to the consumer in a way that optimizes value.
4. Exchanging. Trading value for those offerings.
THE MARKETING PROCESS:
The process of analyzing opportunities in the market, selection of the target markets, and development of
the Marketing Mix and management of the marketing efforts is called the marketing process. The
following four steps are included in the marketing process that primarily focuses the target customers.
The Marketing Process involves the following steps:
1. Analysis of the opportunities in the market.
2. Selection of the target market.
3. Development of marketing mix.
4. Management of marketing efforts.
1. Analysis of the Opportunities in the Market:
This involves analyzing the market in order to find the opportunities that should be availed. These
opportunities are related to the needs and wants of the customers that are not properly satisfied by the
competitors in the market. A company that is initiating the marketing process focuses the opportunities
that would be beneficial in the long run success so that its performance would be effectively improved.
For this purpose, the company gets help from the marketing information system (MIS), which plays a
significant role in providing useful information about the market.

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The company also conducts effective market research in order to obtain valuable information about the
customers, competitors, general trends, and any extraordinary change occurring in the market that can be
useful for the company. Then company identifies the potential opportunities from the collected
information and split the whole market into different segment. These segments are based on some factors
like age group, geographical location etc. The company evaluates each segment separately to check the
potential of the segment in the light of its strengths and weaknesses. Finally, it selects the target market
segment to proceed further.
2. Selection of the Target Market:
This is the most important step of the marketing process in which the target customers are selected. For
this purpose, the company conducts a careful analysis of the target markets in order to choose the final
customers. As it is obvious that the company cannot satisfy the needs and wants of the whole market
therefore it must divide the whole market into different segments and choose the segment that will best
meet its strengths and opportunities. This will entail the following.
 Market Segmentation:
The process in which the whole market is split into different units of consumers, each unit having similar
wants, characteristics and behavior of consumers which need different marketing mixes and strategies.
 Market Targeting:
In this process the targeted segments of the total market are evaluated to ascertain the attractiveness of
each segment so that the one or two most suitable and potential segments should be selected and entered.
The simple rule of selecting the target unit or segment is that it must provide the opportunity to the
company to create potential customer value in the long run. Another important rule is that a certain
company has the option to satisfy the needs and wants of one or two segments. In this case the company
focuses on that relevant segments and develops its products and strategies for them only. Such small
segments are called “niches”. The company has also another option to split the whole market into
different segments and offers different products and marketing mixes to each segment of the market. But
the most effective method is to focus on one or two segments and after succeeding in those segments,
further new segments should be targeted.
 Market Positioning:

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This concept relates to the positioning of the product of a company in the minds of the customers as
compared to the products of competitors. In other words the company tries to maintain a clear and
specific perception in customers about its products. When a company wants to position its product, it first
specifies the competitive edge for which it offers competitive advantages to its target customers. The
whole marketing program of the company should concentrate its identified positioning strategy. The
positioning is effective when the company truly provides the efficient, competitive offering to its
customers in order to give them maximum value as compared to the offering of competitors.
3. Development of Marketing Mix:
After setting of a complete marketing strategy of a company, then it is ready to initiate the planning of its
marketing mix.
 Marketing Mix:
Marketing Mix is composed of certain variables of markets that are mixed by the company in order to
generate certain desired response in the targeted segments.
In fact the demand of the product is influenced by the use of certain activities of the marketing mix. The
marketing mix is composed of the following four P’s.
 Product: means any offering (goods or services) to the market by the company.

 Price: means the money paid by the customers to obtain the product.
 Place: means the efforts which ensure the availability of the product in the market to customers.
 Promotion: means all the efforts by the company that ensure the sale of products to customers
through better provision of information about the advantages of the product.
A company develops an effective marketing program in which a suitable combination of marketing mix is
blended so that they are efficiently coordinated into a useful program to provide the greater customer
value in order to accomplish the company’s objectives.
4P’s of marketing mix are from the seller perspective. In certain cases the 4C’s are replaced by the 4P’s
which are
 Product means Customer Solution
 Price means Customer Cost
 Place means Convenience

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 Promotion means Communication
4. Management of Marketing Efforts:
This is actually the action phase of the development marketing program in which a suitable marketing
mix is set for a target market. For the management of marketing efforts four functions are adopted which
are as follow.
 Analysis of the Market in which the company identifies the internal strengths and weaknesses
along with the external opportunities and threats.
 Marketing Planning in which certain marketing plans or strategies are developed so that the
overall objective of the marketing should be accomplished.
 Marketing Implementation in which the developed plans and strategies are practically
implemented in order to achieve the marketing objectives.
 Marketing Control in which the performance results of the marketing plans and strategies are
evaluated and necessary steps are taken to ensure the accomplishment of overall marketing
objectives of the company.
MARKETING GOALS:
 Increase sales
 Build brand awareness
 Grow market share
 Launch new products or services
 Target new customers
 Enter new markets internationally or locally
 Improve stakeholder relations
 Enhance customer relationships
 Improve internal communications
 Increase profit

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MARKETING PHYLOSOPHIES:
There are five major alternative marketing management philosophies or often which are also known as
alternative marketing orientations or concepts under which organizations conduct their marketing
activities. These are
 The production concept

 The product concept
 Selling concept
 The marketing- orientation/concept
 The societal marketing concept
Therefore, under the marketing philosophy, there are following five concepts:
Production Concept:
Production concept lays emphasis on availability and affordability of products. If these two elements are
present in marketing, the enterprise will succeed. Therefore, marketing should aim at the reduction in the
cost of production and concentrate on mass production and distribution. This concept holds that potential
exchange would be realized when the products are inexpensive and widely available.
However, this concept is not entirely true. Sometimes customers don’t always buy products which are
inexpensive and easily available. For example, fleet shoes.
Product Concept:
Product concept lays emphasis on ‘quality of production’ rather than ‘quantity of production’. Therefore,
this concept insists that enterprise should concentrate on product and its continuous improvement over
time because customers favor high quality products and are ready to pay higher prices for them.
The enterprises following this concept direct their maximum efforts into creating superior products and
improving the existing products. However, the main drawback of this concept is that customers will buy
the product only if they require the same. For example, a firm may be dealing in very spacious, luxurious
and expensive cars but the customers will demand same only when they really need them and can afford
their price.

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Selling Concept:
This concept stresses on attracting and persuading customers to buy the product by making aggressive
selling and promotional efforts. Thus, the focus of business firms is to ensure that the sale of products
through aggressive selling techniques such as advertising, personal selling and sales promotion without
giving any consideration to customers’ satisfaction.
The main aim of selling is to convert the goods into cash by using fair or unfair means. But the buyers
cannot be manipulated every time; hence selling can be successful only for short period but not during
long period.
Marketing Concept:
According to this concept, customer satisfaction is the key to organizational success. It assumes that a
firm can achieve its objective of maximizing profit in the long run only by identifying and satisfying the
need of present and prospective buyers in an effective way. Business firms don’t sell what they can make;
rather they make and sell what customers want. This concept is based on the following pillars:
i. To identify the market or customers who are selected as the target of marketing effort.
ii. To understand the needs and wants of customers in the target market.
iii. Developing products or services for satisfying the needs of the target customers.
iv. To ensure better satisfaction of needs of the target market as compared to competitors.
v. Do all this at a profit.
The Social Marketing Concept:
The marketing concept has been criticized by some of the people because of the challenges posed by
social problems like environmental pollution, deforestation, population explosion, inflation etc. This is
because any activity which results in customer satisfaction but is harmful for the interest of the society at
large cannot be justified. Therefore, the firms must perform the functions of marketing keeping in view
the social welfare. For example. No to plastic bags, recycled paper.
HISTORICAL DEVELOPMENT OF MARKETING:

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Beginning with the Industrial Revolution in the late 1800s, companies were production oriented. They
believed that the best way to compete was by reducing production costs. In other words, companies
thought that good products would sell themselves. Perhaps the best example of such a product was Henry
Ford’s Model Automobile, the first product of his production line innovation. Ford’s production line
made the automobile cheap and affordable for just about everyone. The production era lasted until the
1920s, when production-capacity growth began to outpace demand growth and new strategies were called
for. There are, however, companies that still focus on production as the way to compete.
From the 1920s until after World War II, companies tended to be selling oriented, meaning they believed
it was necessary to push their products by heavily emphasizing advertising and selling. Consumers during
the Great Depression and World War II did not have as much money, so the competition for their
available dollars was stiff. The result was this push approach during the selling era. Companies like the
Fuller Brush Company and Hoover Vacuum began selling door-to-door and the vacuum-cleaner salesman
(they were always men) was created. Just as with production, some companies still operate with a push
focus.
In the post–World War II environment, demand for goods increased as the economy soared. Some
products, limited in supply during World War II, were now plentiful to the point of surplus. Companies
believed that a way to compete was to create products different from the competition, so many focused on
product innovation. This focus on product innovation is called the product orientation. Companies like
Procter & Gamble created many products that served the same basic function but with a slight twist or
difference in order to appeal to a different consumer, and as a result products proliferated. But as
consumers had many choices available to them, companies had to find new ways to compete. Which
products were best to create? Why create them? The answer was to create what customers wanted,
leading to the development of the marketing concept. During this time, the marketing concept was
developed, and from about 1950 to 1990, businesses operated in the marketing era.
So what era would you say we’re in now? Some call it the value era: a time when companies emphasize
creating value for customers. Is that really different from the marketing era, in which the emphasis was on
fulfilling the marketing concept? Maybe not. Others call today’s business environment the one-to-one era,
meaning that the way to compete is to build relationships with customers one at a time and seek to serve
each customer’s needs individually. For example, the longer you are customer of Amazon, the more detail
they gain in your purchasing habits and the better they can target you with offers of new products. With

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the advent of social media and the empowerment of consumers through ubiquitous information that
includes consumer reviews, there is clearly greater emphasis on meeting customer needs. Yet is that
substantially different from the marketing concept?
Still others argue that this is the time of service-dominant logic and that we are in the service-dominant
logic era. Service-dominant logic is an approach to business that recognizes that consumers want value no
matter how it is delivered, whether it’s via a product, a service, or a combination of the two. Although
there is merit in this belief, there is also merit to the value approach and the one-to-one approach. As you
will see throughout this book, all three are intertwined. Perhaps, then, the name for this era has yet to be
devised.
Whatever era we’re in now, most historians would agree that defining and labeling it is difficult. Value
and one-to-one are both natural extensions of the marketing concept, so we may still be in the marketing
era. To make matters more confusing, not all companies adopt the philosophy of the era. For example, in
the 1800s Singer and National Cash Register adopted strategies rooted in sales, so they operated in the
selling era forty years before it existed. Some companies are still in the selling era. Recently, many
considered automobile manufacturers to be in the trouble they were in because they work too hard to sell
or push product and not hard enough on delivering value.
ROLE OF MARKETING IN ECONOMIC DEVELOPMENT:
 Marketing Enables Profitable Transactions to Occur
Marketing educates customers so that they can find the products they want, make better choices about
those products, and extract the most value from them. In this way, marketing helps facilitate exchanges
between buyers and sellers for the mutual benefit of both parties. Likewise, good social marketing
provides people with information and helps them make healthier decisions for themselves and for others.
 Marketing Delivers Value
Marketing doesn’t only deliver value to customers, but it translates the same to the firm as it develops a
reliable customer base and increases its sales and profitability. So when we say that marketing delivers
value, marketing delivers value to both the customer and the company. Franklin D. Roosevelt, the U.S.
president with perhaps the greatest influence on our economic system, once said, “If I were starting life

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over again, I am inclined to think that I would go into the advertising business in preference to almost any
other. The general raising of the standards of modern civilization among all groups of people during the
past half century would have been impossible without the spreading of the knowledge of higher standards
by means of advertising.” Marketing finishes the job by ensuring that what is delivered is valuable.
 Marketing Benefits Society
Marketing benefits society in general by improving people’s lives in two ways. First, as we mentioned, it
facilitates trade. As you have learned, or will learn, in economics, being able to trade makes people’s lives
better. Otherwise people wouldn’t do it.Because better marketing means more successful companies, jobs
are created. This generates wealth for people, who are then able to make purchases, which, in turn, creates
more jobs.
 Marketing enables consumers to make informed decisions
Because of marketers who try to deliver offerings of greater value to consumers and are effectively
communicating that value, consumers are able to make more informed decisions about a wider array of
choices. From an economic perspective, more choices and smarter consumers are indicative of a higher
quality of life.
 Marketing Costs Money
Marketing can sometimes be the largest expense associated with producing a product. In the soft drink
business, marketing expenses account for about one-third of a product’s price—about the same as the
ingredients used to make the soft drink itself. At the bottling and retailing level, the expenses involved in
marketing a drink to consumers like you and me make up the largest cost of the product.
Some people argue that society does not benefit from marketing when it represents such a huge chunk of
a product’s final price. In some cases, that argument is justified. Yet when marketing results in more
informed consumers receiving a greater amount of value, then the cost is justified.
 Marketing Offers People Career Opportunities

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Marketing is the interface between producers and consumers. In other words, it is the one function in the
organization in which the entire business comes together. Being responsible for both making money for
your company and delivering satisfaction to your customers makes marketing a great career. In addition,
because marketing can be such an expensive part of a business and is so critical to its success, companies
actively seek good marketing people. At the beginning of each chapter in this book, we profile a person in
the marketing profession and let that person describe for you what he or she does. As you will learn,
there’s a great variety of jobs available in the marketing profession. These positions represent only a few
of the opportunities available in marketing.
 Marketing research. Personnel in marketing research are responsible for studying markets and
customers in order to understand what strategies or tactics might work best for firms.
 Merchandising. In retailing, merchandisers are responsible for developing strategies regarding
what products wholesalers should carry to sell to retailers such as Target and Walmart.
 Sales. Salespeople meet with customers, determine their needs, propose offerings, and make sure
that the customer is satisfied. Sales departments can also include sales support teams who work
on creating the offering.
 Advertising. Whether it’s for an advertising agency or inside a company, some marketing
personnel work on advertising. Television commercials and print ads are only part of the
advertising mix. Many people who work in advertising spend all their time creating advertising
for electronic media, such as Web sites and their pop-up ads, podcasts, and the like.
 Product development. People in product development are responsible for identifying and
creating features that meet the needs of a firm’s customers. They often work with engineers or
other technical personnel to ensure that value is created.
 Direct marketing. Professionals in direct marketing communicate directly with customers about
a company’s product offerings via channels such as e-mail, chat lines, telephone, or direct mail.
 Digital media. Digital media professional’s combine advertising, direct marketing, and other
areas of marketing to communicate directly with customers via social media, the Web, and
mobile media (including texts). They also work with statisticians in order to determine which
consumers receive which message and with IT professionals to create the right look and feel of
digital media.
 Event marketing. Some marketing personnel plan special events, orchestrating face-to-face
conversations with potential and current customers in a special setting.

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 Nonprofit marketing. Nonprofit marketers often don’t get to do everything listed previously as
nonprofits typically have smaller budgets. But their work is always very important as they try to
change behaviors without having a product to sell.
 Developing products that satisfy needs, including products that enhance society’s quality of life
 Creating a competitive environment that helps lower product prices
 Developing product distribution systems that offer access to products to a large number of
customers and many geographic regions
 Building demand for products that require organizations to expand their labor force
 Offering techniques that have the ability to convey messages that change societal behavior in a
positive way (e.g., anti-smoking advertising)
CRITICISMS OF MARKETING:
While marketing is viewed as offering significant benefits to organizations and to society, the fact that
marketing is a business function operating in close contact with the public opens this functional area to
extensive criticism.
Among the issues cited by those who criticize marketing are:
 Marketing Encourages People to Purchase What They Do Not Need
Possibly the criticism most frequently made about marketing is that marketers are only concerned with
getting customers to buy whether they want the product or not. The root of this argument stems from the
belief that marketers are only out to satisfy their own needs and really do not care about the needs of their
customers.
As we will discuss, while many marketers are guilty of manipulating customers into making unwanted
purchases, the vast majority understand that undertaking such tactics will not lead to loyal customers and,
consequently, is unlikely to lead to longer term success.
 Marketers embellish (exaggerate) Product Claims
Marketers are often criticized for exaggerating the benefits offered by their products. This is especially
the case with the part of marketing that engages in customer communication, such as advertising and

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salespeople. The most serious problems arise when product claims are seen as misleading customers into
believing a product can offer a certain level of value that, in fact, it cannot.
But sometimes there is a fine line between what a rational person should accept as a “reasonable
exaggeration” and what is considered downright misleading. Fortunately, many countries offer customers
some level of protection from misleading claims since such business practices may subject the marketer
to legal action. Again, using such tactics is likely to lead to marketing failure as customers will not be
satisfied and will likely not return.
 Marketing Discriminates in Customer Selection
We will see later that a key to marketing success is to engage in a deliberate process that identifies
customers who offer marketers the best chance for satisfying organizational objectives. This method,
called target marketing, often drives most marketing decisions, including product development and price
setting. But some argue that target marketing leads marketers to focus their efforts primarily on customers
who have the financial means to make more expensive purchases. They contend that doing so
intentionally discriminates against others, especially lower income customers who cannot afford to
purchase higher priced products. This group ends ups being targeted with lower quality (and in some
cases less safe) products or for some groups, no product options.
While this criticism is often valid, it is worth noting that while many “lower quality” products are inferior
to current high-end products, comparison of their quality to similar products from just a few years ago
shows there has been significant improvement. For instance, low cost electronic equipment, such as
digital cameras, offer more features compared to low cost cameras of just a few years ago. Thus, while
certain customer groups may not be the target market for certain new product offerings they may
eventually benefit from higher-end products.
 Marketing Contributes to Environmental Waste
In recent years one of the loudest complaints against marketing concerns its impact on the environment.
Those critical of marketing’s effect on the environment point to such issues as:
 The use of excessive, non-biodegradable packaging (e.g., use of plastics, placing small products in
large packages, etc.)
 The continual development of resource consuming products (e.g., construction of new buildings, golf
courses, shopping malls, etc.)

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 The proliferation of unsightly and wasteful methods of promotions (e.g., outdoor billboards, direct
mail, etc.).
Marketers have begun to respond to these concerns by introducing “green marketing” campaigns that are
not only intended to appease critics but also take advantage of potential business opportunities. For
example, auto makers see opportunity by creating new fuel efficient hybrid vehicles, the demand for
which has accelerated in the last few years. Also, certain retailers are finding financial opportunity and
promotional value by asserting their marketing muscle to encourage customers to become more
environmentally responsible. This can be seen with retailers, such as Wal-Mart, that are shifting its
inventory of light bulbs from standard incandescent types to more efficient fluorescent products. It is
expected that as environmental activism gains political clout and more consumer support, marketers will
see even more opportunity to market environmentally friendly products.
 Marketing Encroaches on Customers’ Right to Privacy
As we will see later in our discussion of Marketing Research, gathering and analyzing information on the
market in which marketers conduct business is a vital step in making good marketing decisions. Often the
most valuable information deals with customers’ buying behavior and especially determining which
factors influence how customers make purchase decisions.
But to some consumer advocates digging deep into customer buying behavior crosses the line of what is
considered private information. Of most concern to privacy advocates is marketers’ use of methods that
track user activity. In particular, they are critical of the growing use of advanced technologies that allow
marketers to gain access to customer shopping and information gathering habits. For instance, marketers
can use highly advanced techniques to track user activity on the Internet. Some marketers do so using
questionable practices, such as loading tracking software onto a user’s computer, without the knowledge
or permission of the user. One type of software called adware allows marketers to monitor users’ website
browsing activity and use this information to deliver advertisements based on users Internet habits.
Privacy issues are not limited to concerns with online tracking; marketers also use techniques to track
customers’ offline purchase activity. One example of offline tracking occurs when retail stores match
sales transactions to individual shoppers. This is easy to do when customers use purchase cards (a.k.a.
loyalty cards, discount cards, club cards, etc.) as part of the buying process.
Privacy issues are not restricted to marketing research. Other areas of marketing have also experienced
problems. For instance, there have been several recent incidences, most notably those involving

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mishandled credit card payment information, where a breach in customer privacy has placed customers at
risk.
The issue of customer privacy is likely to become one of the most contentious issues marketers face in the
coming years. If this continues marketers may soon face greater legal limits on how they conduct
business.
MARKETING ENVIRONMENT
This refers to factors and forces that affect a firm’s ability to build and maintain successful relationships
with customers. Three levels of the environment are:
 Micro (internal) environment - small forces within the company that affect its ability to serve its
customers.
 Meso environment – the industry in which a company operates and the industry’s market(s).
 Macro (national) environment - larger societal forces that affect the microenvironment.
In economics, macroeconomics encompasses societal perspective on resource allocation. Microeconomics

involves factors of resources availability and usage that impact individuals and businesses. As a company
operator, understanding the core microeconomic factors affecting your business helps in planning and
preparation, as well as long-term business strategy development. Six microeconomic business factors that
affect almost any business are customers, employees, competitors, media, shareholders and suppliers.
Micro Environment:
Introduction:

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Micro environment factors, are factors close to a business that have a direct impact on its business
operations and success. Before deciding corporate strategy businesses should carry out a full analysis of
their micro environment.
The diagram below shows the stakeholders involved in the Micro Environment
Customers:
The firm's marketing plan should aim to attract and retain customers through products that meets their
"wants and needs" and excellent customer service. Customers have the most direct microeconomic impact
on a business. The simple fact is that you can't successfully operate for-profit company without attracting
targeted customers. Knowing your ideal customer types and developing and presenting effective
marketing campaigns are integral to building a customer base and generating revenue streams.
Employees:

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Your workers produce, sell or service the goods and services that drive your business. The availability of
qualified, motivated employees for your business type is vital to economic success. If you operate a
highly technical business, for instance, you might have to pay more in salary to attract a limited number
of available, specialized workers.
Employing staff with relevant skills and experience is essential. This process begins at recruitment stage
and continues throughout an employee's employment via ongoing training and promotion opportunities.
Training and development play a critical role in achieving a competitive edge; especially in Service
Sector Marketing. If a business employs staff without motivation, skills or experience it will affect
customer service and ultimately sales.
Distribution Channels and Suppliers:
Sourcing goods used in production or resale and distributing your inventory to customers are important as
well. Manufacturers rely on materials suppliers and resale companies rely on manufacturers or
wholesalers to transport goods. To operate profitably, you need to get good value on products and
supplies and, in turn, offer good value to your customers with accessible solutions.
Also Suppliers provide businesses with the materials they need to carry out their business activities. A
supplier's behavior will directly impact the business it supplies. For example if a supplier supplies
substandard goods/service will directly impact on timescales or product quality. An increase in raw
material prices will affect an organization’s Marketing Mix strategy and may even force price increases.
Close supplier relationships are an effective way to remain competitive and secure quality products
Competitors:
The level of competition also impacts your economic livelihood. In theory, more competitors means you
share customers as the dollars spend diminishes. However, a large number of competitors in an industry
usually signifies lots of demand for the products or services provided. If an industry lacks competition,
you might not find enough demand to succeed in the long run.
The name of the game in marketing is differentiation. Can the organization offer benefits that are better
than those offered by competitors? Does the business have a unique selling point (USP)? Competitor
analysis and monitoring is crucial if an organization is to maintain or improve its position within the
market. If a business is unaware of its competitor's activities they will find it very difficult to “beat” their

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competitors. The market can move very quickly for example through a change in trading conditions,
consumer behavior or technological developments. As a business it is important to examine competitors'
responses to these changes so that you can maximize the impact of your response.
Investors:
Shareholders and investors may help fund your company at start-up or as you look to grow. Without
funds to build and expand, you likely can't operate a business. You could look to creditors, but you have
to repay loans with interest. By taking on investors, you share the risks of operating and often gain
support and expertise. You do give up some control, though.
As organizations require investment to grow, they may decide to raise money by floating on the stock
market i.e. move from private to public ownership. The introduction of public shareholders brings new
pressures as public shareholders want a return from the money they have invested in the company.
Shareholder pressure to increase profits will affect organizational strategy. Relationships with
shareholders need to be managed carefully as rapid short term increases in profit could detrimentally
affect the long term success of the business.
Media and the General Public:
Your local community and media also affect your ongoing business image. Communities often support
companies that provide jobs, pay taxes and operate with social and environmental responsibility. If you
don't do these things, you may run into negative public backlash. Local media often help your story
proliferate, for better or worse.
Positive media attention can “make” an organization (or its products) and negative media attention can
“break” an organization. Organizations need to manage the media so that the media help promote the
positive things about the organization and reduce the impact of a negative event on their reputation. Some
organizations will even employ public relations (PR) consultants to help them manage a particular event
or incident.

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Conclusion:
Businesses cannot always control micro environment factors but they should endeavor to manage them
along with Macro Environment and Environment factors.
MACRO-ENVIRONMENT:
Macro environment consists of the major external and uncontrollable factors that influence an
organization's decision making and affect its performance and strategies. It refers to all forces that are part
of the larger society
The PESTLE Factors

Political forces. First of all, political factors refer to the stability of the political environment and the
attitudes of political parties or movements. This may manifest in government influence on tax policies, or
government involvement in trading agreements.

Economic factors represent the wider economy which may include economic growth rates, levels
of employment and unemployment, costs of raw materials such as energy, petrol and steel, interest
rates and monetary policies, exchange rates and inflation rates. These may also vary from one country
to another.

Socio-cultural factors represent the culture of the society that an organization operates within. They may
include demographics, age distribution, population growth rates, level of education, distribution of wealth
and social classes, living conditions and lifestyle.

Technological factors refer to the rate of new inventions and development, changes in information
and mobile technology, changes in internet and e-commerce or even mobile commerce, and
government spending on research. There is often a tendency to focus Technological developments on

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digital and internet-related areas, but it should also include material development and new methods
of manufacture, distribution and logistics.
Legal factors such as national employment laws, international trade regulations and restrictions,

monopolies and mergers’ rules, and consumer protection. The difference between Political and Legal
factors is that Political refers to attitudes and approaches, whereas Legal factors are those which have
become law and regulations. Legal needs to be complied with whereas Political may represent influences,
restrictions or opportunities, but they are not mandatory.

Environmental impacts can include issues such as limited natural resources, waste disposal and
recycling procedures.
IMPACT OF ENVIRONMENTAL FACTORS ON MARKETING:
Micro Environment Factors
 The suppliers: Suppliers can control the success of the business when they hold the power.
The supplier holds the power when they are the only or the largest supplier of their goods; the
buyer is not vital to the supplier’s business; the supplier’s product is a core part of the buyer’s
finished product and/or business.
 The resellers: If the product the organisation produces is taken to market by 3 rdparty resellers
or market intermediaries such as retailers, wholesalers, etc. then the marketing success is
impacted by those 3rd party resellers. For example, if a retail seller is a reputable name then
this reputation can be leveraged in the marketing of the product.
 The customers: Who the customers are (B2B or B2C, local or international, etc.) and their
reasons for buying the product will play a large role in how you approach the marketing of
your products and services to them.

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 The competition: Those who sell same or similar products and services as your organisation
are your market competition, and they way they sell needs to be taken into account. How
does their price and product differentiation impact you? How can you leverage this to reap
better results and get ahead of them?
 The general public: Your organisation has a duty to satisfy the public. Any actions of your
company must be considered from the angle of the general public and how they are affected.
The public have the power to help you reach your goals; just as they can also prevent you
from achieving them.
Macro Environment Factors
 Demographic forces: Different market segments are typically impacted by common

demographic forces, including country/region; age; ethnicity; education level; household
lifestyle; cultural characteristics and movements.
 Economic factors: The economic environment can impact both the organisation’s production
and the consumer’s decision making process.
 Natural/physical forces: The Earth’s renewal of its natural resources such as forests,
agricultural products, marine products, etc must be taken into account. There are also the
natural non-renewable resources such as oil, coal, minerals, etc that may also impact the
organisation’s production.
 Technological factors: The skills and knowledge applied to the production, and the
technology and materials needed for production of products and services can also impact the
smooth running of the business and must be considered.
 Political and legal forces: Sound marketing decisions should always take into account
political and/or legal developments relating to the organisation and its markets.
 Social and cultural forces: The impact the products and services your organisations brings to
market have on society must be considered. Any elements of the production process or any
products/services that are harmful to society should be eliminated to show your organisation
is taking social responsibility. A recent example of this is the environment and how many
sectors are being forced to review their products and services in order to become more
environmentally friendly.

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Micro and macro environments have a significant impact on the success of marketing campaigns, and
therefore the factors of these environments should be considered in-depth during the decision making
process of a strategic marketer. Considering these factors will improve the success of your organisation’s
marketing campaign and the reputation of the brand in the long term.
Various Environmental factors Affecting Marketing Function.
July 19, 2012
Various factors affecting marketing function.
The environmental factors that are affecting marketing function can be classified into:
1) Internal environment and
2) External environment
Internal Environment of Marketing:
This refers to factors existing within a marketing firm. They are also called as controllable factors,
because the company has control over these factors:
a) It can alter or modify factors as its personnel, physical facilities, organization and function means, such
as marketing mix, to suit the environment.
There are many internal factors that influence the marketing function, they are:
Top Management: The organizational structure, Board of Director, professionalization of

management.etc. Factors like the amount of support the top management enjoys from different levels of
employees, shareholders and Board of Directors have important influence on the marketing decisions and
their implementation.
Finance and Accounting: Accounting refers to measure of revenue and costs to help the marketing and
to know how well it is achieving its objectives. Finance refers to funding and using funds to carry out the
marketing plan. Financial factors are financial policies, financial position and capital structure.
Research and Development: Research and Development refers to designing the product safe and
attractive. They are technological capabilities, determine a company ability to innovate and compete.

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Manufacturing: It is responsible for producing the desired quality and quantity of products. Factors
which influence the competitiveness of a firm are production capacity technology and efficiency of the
productive apparatus, distribution logistics etc.
Purchasing: Purchasing refers to procurement of goods and services from some external agencies. It is
the strategic activity of the business.
Company Image and Brand Equity: The image of the company refers in raising finance, forming joint
ventures or other alliances soliciting marketing intermediaries, entering purchase or sales contract,
launching new products etc.
In organization, the marketing resources like organization for marketing, quality of marketing, brand
equity and distribution network have direct bearing on marketing efficiency. They are important for new
product introduction and brand extension, etc.
External Environment of Marketing.
External factors are beyond the control of a firm, its success depends to a large extent on its adaptability
to the environment.
The external marketing environment consists of:
a) Macro environment, and
b) Micro environment
a) Micro environment: The environmental factors that are in its proximity. The factors influence the
company’s non-capacity to produce and serve the market. The factors are:
a) Suppliers: The suppliers to a firm can also alter its competitive position and marketing
capabilities. These are raw material suppliers, energy suppliers, suppliers of labor and capital.
According to Michael Porter, the relationship between suppliers and the firm epitomizes a power
equation between them. This equation is based on the industry condition and the extent to which
each of them is dependent on the other. The bargaining power of the supplier gets maximized in
the following situations:
 The seller firm is a monopoly or an oligopoly firm.
 The supplier is not obliged to contend with other substitute products for sale to the buyer group.
 The buyer is not an important customer.
 The suppliers’ product is an important input to the buyer’s business and finished product.

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 The supplier poses a real threat of forward integration.
b) Market Intermediaries: Every producer has to have a number of intermediaries for promoting,
selling and distributing the goods and service to ultimate consumers. These intermediaries may be
individual or business firms. These intermediaries are middleman (wholesalers, retailers, agent’s
etc.), distributing agency market service agencies and financial institutions.
c) Customers : The customers may be classified as :
 Ultimate customers: These customers may be individual and householders.
 Industrial customers: These customers are organization which buy goods and services for
producing other goods and services for the purpose of other earning profits or fulfilling other
objectives.
 Resellers: They are the intermediaries who purchase goods with a view to resell them at a profit.
They can be wholesalers, retailers, distributors, etc.
 Government and other non-profit customers: These customers purchase goods and services to
those for whom they are produced, for their consumption in most of the cases.
 International customers: These customers are individual and organizations of other countries
who buy goods and services either for consumption or for industrial use. Such buyers may be
consumers, producers, resellers, and governments.
d) Competitors: Competitors are those who sell the goods and services of the same and similar
description, in the same market. Apart from competition on price, there are like product
differentiation. Therefore, it is necessary to build an efficient system of marketing. This will bring
confidence and better results.
e) Public: It is duty of the company to satisfy the people at large along with its competitors and the
consumers. It is necessary for future growth. The action of the company do influence the other
groups forming the general public for the company. A public is defined as ‘any group that has an
actual or potential interest in or impact on a company’s ability to achieve its objective.’ Public
relations are certainly a broad marketing operation which must be fully taken care of.
Macro Environment:
Macro environment factors act external to the company and are quite uncontrollable. These factors do not
affect the marketing ability of the concern directly but indirectly the influence marketing decisions of the
company.

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These are the macro environmental factors that affect the company’s marketing decisions:
a) Demographic Forces: Here, the marketer monitor the population because people forms markets.
Marketers are keenly interested in the size and growth rate of population in different cities,
regions, and nations; age distribution and ethnic mix; educational levels; households patterns; and
regional characteristics and movements.
b) Economic Factors: The economic environment consists of macro-level factors related to means
of production and distribution that have an impact on the business of an organization.
c) Ecological (natural) Forces: Components of physical forces are earth’s natural renewal and non-
renewal resources. Natural renewal forces are forest, food products from agriculture or sea etc.
Non- renewal natural resources are finite such as oil, coal, minerals, etc. Both of these
components quite often change the level and type of resources available to a marketer for his
production.
d) Technological Factors: The technological environment consists of factors related to knowledge
applied, and the materials and machines used in the production of goods and services that have an
impact on the business of an organization.
e) Political and Legal Forces: Developments in political and legal field greatly affect the
marketing decisions. sound marketing decision cannot be taken without taking into account, the
government agencies, political party in power and in opposition their ideologies, pressure groups,
and laws of the land. These variables create tremendous pressures on marketing management.
Laws affect production capacity, capability, product design, pricing and promotion. Government
in almost all the country intervenes in marketing process irrespective of their political ideologies.
f) Social and Cultural Forces: This concept has crept into marketing literature as an alternative to
the marketing concept. The social forces attempt to make the marketing socially responsible. It
means that the business firms should take a lead in eliminating socially harmful products and
produce only what is beneficial to the society. These are numbers of pressure groups in the
society who impose restrictions on the marketing process

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MARKET SEGMENTATION AND TARGETING:

What is Market Segmentation (MS)?
Market segmentation is the process of dividing an entire market up into different customer segments/
units/sections.
According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups
of buyers who might require separate products and/or marketing mixes."
According to William J. Stanton, "Market segmentation in the process of dividing the total
heterogeneous market for a good or service into several segments. Each of which tends to be
homogeneous in all significant aspects."
 Market segmentation is a marketing concept which divides the complete market set up into
smaller subsets comprising of consumers with a similar taste, demand and preference.
 A market segment is a small unit within a large market comprising of likeminded individuals.
 One market segment is totally distinct from the other segment.
 A market segment comprises of individuals who think on the same lines and have similar
interests.
 The individuals from the same segment respond in a similar way to the fluctuations in the
market.
What is Market Targeting?
Targeting or target marketing then entails deciding which potential customer segments the company will
focus on or it is the selection of potential customers to whom a business wishes to sell products or
services to.
IMPORTANCE OF MARKET SEGMENTATION AND TARGETING.
1. Facilitates consumer-oriented marketing: Market segmentation facilitates formation of marketing-

mix which is more specific and useful for achieving marketing objectives. Segment-wise
approach is better and effective as compared to integrated approach for the whole market.

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2. Facilitates introduction of suitable marketing mix: Market segmentation enables a producer to
understand the needs of consumers, their behavior and expectations as information is collected
segment-wise in an accurate manner. Such information is purposefully usable. Decisions
regarding Four Ps based on such information are always effective and beneficial to consumers
and the producers.
3. Facilitates introduction of effective product strategy: Due to market segmentation, product

development is compatible with consumer needs as there is effective crystallization of the
specific needs of the buyers in the target market. Market segmentation facilitates the matching of
products with consumer needs. This gives satisfaction to consumers and higher sales and profit to
the marketing firm.
4. Facilitates the selection of promising markets: Market segmentation facilitates the identification
of those sub-markets which can be served best with limited resources by the firm. A firm can
concentrate efforts on most productive/ profitable segments of the total market due to
segmentation technique. Thus market segmentation facilitates the selection of the most suitable
market.
5. Facilitates exploitation of better marketing opportunities: Market segmentation helps to identify

promising market opportunities. It helps the marketing man to distinguish one customer group
from another within a given market. This enables him to decide his target market. It also enables
the marketer to utilize the available marketing resources effectively as the exact target group is
identified at the initial stage only.
6. Facilitates selection of proper marketing programme- Market segmentation helps the marketing
man to develop his marketing mix programme on a reliable base as adequate information about
the needs of consumers in the target market is available. The buyers are introduced to marketing
programme which is as per their needs and expectations.
7. Provides proper direction to marketing efforts: Market segmentation is rightly described as the
strategy of "dividing the markets in order to conquer them". Due to segmentation, a firm can
avoid the markets which are unprofitable and irrelevant for its marketing purpose and concentrate
on certain promising segments only. Thus due to market segmentation, marketing efforts are
given one clear direction for achieving marketing objectives.

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8. Facilitates effective advertising: Advertising media can be more effectively used because only the
media that reach the segments can be employed. It makes advertising result oriented.
9. Provides special benefits to small firms: Market segmentation offers special benefits to small
firms. The resources available with them are limited as they are comparatively new in the market.
Such firms can select only suitable market segment and concentrate all efforts within that
segment only for better marketing performance. Such firms can compete even with large firms by
offering personal services to customers within the segment selected.
10. Facilitates optimum use of resources: Market segmentation facilitates efficient use of available
resources. It enables a marketing firm to use its marketing resources in the most efficient manner
in the selected target market. The marketing firm selects the most promising market segment and
concentrates all attention on that segment only. This offers best results to the firm in terms of
sale, profit and consumer support as compared to the results available from spending such
resources on the total market.
In conclusion, it can be said that market segmentation offers benefits not only to marketing firms but also
to customers. The marketing job will be conducted efficiently and the available resources will be utilized
in a better mariner. These advantages also suggest the importance of market segmentation and make a
case in its favor.
BASES OF MARKET SEGMENTATION:
Segmentation is all about identifying specific groups of people based on common characteristics.
The four bases for segmenting consumer market are as follows: A. Demographic Segmentation B.
Geographic Segmentation C. Psychographic Segmentation D. Behavioral Segmentation.
A. Demographic Segmentation:
Demographic segmentation divides the markets into groups based on variables such as age, gender,
family size, income, occupation, education, religion, race and nationality. Demographic factors are the
most popular bases for segmenting the consumer group. One reason is that consumer needs, wants, and
usage rates often vary closely with the demographic variables. Moreover, demographic factors are easier
to measure than most other type of variables.
 Age:

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It is one of the most common demographic variables used to segment markets. Some companies offer
different products, or use different marketing approaches for different age groups. For example,
McDonald’s targets children, teens, adults and seniors with different ads and media. Markets that are
commonly segmented by age includes clothing, toys, music, automobiles, soaps, shampoos and foods.
 Gender:
Gender segmentation is used in clothing, cosmetics and magazines.
 Income:
Markets are also segmented on the basis of income. Income is used to divide the markets because it
influences the people’s product purchase. It affects a consumer’s buying power and style of living.
Income includes housing, furniture, automobile, clothing, alcoholic, beverages, food, sporting goods,
luxury goods, financial services and travel.
 Family cycle:
Product needs vary according to age, number of persons in the household, marital status, and number and
age of children. These variables can be combined into a single variable called family life cycle. Housing,
home appliances, furniture, food and automobile are few of the numerous product markets segmented by
the family cycle stages. Social class can be divided into upper class, middle class and lower class. Many
companies deal in clothing, home furnishing, leisure activities, design products and services for specific
social classes.
B. Geographic Segmentation:
Geographic segmentation refers to dividing a market into different geographical units such as nations,
states, regions, cities, or neighborhood’s. For example, national newspapers are published and distributed
to different cities in different languages to cater to the needs of the consumers.
Geographic variables such as climate, terrain, natural resources, and population density also influence
consumer product needs. Companies may divide markets into regions because the differences in
geographic variables can cause consumer needs and wants to differ from one region to another.
C. Psychographic Segmentation:

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Psychographic segmentation pertains to lifestyle and personality traits. In the case of certain products,
buying behavior predominantly depends on lifestyle and personality characteristics.
 Personality characteristics:
It refers to a person’s individual character traits, attitudes and habits. Here markets are segmented
according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc. This type of
segmentation is used when a product is similar to many competing products, and consumer needs for
products are not affected by other segmentation variables.
 Lifestyle:
It is the manner in which people live and spend their time and money. Lifestyle analysis provides
marketers with a broad view of consumers because it segments the markets into groups on the basis of
activities, interests, beliefs and opinions. Companies making cosmetics, alcoholic beverages and
furniture’s segment market according to the lifestyle.
D. Behavioral Segmentation:
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge of, attitude
towards, use of, or response to a product. Behavioral segmentation includes segmentation on the basis of
occasions, user status, usage rate ,loyalty status, buyer-readiness stage and attitude.
 Occasion:
Buyers can be distinguished according to the occasions when they purchase a product, use a product, or
develop a need to use a product. It helps the firm expand the product usage. For example, Cadbury’s
advertising to promote the product during wedding season is an example of occasion segmentation.
 User status:
Sometimes the markets are segmented on the basis of user status, that is, on the basis of non-user, ex-user,
potential user, first-time user and regular user of the product. Large companies usually target potential
users, whereas smaller firms focus on current users.
 Usage rate:

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Markets can be distinguished on the basis of usage rate, that is, on the basis of light, medium and heavy
users. Heavy users are often a small percentage of the market, but account for a high percentage of the
total consumption. Marketers usually prefer to attract a heavy user rather than several light users, and
vary their promotional efforts accordingly.
 Loyalty status:
Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who buy one brand
all the time), split loyal (consumers who are loyal to two or three brands), shifting loyal (consumers who
shift from one brand to another), and switchers (consumers who show no loyalty to any brand).
 Buyer readiness stage:
The six psychological stages through which a person passes when deciding to purchase a product. The six
stages are awareness of the product, knowledge of what it does, interest in the product, preference over
competing products, conviction of the product’s suitability, and purchase. Marketing campaigns exist in
large part to move the target audience through the buyer readiness stages.
PROCESS OF MARKET SEGMENTATION AND TARGETING.
1. Define the market
Clearly define the market of interest by determining the market’s geographic boundaries, sub-markets and
product-markets section; it is important to define specific market.
2. Create market segments
There is need to determine what types of different consumers form that overall market. This can be
achieved by reviewing the list of the segmented bases/variables and choose two or three of those variables
that we think (or know from market research) affect the purchasing behavior of the consumers like age
group, shopping style etc
3. Evaluate the proposed market segments for viability
Now that we have developed some market segments we may be required to evaluate them to ensure that
they are useable and logical. You need to quickly assess the segments against a checklist of factors.

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Basically, all that is required is to list the evaluation criteria and to provide a supporting comment, as is
demonstrated in the following table.
If, on occasion, the segments that you have created don’t appear to meet the evaluation criteria, then
simply revisit step two and change the segmentation variables that you have selected.
EVALUATION CRITERIA OUR ASSESSMENT
Homogeneous Segments should be similar in needs
Heterogeneous Assumes that age groups vary in needs, which is likely in this market
Measurable Market research data can be utilized
Substantial Given the segments are relatively broad, they should be individually
substantial
Accessible Various merchandising techniques can be used to promote and reach

each of these segments
Actionable/practical The firm has the capabilities to market to each segment, if required
Responsive Each market segment should respond better to a distinct marketing

mix, rather than a generic offering
4. Construct segment profiles
You may be required to describe the segments (develop a segment profile). The following is a checklist of
factors that you might consider. For some of these items below you may not know actually – in that case
either make a logical assumption or do not include the factor in the segment profile. Remember that the
task here is to describe and understand the segments a little more.
An example of how to complete this table is shown in segment profiles.

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KEY MEASURES
 Segment size measures
 Segment growth rate
 Proportion of the overall market
CONSUMER BEHAVIOR
 Main consumer needs
 Usage level
 Level of brand loyalty
 Price sensitivity
 Product involvement levels
 Retailer preferences
DESCRIPTION
 Geographic spread
 Demographic description
 Psychographic description
COMPETITION/COMMUNICATION
 Main competitive offerings
 Main media choices

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5. Evaluate the attractiveness of each segment
If you are required to select one target market from your list of market segments, then you need to use
some form of objective assessment. You can use some of the following factors in assessing the
attractiveness of each market segment.
Financial Issues
 Segment size
 Segment growth rate
 Profit margins
Structural Attractiveness
 Competitors
 Distribution channels
Strategic Direction
 Fit with firm’s strategy
 Fit with firm’s goals
Marketing Expertise
 Resources
 Capability
 Branding
6. Select target market(s)
Using the assessment information you have just constructed, you can select the most appropriate target
market for the firm. While there are many factors to consider, you should at least take into account: the
firm’s strategy, the attractiveness of the segment, the competitive rivalry of the segment, and the firm’s
ability to successfully compete.

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BENEFITS OF MARKET SEGMENTATION AND TARGETING
Segmentation of target markets has several advantages.
1. Determining market opportunities: Market segmentation enables to identify market opportunities.

The marketer can study the needs of each segment in the light of current offerings by the
competitors. From such study, the marketer can find out the current satisfaction of customers.
Segments with low level of satisfaction from present offering may represent excellent market
opportunities. For example, customers may not be satisfied with the current offering of water
purifiers in terms of product or after-sale service. Such situation enables a marketer to launch a
new range of water purifiers and market them well.
2. Adjustments in marketing appeals:Sellers can make best possible adjustments of their product
and marketing appeals. Instead of one marketing programme aimed to draw in all potential buy-
ers, sellers can create separate marketing programs designed to satisfy the needs of different
customers. Proper advertising and sales promotional appeals can be made depending on the target
audience.
3. Developing marketing programs: Companies can develop marketing programs and budgets based
on a clearer idea of the response characteristics of specific market segments. They can budget
funds to different segments depending on their buying response.
4. Designing a product:Market segmentation helps in designing products that really match the
demands of the target audience. Products with high market potential can be designed and directed
to meet the satisfaction of the target market.
5. Media selection:It helps in selection of advertising media more intelligently and in allocating
funds to various media. The funds are allocated to various media depending on the target audi-
ence, impact of the media, competitor advertising, and so on.
6. Timing of marketing efforts:It helps in setting the timings of the promotional efforts so that more
emphasis is placed during those periods when response is likely to be at its peak. For instance,
consumer goods can be heavily advertised to Christians during Christmas season and to Hindus
during Diwali time.
7. Efficient use of resources:By tailoring marketing programme to individual market segments,
management can do a better marketing job and make more efficient use of the marketing
resources. For example, a small firm can effectively use its limited resources – money, sales

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force, etc. – in one or two segmented markets rather than unsuccessfully aiming at a wider
market.
8. Better service to customers:Market segmentation enables a company to concentrate its marketing
efforts in a particular market area, thereby, providing a better service to the target customers.
Proper marketing segmentation can facilitate customer satisfaction.
9. Helps in fixing prices:The marketing segmentation also enables to fix prices of the goods and
services. Since different market segments have different price perceptions, it is necessary to adopt
different pricing strategies for the markets. For instance, the prices for lower-income groups have
to be lower and the product and promotional efforts are adjusted accordingly.
10. Assist in distribution strategies:Segmentation also assists in adopting suitable distribution
strategies. Different market segments may require different distribution mix. For example, if the
product is of very high quality intended to target the upper class, then it must be distributed at
prestigious outlets located at selective places.
11. Avoid head-on competition with other firms trying to capture the same customers.
12. Develop new offerings and expand profitable brands and products lines.
13. Remarket older, less-profitable products and brands.
14. Identify early adopters.
15. Redistribute money and sales efforts to focus on your most profitable customers.
16. Retain “at-risk” customers in danger of defecting to your competitors.
LIMITATIONS OF MARKET SEGMENTATION:
Market segmentation suffers from the following disadvantages:
Segmentation also has its limitations as it needs to be implemented in the proper manner. As
segmentation is one of the most important process in the marketing plan or for your business, you need to
know the limitations of segmentation and what pitfalls lie ahead if you go wrong with your target market
segment.
 Segments are too small
If the chosen segment is too small then you will not have the proper turnover which in turn will affect the
total margins and the viability of the business.
 Consumers are misinterpreted

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The right product to the wrong customers. What if your market research says that your customers want a
new soap and you come out with a new facial cream? The concept is same, cleanliness. But the concept is
completely different.
 Costing is not taken into consideration
Targeting a segment is ok but you also need to know how much you will have to spend to target a
particular segment. If it is a segment and you do not have the budget in place, then your segmentation
strategy is a failure.
 There are too many brands
Along with segmentation, you also need to check out the competition offered in the same segment from
other products. Getting into a segment already saturated will mean higher costs and lesser profit margins.
 Consumer is confused
If the consumer himself doesn’t know whether he will be interested in a particular product or not, than
that’s a sign that you need to get out of that segment / product.
 Product is completely new
If a product is completely new than there is no market research to base your segmentation on. You need
to market it to the masses and as acceptance increases, only then will you be able to focus on one
particular segment.
 Segmentation increases costs.
When a firm attempts to serve several market segments, there is a proliferation of products. Cost of
production rises due to shorter production runs and product variations.
 Larger inventory has to be maintained by both the manufacturer and the distributors.
 Promotion and distribution expenditures increase when separate programme are used for
different market segments.
 When characteristics of a market segment change, investment made already might
become useless.

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CONSUMER BEHAVIOUR:
Consumer behavior refers to the selection, purchase and consumption of goods and services for the
satisfaction of their wants. There are different processes involved in the consumer behavior. Initially the
consumer tries to find what commodities he would like to consume, then he selects only those
commodities that promise greater utility. After selecting the commodities, the consumer makes an
estimate of the available money which he can spend. Lastly, the consumer analyzes the prevailing prices
of commodities and takes the decision about the commodities he should consume.
CONSUMER AND ORGANIZATIONAL MARKETS:
Consumer behavior:It is the decision processes an individual or group go through in evaluating,

acquiring, using or consuming goods and services.
It is the study of consumers and the processes they use to choose, use and dispose off products and
services
Consumer market: These consists of all the individuals and households who purchase goods and
services for personal use.
Business/Organizational market: Organizational buyers buy goods and services for production, for their
own use or resale. e.g. Government agencies, manufacturers, and wholesalers.
IMPORTANCE OF STUDYING CONSUMER BEHAVIOR:
1. It helps identify consumers’ needs and satisfy them more effectively than

competitors. It makes marketing consumer-oriented. It is the key to succeed
2. It helps in achieving marketing goals. The key to a company’s survival, profitability and growth
in a highly competitive marketing environment is its ability to identify and satisfy unfulfilled
consumer needs better and sooner than the competitors.
3. It improves performance of the entire distribution system. Knowledge of consumer behavior is
equally useful for middlemen and salesmen to perform their tasks effectively in meeting
consumer needs and wants successfully.

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4. Marketing programme is instrumental in realizing marketing goals. This program consists of
product, price, promotion, and distribution decisions which should be based on the study of
consumer behavior.
5. It helps in Predicting Market trends. Consumer behavior can aid in projecting the future market
trends. Marketers finds enough time to prepare for exploiting the emerging opportunities and/ or
facing challenges and threats.
6. It helps the marketer in adjusting Marketing Programme over time. Consumer behavior studies
the consumer response pattern on a continuous basis. A marketer can easily come to know the
changes taking place in the market based on the current market trend which in turn can enable
him to make the necessary changes in marketing programme to adjust withthe market.
7. Provide value and customer satisfaction
8. Effectively target customers
9. Enhance the value of the company
10. Improve products and services
11. Create a competitive advantage
12. Understand how customers view their products versus their competitors' products
13. Expand the knowledge base in the field of marketing
14. Apply marketing strategies toward a positive effect on society
FACTORS INFLUENCING CONSUMER AND ORGANIZATIONAL BUYING BEHAVIOR:
Factors Affecting Consumer Behavior
There are various other factors influencing the consumer behavior such as social, cultural, personal and
psychological as explained below.
1. Cultural Factors
Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture, and social
class.
 Culture

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Basically, culture is the part of every society and is the important cause of person wants and behavior.
The influence of culture on buying behavior varies from country to country therefore marketers have to
be very careful in analyzing the culture of different groups, regions or even countries.
 Subculture
Each culture contains different subcultures such as religions, nationalities, geographic regions, racial
group’s etc. Marketers can use these groups by segmenting the market into various small portions. For
example marketers can design products according to the needs of a particular geographic group.
 Social Class
Every society possesses some form of social class which is important to the marketers because the buying
behavior of people in a given social class is similar. In this way marketing activities could be tailored
according to different social classes. Here we should note that social class is not only determined by
income but there are various other factors as well such as: wealth, education, occupation etc.
2. Social Factors
Social factors also impact the buying behavior of consumers. The important social factors are: reference
groups, family, role and status.
 Reference Groups
Reference groups have potential in forming a person attitude or behavior. The impact of reference groups
varies across products and brands. For example if the product is visible such as dress, shoes, car etc then
the influence of reference groups will be high. Reference groups also include opinion leader (a person
who influences other because of his special skill, knowledge or other characteristics).
 Family
Buyer behavior is strongly influenced by the member of a family. Therefore marketers are trying to find
the roles and influence of the husband, wife and children. If the buying decision of a particular product is
influenced by wife then the marketers will try to target the women in their advertisement. Here we should
note that buying roles change with change in consumer lifestyles.
 Roles and Status

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Each person possesses different roles and status in the society depending upon the groups, clubs, family,
organization etc. to which he belongs. For example a woman is working in an organization as finance
manager. Now she is playing two roles, one of finance manager and other of mother. Therefore her
buying decisions will be influenced by her role and status.
3. Personal Factors
Personal factors can also affect the consumer behavior. Some of the important personal factors that
influence the buying behavior are: lifestyle, economic situation, occupation, age, personality and self-
concept.
 Age
Age and life-cycle have potential impact on the consumer buying behavior. It is obvious that the
consumers change the purchase of goods and services with the passage of time. Family life-cycle consists
of different stages such young singles, married couples, unmarried couples etc which help marketers to
develop appropriate products for each stage.
 Occupation
The occupation of a person has significant impact on his buying behavior. For example a marketing
manager of an organization will try to purchase business suits, whereas a low level worker in the same
organization will purchase rugged work clothes.
 Economic Situation
Consumer economic situation has great influence on his buying behavior. If the income and savings of a
customer is high then he will purchase more expensive products. On the other hand, a person with low
income and savings will purchase inexpensive products.
 Lifestyle
Lifestyle of customers is another import factor affecting the consumer buying behavior. Lifestyle refers to
the way a person lives in a society and is expressed by the things in his/her surroundings. It is determined
by customer interests, opinions, activities etc and shapes his whole pattern of acting and interacting in the
world.
 Personality

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Personality changes from person to person, time to time and place to place. Therefore it can greatly
influence the buying behavior of customers. Actually, Personality is not what one wears; rather it is the
totality of behavior of a man in different circumstances. It has different characteristics such as:
dominance, aggressiveness, self-confidence etc which can be useful to determine the consumer behavior
for particular product or service.
4. Psychological Factors
There are four important psychological factors affecting the consumer buying behavior. These are:
perception, motivation, learning, beliefs and attitudes.
 Motivation
The level of motivation also affects the buying behavior of customers. Every person has different needs
such as physiological needs, biological needs, social needs etc. The nature of the needs is that, some of
them are most pressing while others are least pressing. Therefore a need becomes a motive when it is
more pressing to direct the person to seek satisfaction.
 Perception
Selecting, organizing and interpreting information in a way to produce a meaningful experience of the
world is called perception. There are three different perceptual processes which are selective attention,
selective distortion and selective retention. In case of selective attention, marketers try to attract the
customer attention. Whereas, in case of selective distortion, customers try to interpret the information in a
way that will support what the customers already believe. Similarly, in case of selective retention,
marketers try to retain information that supports their beliefs.
 Beliefs and Attitudes
Customer possesses specific belief and attitude towards various products. Since such beliefs and attitudes
make up brand image and affect consumer buying behavior therefore marketers are interested in them.
Marketers can change the beliefs and attitudes of customers by launching special campaigns in this
regard.
BUYING DECISION MAKING PROCESS FOR CONSUMER AND ORGANIZATIONAL

MARKETS.

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Consumer decision making process involves five various stages which clearly illustrates and explains
how the consumers make a purchasing decision. These stages are:
 Recognition of need or problem,

 Information search,
 Comparing the alternatives,
 Purchase and
 Post-purchase evaluation.
1. Problem/Need Recognition
Recognition of need or a problem is the first stage of the model. According to Bruner (1993) recognition
of a problem arises in the situation where an individual realizes the difference between the actual state of
affairs and desired state of affairs. Neal and Quester (2006) further state that the recognition of a problem
or need depend on different situations and circumstances such as personal or professional and this
recognition results in creation of a purchasing idea. For instance, consumer may recognize the need to
buy a laptop when there is need to carry it use it in different places which is convenient compared to a
desktop computer.

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2. Information Search
The next stage of the model is information search. Once the need is recognized, the consumer is likely to
search more product-related information before directly making a purchase decision. However, different
individuals are involved in search process differently depending on their knowledge about the product,
their previous experience or purchases or on some external information such as feedback from others.
Search of information process itself can be divided into two parts as stated by Oliver (2011): the internal
search and external search. In internal search, the consumers compare the alternatives from their own
experiences and memories depending on their own past experiences and knowledge. For example,
searching for fast food can be an example for internal search because customers often use their
knowledge and tastes to choose the right product they need rather than asking someone for an advice. On
the other hand, external search ends to be for bigger purchases such as home appliances or gadgets. For
instance, consumers who wish to buy new furniture or a mobile phone tend to ask friends’ opinion and
advices or search in the magazines and media before making a purchasing decision.
Winer (2009) argues that with the enhancing role of internet in professional and personal lives of people,
increasing numbers of individuals are turning to various resources in internet when searching for
information about product categories or specific brands. The author specifically highlights the role of
online user reviews and forums in terms of their significant impact upon information search stage of
consumer decision making process among internet users.
Colleagues, peers, friends and family members are highlighted as another important source of information
by Kahle and Close (2006). Moreover, according to Kahle and Close (2006) the nature of influence of
peers, friends and family members upon information search and consumer decision making process in
general depends on a range of factors such as the nature of relationships, the level of personal influence,
the extent of ‘opinion leadership’ associated with specific individuals etc.
3. Evaluation of Alternatives
After gathering enough information at the first stage the consumer gets into comparing and evaluating
that information in order to make the right choice. In this stage the consumer analyzes all the information
obtained through the search and considers various alternative products and services compares them

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according to the needs and wants. Moreover, another various aspects of the product such as size, quality,
brand and price are considered at this stage. Therefore, this stage is considered to be the most important
stage during the whole consumer decision making process.
Furthermore, according to Ha et al (2010), the process of evaluation of alternatives can sometimes be

difficult, time consuming and full of pressure for a consumer. This is because it is quite hard to find an
ideal product or service that satisfies the needs of the customer as there are numerous factors that hinder
the consumer purchasing decision making process. For instance, when it comes to online hotel reservation
or furniture purchasing evaluation process, it can be quite complex. Several factors and aspects need to be
considered before making a purchasing decision. Factors such as age, culture, taste and budget have all
impact on the evaluation process by the consumer. For example, when purchasing a furniture, the young
people consider the factors such as convenience and price whereas the old people are likely to consider
the quality and design.
Moreover, celebrity endorsement is seen as another factor with great potential impact on evaluation of
alternatives stages of consumer decision making process. Cant et al. (2010) explain the effectiveness of
celebrity endorsements with perceived greatness people associate with their idols and the willingness and
desire to become like their idols.
4. Purchase Decision
Once the information search and evaluation process is over, the consumer makes decision to make a final
purchase as he or she has already reviewed all the alternatives and came to a final decision point.
Purchased further can be classified into three different types: planned purchase, partially purchase and
impulse purchase (Kacen, 2002).
Kacen’s view is further supported by Hoyer and Macinnis (2008) stating that there are a number of
factors that can affect the purchasing process. For example, the desired product may not be available at
the stock. In this case the purchase process is delayed and consumer may consider buying the product
through online stores rather than visiting traditional physical stores.
According to Wiedmann et al. (2007) department store sales assistants play in integral role in terms of
impacting consumer purchase decision in a positive way from a business point of view. At the same time
Wiedmann et al. (2007) warn that this impact must not be done in a pushy manner, in which case it can
prove to be counter-productive.
5. Post-Purchase Evaluation

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The final stage in the consumer decision making process is post-purchase evaluation stage. Many
companies tend to ignore this stage as this takes place after the transaction has been done. However, this
stage can be the most important one as it directly affects the future decision making processes by the
consumer for the same product. Therefore this stage reflects the consumer’s experience of purchasing a
product or service. This view is further supported by Ofir (2005) mentioning that the consumer decision
making process is a repetitive action and a good experience is vital in reducing the uncertainty when the
decision to purchase the same product or service is considered the next time.
The opinions of peers, friends and family regarding the purchases made is specified as one of the most
important factors affecting the outcome of post-purchase evaluation by Perrey and Spillecke (2011). This
point is further expanded by Trehan and Trehan (2011), according to whom peer opinions regarding
product evaluations tend to impact customer level of satisfaction regardless of their level of objectivity.
Brink and Berndt (2009) also highlights the importance of the post-purchase evaluation stage. According
to the authors, the consumer may either get satisfaction or dissatisfaction depending on the evaluation of
the purchase and comparison of their own expectations. The outcome forms the experience of the
customer and it this experience is believed to have a direct impact on the next decision of the consumer to
purchase the same product from the same seller.
Simply, if the consumer is satisfies with the purchase it is likely that the purchase may be repeated while
if they have a negative experience from the purchase it is unlikely that the consumer may make the
decision to buy the same product from the same seller or even may not buy the product at all
There are five stages consumers experience with a purchase in a nutshell:
 Problem/Need Recognition: Recognize what the problem or need is and identify the product or
type of product which is required.
 Information Search:The consumer researches the product which would satisfy the recognized
need.
 Evaluation of Alternatives:The consumer evaluates the searched alternatives. Generally, the

information search reveals multiple products for the consumer to evaluate and understand which
product would be appropriate.
 Purchase Decision:After the consumer has evaluated all the options and would be having the
intention to buy any product, there could be now only two things which might just change the

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decision of the consumer of buying the product that is what the other peers of the consumer think
of the product and any unforeseen circumstances. Unforeseen circumstances for example in this
case could be financial losses which led to not buying of the product.
 Post Purchase Behavior:After the purchase the consumer may experience post purchase
dissonance feeling that buying another product would have been better. Addressing post purchase
dissonance spreads good word for the product and increases the chance of frequent repurchase.
Business market
Organizational buying behavior
Organizational buyers buy goods and services for production, for their own use or resale.
Examples of organizational buyers: Government agencies, manufacturers, and wholesalers.
Characteristics of Organizational buying behavior:
In the organizational buying
 Demand is organizational
 Volume is larger
 Customers are few
 Location is concentrated, not dispersed like consumers
 Distribution of the product is more direct
 The nature of buying is more professional
 Buying is influenced by multiple actors. There are initiators of the buying; there are gate keepers
who control the flow of information; there are deciders who formal and informal power to select
or approve; there are who have formal authority to buy who are buyers of a product or services;
there are the final users of the product or services.
 Negotiations are more complex
 Promotion is through personal selling
Characteristics of organizationalbuying
a) Market characteristics: few customer typical exist and purchase order are large

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b) Product and service characteristics: products or services are technical in nature; they are
purchased on the basis of technical specifications; there is a heavy emphasis on delivery time,
technical assistance, and financing assistance
c) Buying process characteristics: there exist technically qualified and professional buyers; it is a
requirement to follow established purchasing policies and procedures; buying objectives are
spelled out clearly; there are multiple buying influences – multiple parties participate in decision-
making ; negotiations between the buyer and seller is common; reciprocal arrangements exist
d) Marketing mix characteristics: direct sell to the buyer is the rule; promotion, including,
advertising, is technical in nature; often price is negotiable and often affected by trade and
quantity discounts
Organizational buying criteria
Organizational buying criteria include:
1. Ability to meet the buying specifications
2. Price
3. Ability to meet delivery schedule
4. Warrants and claim policies
5. Past performance, particularly in previous contract if any
6. Production facilities and capacity
Organizational buying process
1. Problem recognition: this includes identifying potential applications or use of the product or
services; making a buy-make decisions on a product
2. Information search: identifying suppliers; renegotiating on price, quality and delivery time;
appraisal of the design, quality and performance a product
3. Alternative evaluation: using criteria to select suppliers; sending a quotation or bid request

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4. Purchase decision: selecting suppliers; may be further negotiation concerning price, delivery time
and performance of a product
5. Post purchase: evaluating suppliers and the product
ROLE PLAYERS IN DECISION MAKING PROCESS FOR CONSUMER AND

ORGANIZATIONAL MARKETS.
1. Users: These are the people who are actually going to work with the purchased goods or services
and they exert influence on the specifications. Both customers and employees may take on this
role.
2. Influencers: They can exert influence on the purchasing process by setting preconditions. They
can be found at all levels of the organization.
3. Buyers: The buyer is the actual negotiator with the supplier. The buyer negotiates about contract
terms and eventually places the order. The buyer takes up one of the most important roles within
the decision making unit.
4. Initiators: The initiator is the player who recognizes a problem and tries to find a solution for
this problem. This is the most important person in the decision making unit or DMU.
5. Deciders: The Decider is the player who is ultimately responsible for choosing the supplier and
as a result takes up an important position within the decision making unit or DMU.
6. Gatekeeper: The Gatekeeper is responsible for the information provision within the decision
making unit or DMU. The Gatekeeper determines the type of information that will be delivered to
a certain player and as a consequence they can influence the decision making process strongly.
MARKETING MIX:
Definition:
Marketing mix: Is a set of marketing tools that the firm uses to pursue its marketing objectives in the
target market. “Thus the marketing mix refers to four broad levels of marketing decision, namely:
product, price, promotion, and place.
ELEMENTS OF THE MARKETING MIX

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Product: refers to what the business offers for sale and may include products or services. Product
decisions include the "quality, features, benefits, style, design, branding, packaging, services, warranties,
guarantees, life cycles, investments and returns".
Price: refers to decisions surrounding "list pricing, discount pricing, special offer pricing, credit payment
or credit terms". Price refers to the total cost to customer to acquire the product, and may involve both
monetary and psychological costs such as the time and effort expended in acquisition.
Place: is defined as the "direct or indirect channels to market, geographical distribution, territorial
coverage, retail outlet, market location, catalogues, inventory, logistics and order fulfilment". Place refers
either to the physical location where a business carries out business or the distribution channels used to
reach markets. Place may refer to a retail outlet, but increasingly refers to virtual stores such as "a mail
order catalogue, a telephone call center or a website
Promotion: refers to "the marketing communication used to make the offer known to potential
customers and persuade them to investigate it further. Promotion elements include "advertising, public
relations, direct selling and sales promotions.
1. Product
Goods manufactured by organizations for the end-users are called products.
Products can be of two types - Tangible Product and Intangible Product (Services)
An individual can see, touch and feel tangible products as compared to intangible products.
A product in a market place is something which a seller sells to the buyers in exchange of money.
2. Price
The money which a buyer pays for a product is called as price of the product. The price of a product is
indirectly proportional to its availability in the market. Lesser its availability, more would be its price and
vice a versa.
Retail stores which stock unique products (not available at any other store) quote a higher price from the
buyers.

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3. Place
Place refers to the location where the products are available and can be sold or purchased. Buyers can
purchase products either from physical markets or from virtual markets. In a physical market, buyers and
sellers can physically meet and interact with each other whereas in a virtual market buyers and sellers
meet through internet.
4. Promotion
Promotion refers to the various strategies and ideas implemented by the marketers to make the end - users
aware of their brand. Promotion includes various techniques employed to promote and make a brand
popular amongst the masses.
Promotion can be through any of the following ways:
 Advertising
Print media, Television, radio are effective ways to entice customers and make them aware of the brand’s
existence.
Billboards, hoardings, banners installed intelligently at strategic locations like heavy traffic areas,
crossings, railway stations, bus stands attract the passing individuals towards a particular brand.
Taglines also increase the recall value of the brand amongst the customers.
 Word of mouth
One satisfied customer brings ten more customers along with him whereas one dis-satisfied customer
takes away ten more customers. That’s the importance of word of mouth. Positive word of mouth goes a
long way in promoting brands amongst the customers.
Lately three more P’s have been added to the marketing mix. They are as follows:
 People - The individuals involved in the sale and purchase of products or services come under
people.
 Process - Process includes the various mechanisms and procedures which help the product to
finally reach its target market
 Physical Evidence - With the help of physical evidence, a marketer tries to communicate the
USP’s and benefits of a product to the end users

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Four C’s of Marketing Mix
Now a days, organizations treat their customers like kings. In the current scenario, the four C’s has thus
replaced the four P’s of marketing making it a more customer oriented model. Koichi Shimizu in the year
1973 proposed a four C’s classification.
 Commodity - (Replaces Products)
 Cost - (Replaces Price) involves manufacturing cost, buying cost and selling cost
 Channel - The various channels which help the product reach the target market.
 Communication - (Replaces Promotion)
IMPORTANCE OF THE MARKETING MIX ELEMENTS.
"Marketing mix" is a concept used by business owners, marketing executives and operations managers to
describe the essential elements of a marketing strategy. Traditionally, four Ps are associated with the
marketing mix -- product, price, promotion and place. The marketing mix's importance lies in its ability to
help a business determine the suitability of a product or service for a particular target consumer base.
Studying the marketing mix for your specific product or service starts by grasping the nuances of the four
Ps.
 Product
Product is the most basic building block. When you think of your business' product, the goal is to
visualize what consumers need or want. This can be tangible, something you physically sell, or it can be
intangible, such as a service. No matter if the product is physical or intangible, it will have a lifecycle.
Like the lifecycle of an organism, the lifecycle of a product proceeds from its creation through to its
growth and eventual decline as sales begin to fall or as consumers adopt new products. Businesses that
are able to predict the lifecycle of a product can gain a competitive advantage by having new products or
services ready for customers.
 Price
The price that a consumer is willing to pay for a product is of utmost importance to your business's
marketing mix. Businesses need to make a profit, but that won't happen if the price of your product is

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more than customers are willing to pay. The rule of thumb is to set the price so that is complements the
other components of your marketing strategy. If your product is perceived as luxury, for instance, you can
charge more. However, if your product is geared toward a spend-thrifty consumer, it should be reflected
in the price. Also important to keep in mind is the customers' view of the quality and value of your
products. Market research is therefore invaluable in helping to determine price.
 Promotion
Promotion is the tenet of the marketing mix that most often springs to mind when people hear the word
"marketing." Promotion includes all the methods that a business uses to attract customers and alert people
to the existence of a product. It incorporates elements of advertising, public relations, sales and customer
service. Word-of-mouth and digital advertising are also essential components of promotion. Often, repeat
clients come through the recommendation of friends and family and this is made easier with the ability to
share information on social media networks. As with price, promotion tactics should match the product's
perceived quality and value. If you're selling a luxury car, for example, the advertisements should reflect
the luxury element of the product.
 Place
The fourth element of the marketing mix, place, is also sometimes called "distribution." This simply says
that products must be easily accessible to consumers. If you run a physical store or service center, it
should be easy for customers to find and in a location that will attract business. Online retailers must have
recognizable web domains and easily navigable websites. Convenience for the consumers is the key.
 Offering
Part of marketing is conveying to customers what you have to offer and why it is different and better than
alternatives. The product element is most obvious in the offering, since your product is what people buy.
Where you offer it, whether in-store or online, also is important, making the distribution element a factor.
The price point is part of the overall offering, because it affects your product's value.
 The Target
When you market, you also have to strategize about who to target with your messages. Your primary
customer group becomes the target customers of your marketing campaign. Your product and price offer
some direction in identifying the right audience. For instance, cutting-edge mobile technology ads often

56
are targeted to young consumers. Identifying the media used by these customers is also important, which
brings the "promotion" P into play.
 Message Delivery
Tangibly, the promotion P addresses the actual process of creating and distributing messages about your
brand and products. Under the promotion umbrella, you have to decide what messages and formats to use
to persuade your target customers to buy. Humor, sexuality, fear and anxiety are all used to present
emotional appeals in marketing. Selecting the right media within television, radio, newspapers,
magazines, the Internet, billboards and other support media is another critical part of successful
promotion.
 Value Creation
In a general sense, the marketing mix allows you to understand how to build and sell value to your
customers. Ultimately, customers buy what they perceive is the best value for their money in a purchase
situation. Implementing marketing campaigns that show off great products at fair prices gives you an
opportunity to succeed. Finding affordable marketing options also helps you get better return on your
investment from marketing
FACTORS AFFECTING THE MARKETING MIX ELEMENTS:
Budget Available. For many companies, the budget available to market a product determines what
elements of the promotion mix are utilized. The budget affects a promotion’s reach (number of people
exposed to the message) and frequency (how often people are exposed). For example, many smaller
companies may lack the money to create and run commercials on top-rated television shows or during the
Super Bowl. As a result, they may not get the exposure they need to be successful. Other firms such as
McDonald’s may come up with creative ways to reach different target markets. For example, McDonald’s
targeted college students with a special promotion that it filmed live in a Boston University lecture.
Stage in the product life cycle. The stage in the product life cycle also affects the type and amount of
promotion used. Products in the introductory stages typically need a lot more promotional dollars to
create awareness in the marketplace. Consumers and businesses won’t buy a product if they do not know
about it. More communication is needed in the beginning of the product life cycle to build awareness and
trial.

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Type of product and type of purchase decision. Different products also require different types of
promotion. Very technical products and very expensive products (high involvement) often need
professional selling so the customer understands how the product operates and its different features. By
contrast, advertising is often relied upon to sell convenience goods and products purchased routinely (low
involvement) since customers are familiar with the products and they spend relatively little time making
purchase decisions.
Target market characteristics and consumers’ readiness to purchase. In order to select the best methods
to reach different target markets, organizations need to know what types of media different targets use,
how often they make purchases, where they make purchases, and what their readiness to purchase is as
well as characteristics such as age, gender, and lifestyle. Some people are early adopters and want to try
new things as soon as they are available, and other groups wait until products have been on the market for
a while. Some consumers might not have the money to purchase different products, although they will
need the product later. For example, are most college freshmen ready to purchase new cars?
Consumers’ preferences for various media. We’ve already explained that different types of consumers
prefer different types of media. In terms of target markets, college-aged students may prefer online, cell
phone, mobile marketing, and social media more than older consumers do. Media preferences have been
researched extensively by academics, marketing research companies, and companies to find out how
consumers want to be reached.
Regulations, competitors, and environmental factors. Regulations can affect the type of promotion used.
For example, laws in the United States prohibit tobacco products from being advertised on television. In
some Asian countries, controversial products such as alcohol cannot be advertised during Golden (prime)
time on television. The hope is that by advertising late at night, young children do not see the
advertisements. The strength of the economy can have an impact as well. In a weak economy, some
organizations use more sales promotions such as coupons to get consumers into their stores. The risk is
that consumers may begin to expect coupons and not want to buy items without a special promotion.
Availability of media. Organizations must also plan their promotions based on availability of media. The
top-rated television shows and Super Bowl ad slots, for example, often sell out quickly. Magazines tend
to have a longer lead time, so companies must plan far in advance for some magazines. By contrast,
because of the number of radio stations and the nature of the medium, organizations can often place radio
commercials the same day they want them to be aired. Social media and online media may be immediate,
but users must be careful about what they post and their privacy. Uncontrollable events can affect a

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company’s promotions, too. For example, when a disaster occurs, TV stations often cut advertisements to
make way for continuous news coverage. If there is a crisis or disaster and your company is in the middle
of a promotion being advertised on TV, you will likely have to scramble to reach consumers via another
medium.
PRODUCT:
Product: refers to what the business offers for sale and may include products or services. Product
decisions include the "quality, features, benefits, style, design, branding, packaging, services, warranties,
guarantees, life cycles, investments and returns".
CLASSIFICATIONS OF PRODUCTS:
The Classification of Products in Marketing
Classifying products into meaningful categories helps marketers decide which strategies and methods will
help promote a business’s product or service. Many types of classification exist. For example, marketers
might categorize products by how often they are used. One-time-use products, such as vacation packages,
require completely different marketing strategies than products customers use repeatedly, such as
bicycles. Product classification helps a business design and execute an effective marketing plan.
Considerations
The key is to categorize your products in ways that make sense for your business. This allows you to, for
example, design separate marketing campaigns for each category of product you offer. The alternative --
using a one-size-fits-all marketing plan -- is often less effective than implementing several highly targeted
plans. No simple recipe exists for categorizing products and services, but there are some common product
classifications in marketing: convenience, shopping, specialty and unsought products, according to “The
Advanced Dictionary of Marketing,” by Scott Dacko.
Convenience Products
Convenience products involve items that don’t require much customer effort or forethought. Food staples
often fall into this category, because customers can buy them nearly everywhere and at roughly the same
prices. Marketing convenience products can be a challenge if there are many similar products competing
for the customer’s attention and driving down the price.
Shopping Products

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Customers are willing to invest time and effort to buy shopping products. For example, a customer might
compare ingredients, prices and safety information for a variety of deodorants before making a final
purchase. Often, the most effective marketing approach is to use advertising and heavy promotions to
develop brand preference and loyalty among customers, according to the book “Principles of Marketing,”
by Ashok Jain.
Specialty Products
Specialty products require significant thought or effort. For example, a well-known luxury car model
might be available at just a few local dealerships, meaning an interested customer has restricted options.
Specialty products tend to be expensive, durable goods, often involving authorized dealerships and
personal selling.
Unsought Products
Unsought products are items customers aren’t aware of or don’t often think about. New products that
have no brand recognition fall under this classification, as do certain types of insurance. The marketing
problems presented by an unsought product are as follows. First, you must convince customers they need
the product or service. Second, you must convince customers to buy the product or service from you and
not your competitor.
Key Product Decisions

The actual product is designed to provide the core benefits sought by the target market. The marketer
offers these benefits through a combination of factors that make up the actual product.
Below we discuss in detail four key factors that together help shape the actual product. These factors
include:
 Consumable Product Features
 Branding
 Packaging
 Labeling

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Consumable Product Features

Features are characteristics of a product that offer benefits to the customer. In most cases, the most
important features are those associated with the consumable product since they are the main reason a
customer makes a purchase. For this tutorial we separate the benefits of consumable product features into
two groups:
1. Functional Benefits
2. Psychological Benefits
These features are called functional because they result in a benefit the user directly associates with the
consumable product. For marketers functional benefits are often the result of materials, design and
production decisions. How the product is built can lead to benefits such as effectiveness, durability,
speed, ease-of-use, and cost savings to name just few.
For customers psychological benefits represent certain benefits they perceive to receive when using the
product though these may be difficult to measure and may vary by customer. These benefits address
needs such as status within a group, risk reduction, sense of independence, and happiness. Such benefits
are developed through promotional efforts that target customer’s internal makeup
Branding
Branding involves decisions that establish an identity for a product with the goal of distinguishing it from
competitors’ offerings. In markets where competition is fierce and where customers may select from
among many competitive products, creating an identity through branding is essential. It is particularly
important in helping position the product (see discussion of product position) in the minds of the
product’s target market. A strong brand offers many advantages for marketers including:
 Enhances Product Recognition - Brands provide multiple sensory stimuli to enhance customer
recognition. For example, a brand can be visually recognizable from its packaging, logo, shape, etc. It
can also be recognizable via sound, such as hearing the name on a radio advertisement or talking with
someone who mentions the product.

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 Helps Build Brand Loyalty - Customers who are frequent and enthusiastic purchasers of a particular
brand are likely to become Brand Loyal. Cultivating brand loyalty among customers is the ultimate
reward for successful marketers since these customers are far less likely to be enticed to switch to
other brands compared to non-loyal customers.
 Helps With Product Positioning - Well-developed and promoted brands make product positioning
efforts more effective. The result is that upon exposure to a brand (e.g., hearing it, seeing it)
customers conjure up mental images or feelings of the benefits they receive from using that brand.
The reverse is even better. When customers associate benefits with a particular brand, the brand may
have attained a significant competitive advantage. In these situations the customer who recognizes he
needs a solution to a problem (e.g., needs to bleach clothes) may automatically think of one brand
that offers the solution to the problem (e.g., Clorox). This “benefit = brand” association provides a
significant advantage for the brand that the customer associates with the benefit sought.
 Aids in Introduction of New Products - Firms that establish a successful brand can extend the brand
by adding new products under the same “family” brand. Such branding may allow companies to
introduce new products more easily since the brand is already recognized within the market.
 Builds Brand Equity - Strong brands can lead to financial advantages through the concept of Brand
Equity in which the brand itself becomes valuable. Such gains can be realized through the out-right
sale of a brand or through licensing arrangements. For example, Company A may have a well-
recognized brand (Brand X) within a market but for some reason they are looking to concentrate their
efforts in other markets. Company B is looking to enter the same market as Brand X. If circumstances
are right Company A could sell to Company B the rights to use the Brand X name without selling any
other part of the company. That is, Company A simply sells the legal rights to the Brand X name but
retains all other parts of Brand X, such as the production facilities and employees. In cases of well-
developed brands such a transaction may carry a very large price tag. Thus, through strong branding
efforts Company A achieves a large financial gain by simply signing over the rights to the name. But
why would Company B seek to purchase a brand for such a high price tag? Because by buying the
brand Company B has already achieved an important marketing goal – building awareness within the
target market. The fact the market is already be familiar with the brand allows the Company B to
concentrate on other marketing decisions.
Packaging

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Nearly all tangible products (i.e., goods) are sold to customers within a container or package that, as we
will discuss, serves many purposes including protecting the product during shipment. In a few cases, such
as with certain produce items, the final customer may purchase the product without a package but the
produce marketer still faces packaging decisions when it comes to shipping to the store. Thus, for many
products there are two packaging decisions:
1. Final Customer Package

2. Distribution Channel Package
Packaging decisions are important for several reasons including:
 Protection – Packaging is used to protect the product from damage during shipping and handling,
and to lessen spoilage if the protect is exposed to air or other elements.
 Visibility – Packaging design is used to capture customers’ attention as they are shopping or glancing
through a catalog or website. This is particularly important for customers who are not familiar with
the product and in situations, such as those found in grocery stores, where a product must stand out
among thousands of other products. Packaging designs that standout are more likely to be
remembered on future shopping trips.
 Added Value – Packaging design and structure can add value to a product. For instance, benefits can
be obtained from package structures that make the product easier to use while stylistic designs can
make the product more attractive to display in the customer’s home.
 Distributor Acceptance – Packaging decisions must not only be accepted by the final customer, they
may also have to be accepted by distributors who sell the product for the supplier. For instance, a
retailer may not accept packages unless they conform to requirements they have for storing products
on their shelves.
 Cost – Packaging can represent a significant portion of a product’s selling price. For example, it is
estimated that in the cosmetics industry the packaging cost of some products may be as high as 40%
of a product’s selling price. Smart packaging decisions can help reduce costs and possibly lead to
higher profits.
 Expensive to Create - Developing new packaging can be extremely expensive. The costs involved in
creating new packaging include: graphic and structural design, production, customer testing, possible
destruction of leftover old packaging, and possible advertising to inform customer of the new
packaging.

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 Long Term Decision – When companies create a new package it is most often with the intention of
having the design on the market for an extended period of time. In fact, changing a product’s
packaging too frequently can have negative effects since customers become conditioned to locate the
product based on its package and may be confused if the design is altered.
 Environmental or Legal Issues – Packaging decisions must also include an assessment of its
environmental impact especially for products with packages that are frequently discarded. Packages
that are not easily bio-degradable could draw customer and possibly governmental concern. Also,
caution must be exercised in order to create packages that do not infringe on intellectual property,
such as copyrights, trademarks or patents, held by others.
Labeling
Most packages, whether final customer packaging or distribution packaging, are imprinted with
information intended to assist the customer. For consumer products, labeling decisions are extremely
important for the following reasons.
 Captures Attention - Labels serve to capture the attention of shoppers. The use of catchy words may
cause strolling customers to stop and evaluate the product.
 Offers First Impression - The label is likely to be the first thing a new customer sees and thus offers
their first impression of the product.
 Provides Information - The label provides customers with product information to aid their purchase
decision or help improve the customer’s experience when using the product (e.g., recipes).
 Aids Purchasing - Labels generally include a universal product codes (UPC) and, in some cases,
radio frequency identification (RFID) tags, that make it easy for resellers, such as retailers, to
checkout customers and manage inventory.
 Addresses Needs in Global Markets - For companies serving international markets or diverse
cultures within a single country, bilingual or multilingual labels may be needed.
 Meets Legal Requirements - In some countries many products, including food and pharmaceuticals,
are required by law to contain certain labels such as listing ingredients, providing nutritional
information or including usage warning information.
NEW PRODUCT DEVELOPMENT PROCESS:
New product development process involves the following processes:

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1. Idea Generation: 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.
 Lots of ideas are generated about the new product. Out of these ideas many are implemented. The
ideas are generated in many forms. Many reasons are responsible for generation of an idea.
 Idea for new product can come from many sources, such as customer, scientists, competitors,
employees, channel member, and top management.
 Customer need and wants are the logical place to start the search.
 Idea Generation or Brainstorming of new product, service, or store concepts - idea generation
techniques can begin when you have done your OPPORTUNITY ANALYSIS to support your
ideas in the Idea Screening Phase (shown in the next development step).
2. Idea Screening: The object is to eliminate unsound concepts prior to devoting resources to them.
The screener should ask several questions such as :
 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 the target
price?
3. Idea Development and Testing
 Develop the marketing and engineering details
 Product Idea - It is an idea for a possible product that the company can see itself
offering to the market.

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 Product Concept - when idea is developed in every aspect so as to make it presentable,
it is called a concept.
 Product Identity - It is the way business perceive an actual or potential product.
 Investigate intellectual property issues and search patent databases
 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 - Random people belonging to the target group are chosen to test the
concept. Information is provided and questions are asked. Their answers and reactions are
noted for further improvement of concept.
4. Business Analysis
 Estimate likely selling price based upon competition and customer feedback
 Estimate sales volume based upon size of market.
 Estimate profitability and break-even point
5. 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

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 Produce an initial run of the product and sell it in a test market area to determine
customer acceptance
6. 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
7. 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
8. New Product Pricing
 Impact of new product on the entire product portfolio
 Value Analysis (internal & external)

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 Competition and alternative competitive technologies
 Differing value segments (price, value and need)
 Product Costs (fixed & variable)
 Forecast of unit volumes, revenue, and profit
The New Product Development process is often referred to as The Stage-Gate innovation process,
developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons why products
succeed and why they fail.
When teams collaborate in developing new innovations, having the following eight ingredients mixed
into your team’s new product developmental repertoire will ensure that it’s overall marketability will
happen relatively quick, and accurately — making everyone productive across the board.
Step 1: Generating
Utilizing basic internal and external SWOT analyses, as well as current marketing trends, one can
distance themselves from the competition by generating ideologies which take affordability, ROI and
widespread distribution costs into account.
Lean, mean and scalable are the key points to keep in mind. During the NPD process, keep the system
nimble and use flexible discretion over which activities are executed. You may want to develop multiple
versions of your road map scaled to suit different types and risk levels of projects.
Step 2: Screening the Idea

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Wichita, possessing more aviation industry than most other states, is seeing many new innovations stop
with Step two screening. Do you go/no go? Set specific criteria for ideas that should be continued or
dropped. Stick to the agreed upon criteria so poor projects can be sent back to the idea-hopper early on.
Because product development costs are being cut in areas like Wichita, “prescreening product ideas,”
means taking your top three competitors’ new innovations into account, how much market share they’re
chomping up, what benefits end consumers could expect etc. An interesting industry fact: Aviation
industrialists will often compare growth with metals markets; therefore, when Boeing is idle, never
assume that all airplanes are grounded, per se.
Step 3: Testing the Concept
As Gaurav Akrani has said, “Concept testing is done after idea screening.” And it is important to note, it
is different from test marketing.
Aside from patent research, design due diligence, and other legalities involved with new product
development, knowing where the marketing messages will work best is often the biggest part of testing
the concept. Does the consumer understand, need or want the product or service?
Step 4: Business Analytics
During the New Product Development process, build a system of metrics to monitor progress. Include
input metrics, such as average time in each stage, as well as output metrics that measure the value of
launched products, percentage of new product sales and other figures that provide valuable feedback. It is
important for an organization to be in agreement for these criteria and metrics.

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Even if an idea doesn’t turn into product, keep it in the hopper because it can prove to be a valuable asset
for future products and a basis for learning and growth.
Step 5: Beta/Marketability Tests
Arranging private tests groups, launching beta versions, and then forming test panels after the product or
products have been tested will provide you with valuable information allowing last minute improvements
and tweaks. Not to mention helping to generate a small amount of buzz. Wordpress is becoming
synonymous with beta testing, and it’s effective. Thousands of programmers contribute code, millions test
it, and finally even more download the completed end-product.
Step 6: Technicalities and Product Development
Provided the technical aspects can be perfected without alterations to post-beta products, heading towards
a smooth Step seven is imminent.
According to Akrani, in this step, “The production department will make plans to produce the product.
The marketing department will make plans to distribute the product. The finance department will provide
the finance for introducing the new product”.
As an example, in manufacturing, the process before sending technical specs to machinery involves
printing MSDS sheets, a requirement for retaining an ISO 9001 certification (the organizational structure,
procedures, processes and resources needed to implement quality management).
In internet jargon, honing the technicalities after beta testing involves final database preparations,
estimation of server resources, and planning automated logistics. Be sure to have your technicalities in
line when moving forward.

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Step 7: Commercialize
At this stage, your new product developments have gone mainstream, consumers are purchasing your
good or service, and technical support is consistently monitoring progress. Keeping your distribution
pipelines loaded with products is an integral part of this process too, as one prefers not to give physical
(or perpetual) shelf space to competition. Refreshing advertisements during this stage will keep your
product’s name firmly supplanted into the minds of those in the contemplation stages of purchase.
Step 8: Post Launch Review and Perfect Pricing
Review the NPD process efficiency and look for continues improvements. Most new products are
introduced with introductory pricing, in which final prices are nailed down after consumers have “gotten
in.” In this final stage, you’ll gauge overall value relevant to COGS (cost of goods sold), making sure
internal costs aren’t overshadowing new product profits. You continuously differentiate consumer needs
as your products age, forecast profits and improve delivery process whether physical, or digital, products
are being perpetuated.
Remember: The Process Is Loose.
The entire new product development process is an ever-evolving testing platform where errors will be
made, designs will get trashed, and loss could be recorded. Having your entire team working in tight
synchronicity will ensure the successful launch of goods or services, even if reinventing your own wheel.
Productivity during product development can be achieved if, and only if, goals are clearly defined along
the way and each process has contingencies clearly outlined on paper.
PRODUCTS ADOPTION PROCESS:

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The Stages of Consumer Adoption Process
Consumer Adoption Process is a constant marketing tool, which has different stages to get itself
completed. These stages of the Consumer Adoption Process are discussed as under:
 Product Awareness:
 Product Interest:
 Evaluation:
 Trial:
 Adoption/Rejection:
1. Product Awareness:
Introducing a product in the market and creating awareness for that product is the first stage of the
Consumer Adoption process. Companies invest a lot in creating avenue for informing the consumer and
customer. Creating Product or Brand Awareness is very important for the success of the entire business.
Making customer aware of the existence of the product ensure the entire existence of the company. The
companies use many advertising techniques and marketing materials like teasers, videos, banners and
images. The companies use many interesting ways to engage the consumers in this phase of product
marketing. Creating a strong attractive presence for the newly launched product can attract more
customers.
In this era of internet marketing, online shopping and social media advertising the marketers have many
advertising tools are available to create awareness about the product in the customers. The Companies
deploy smart tactics to launch a product in the market to avoid the advertisement clutter.
2. Product Interest:
During this phase of adoption process the consumer becomes more aware and informed about the product
itself, the value the product deliver, its unique feature and the manufacturer of the product. Creating and
maintaining the interest of the customer is very necessary for the companies. This is why the marketers
use those promotional channels which are easily accessible to the targeted market.
3. Product Evaluation:

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The process of consumer examination, comparison and evaluation of the product before making a
purchase decision comprises of Stage 3 in the Adoption Process. The Consumer behavior varies in
intensity according to the need, the price of the product, features of the product and the value that the
product delivers.
The consumers search for information about the product options and the brand available in the market.
Online surfing to learn about the new brand in the market is very common now days. The Customer
utilizes social media channels, online shopping sites and other media channels to learn and explore about
the products. The consumer use recommendations, online reviews, and suggestions from online groups
before making purchase decisions.
 In this phase the consumer verifies the pro and cons of the product, the substitutes available in the
market and the value for money.
 The consumer outlines the unique selling proposition, identifies what your product offers against
other competing products.
 Utilizing the marketing strategies provides the companies with a platform that allows the
businesses to communicate to the existing and potential customers and advertise the unique
feature of the product.
4. Product Trial:
In this phase of the Consumer Adoption Process the consumer use the product on trial basis. Trying out
the actual product gives the consumer the idea of the product and its benefits. The trail is the most
important stage as the entire product acceptance and rejection depends upon the trail phase. The company
can provides free sample and trail products as part of the marketing campaign. Free sampling is very
important as this will the consumer expectations about the product.
5. Product Adoption:
The consumer is ready to adopt the product which means that he is ready to actually spend the money on
the product. The Adoption phase is the most critical stage in the whole process as the companies needs
the consumers to accept the product and complete adopt it. The company needs to ensure availability,
quality, ease and accessibility of the product to the consumer.
Factors Affecting Consumer Adoption Process:

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Some important factors influencing the consumer adoption process are as bellow:
 Readiness of the Consumer/Customer to try new products and switch to the new brands
 New product or Innovation
 Personal Choices and influences about the Purchase Decisions
 Varying Rates of Product Adoption
 Readiness of the organization to launch new products
Consumer adoption Process varies from customer to customer based upon the behavioral factors. Some
Consumers prefer change and some are very resistant towards changing things and have a difficulty in
accepting and adopting new things. Rate of adopting a product depends upon competitive advantage,
complexity, compatibility and communicability.
Personal Influences is the effect of other people on the consumer attitude and purchase decision. Personal
Influences can greatly impact the adoption process of the consumer and it can really affect the acceptance
and rejection of the purchase decision of a customer.
Importance of Consumer Adoption Process
It is very important to build strong marketing strategy and invest on the necessary tools to move your
consumer through the five stages of Consumer Adoption Process. Successfully managing consumer
adoption process ensures loyal customers for the product, long term profit marketing for the business, and
Brand Equity for the entire company. Marketing a product successfully is as important as Manufacturing
a product of quality.
Marketing management articles » New product adoption
New product adoption
By Hitesh Bhasin July 3, 2016

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The first question to be asked in New product adoption is how does new product adoption differ from the
process of buying a product, which the customer has already bought once before? What does “new
product adoption” mean? and what is the process of new product adoption?
A new product adoption can be defined as: “A good, service or idea that is “perceived” by some potential
customers as new. It may have been available for some time, but many potential customers have not yet
adopted the product nor decided to become a regular user of the product. Thus if they buy this product, it
is new product adoption.”
Research suggests that customers go through five stages in the process of new product adoption or
service: these are summarized below:
(1) Awareness – the customer becomes aware of the new product, but lacks information about it.
(2) Interest – the customer seeks information about the new product.
(3) Evaluation – the customer considers whether trying the new product makes sense.
(4) Trial – the customer tries the new product on a limited or small scale to assess the value of the
product.

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(5) Product Adoption – the customer decides to make full and/or regular use of the new product.
Thus if a customer goes through all the above stages he is assumed to have adopted the product. There are
various stages post adoption as well which decide whether or not the customer will be retained with the
product. One of such things is post sale service which is extremely important to retain the customer
5 Stages to the Consumer Adoption Process

Stage 1 - Product Awareness
This first stage is about creating awareness that your product is in the market. It is important that your
company develops a successful avenue for your consumers to become aware of your product. If
consumers do not know your product exists, than it might as well not exist! Create marketing material.
These can be one-sheets, video teasers, images, and landing pages. Make these marketing materials easily
accessible. Utilizing creativity and wit is a great way to engage consumers in this awareness stage. I
recommend creating a strong social presence for said product. In the era of social media, many tools are
available in the market that provide companies with the techniques and methods to increase product
awareness through social channels – enabling them to reach a large number of customers at a low cost!
Case Example – Movie Teasers and Tesla Model D

As an example, movie teasers are designed to inform the audience and customers that a movie will be
released soon, but it doesn’t provide them in-depth information about the movie. Another great example
includes Tesla’s Model D. Prior to its launch and release, Elon Musk published the below image on his
Twitter in order to build momentum and awareness of their upcoming launch. What’s amazing about this
picture is the way it has been strategically designed to make consumers aware of the product without
exposing too much about the product. The viewer is left wanting to learn more.
Stage 2 - Product Interest

In this stage consumers are ready to learn more about your companies product and / or service. Your
organization must guide the consumer through the interest stage by providing easily accessible
information on your product. Among the methods used in the todays business landscape include a website
describing the product, blog posts, tutorial or instructional videos, white papers, and other sources of info
that the potential consumer can discover and review.

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Case Example – Apple
Apple utilizes its product launch to provide information and insight into its latest product. With well-
designed and organized speech, scripted presentation, and balanced use of technical and non-technical
vocabulary, Apple delivers information eloquently and successfully to broad range of customers. With the
information now available in multiple mediums and comprehensible by both technical and non-technical
individuals, Apple gains the interest of their potential customers and builds strong momentum of
interested buyers.
Stage 3 - Product Evaluation

Prior to purchasing, consumers examine, compare and evaluate the product. Such behavior increases in
intensity and need once the item in question is more expensive, sophisticated and complex, or critical.
Consumers are searching for information. We are now finding that consumers go online and utilize social
media channels to ask other individuals about your product or service. In addition, they find online
reviews and recommendations. In order to simplify a customer’s search and evaluation of your product, I
suggest creating information that outlines the difference between your product and other similar products,
or differences within the different products and services you sell. Outline what separates your product
from others, and emphasize on strength. Another great system to utilize is the webinar. This platform
allow you to communicate with potential customer in depth information about your product and provides
time for Q&A.
Case Example – PCMag

PCMag is a world-renowned website for comparing gadgets and computers. They are notable for their
reliable reporting, comprehensive evaluation editorials, and categorization of different gadgets based on
their qualities. For example, in order to maintain fairness, PCMag categorizes laptops differently (such as
work laptop, ultra-notebooks, …etc) in order to provide a more reasonable evaluation that fits the needs
of the customer. PCMag is a great tool for consumers to evaluate products. Product manufactures can
contact PCMag and request to get their products included in the magazine.

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Stage 4 - Product Trial

This is the stage where the consumer “kicks the tires”. Nothing helps a consumer make a decision about
your product more than actually trying your product out! There are many ways this is accomplished. For
example, your company can provide your consumer with a free trial or a proof of concept campaign. In
this stage it is very important to set the customer expectations correctly and deliver on said expectations.
Case Example – Costco

Costco is known for their free samples. I have heard that some customers piecemeal an entire lunch just
from bouncing around the free sample tables during a visit to a Costco location. This “free sample"
approach is very smart. In some cases Costco has seen this strategy increase sales of a product over 1000

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percent. There are additional psychological effects from this, which include consumer loyalty and
consumer reciprocity. Consumers feel that if they receive something for free they owe something in
return.

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Stage 5 - Product Adoption
When the consumer enters the product adoption phase, he/she is ready to purchase your companies
product. This is the critical stage that businesses need to get their consumers to. When the customer is
here, you need to make the payment process simple, intuitive, and pain free. In addition, you need to
ensure that the consumer can easily obtain the product. If you make it to and through this last phase
successfully, than you can take money to the bank - A job well done!
Consumer Adoption Process is for All!

Whether you have a new business or an existing business, a product built for the enterprise or a product
built for a consumer; the consumer adoption process is the same. It is important to create a strategy and
the necessary tools to successfully take your consumers through these 5 stages. If you can nail this, than
you are in business. Last piece of advice; Marketing your product is as important, if not more important,
than creating your product
 uction
 Growth
 Maturity
 Decline
 Examples
 New Product Development
Product Life Cycle Stages

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As consumers, we buy millions of products

every year. And just like us, these products have a life cycle. Older, long-established products eventually
become less popular, while in contrast, the demand for new, more modern goods usually increases quite
rapidly after they are launched.
Because most companies understand the different product life cycle stages, and that the products they sell
all have a limited lifespan, the majority of them will invest heavily in new product development in order
to make sure that their businesses continue to grow.
PRODUCT LIFE CYCLE :
The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean
different things for business that are trying to manage the life cycle of their particular products.
Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new
product. The size of the market for the product is small, which means sales are low, although they will be
increasing. On the other hand, the cost of things like research and development, consumer testing, and the
marketing needed to launch the product can be very high, especially if it’s a competitive sector.
Growth Stage – The growth stage is typically characterized by a strong growth in sales and profits, and
because the company can start to benefit from economies of scale in production, the profit margins, as
well as the overall amount of profit, will increase. This makes it possible for businesses to invest more
money in the promotional activity to maximize the potential of this growth stage.

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Maturity Stage – During the maturity stage, the product is established and the aim for the manufacturer
is now to maintain the market share they have built up. This is probably the most competitive time for
most products and businesses need to invest wisely in any marketing they undertake. They also need to
consider any product modifications or improvements to the production process which might give them a
competitive advantage.
Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the
decline stage. This shrinkage could be due to the market becoming saturated (i.e. all the customers who
will buy the product have already purchased it), or because the consumers are switching to a different
type of product. While this decline may be inevitable, it may still be possible for companies to make some
profit by switching to less-expensive production methods and cheaper markets.
PRICE:
Definition:
 Price is the amount of money charged for a product or service.

 Price is the sum of all the values that consumers exchange for the benefits of having or using the
product or service.
 Price is that which people have to forego in order to acquire a product or service.
 Price is the value placed on what is exchanged. Something of value – usually purchasing power –
is exchanged for satisfaction or utility.
Importance of price:
How you set your prices can have a host of implications for your business. Not every price you set needs
to maximize your margins. Many small businesses use price to compete, change market share or create
different revenue scenarios. Understanding how pricing affects your business model, not just your bottom
line, will help you better choose price levels.
 It affects Profit Margins

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The price you set affects your profit margin per unit sold, with higher prices giving you a higher profit per
item if you don’t lose sales. However, higher prices that lead to lower sales volumes can decrease, or
wipe out, your profits, because your overhead costs per unit increase as you sell fewer units.
 It determines Sales Volumes
One of the most obvious affects pricing will have on your business is an increase or decrease in sales
volume. Economists study price elasticity, or the response of consumer purchasing to a price change.
Increasing your prices might lower your sales volume only slightly, helping you make up for decreased
volume with higher total profits generated by higher margins. Lowering your prices can increase your
profits if your sales jump significantly, decreasing your overhead expense per unit. Test the market’s
response to price increases by changing prices in targeted areas before instituting an across-the-board
price increase.
 It helps Position the organization on the market.
The price you set sends a message to some consumers about your business, product or service, creating a
perceived value. This affects your brand, image or position in the marketplace. For example, higher prices
tell some consumers that you have higher quality, or you wouldn’t be able to charge those prices. Other
consumers look for low-priced products and services, believing they’ll get the quality they need at a low
price. Offering sales, discounts, rebates and closeouts can send the message you can’t sell your products
or services at your regular price, or tell buyers they have a short-term opportunity to get a bargain.
 Price affects the Market Share of an organization
The price you set makes you more or less competitive in the marketplace, affecting your share of the
market’s volume. Some businesses lower prices temporarily to gain market share from competitors, who
can’t respond to and meet a price decrease. After consumers have had time to try your product and
develop a brand preference or loyalty, you can raise your prices again to a level that won’t cause them to
leave you. Predatory pricing is the practice of selling a product or service below cost for the specific
purpose of taking market share away from a competitor or closing it down, then raising prices on
consumers when they have fewer, or no options after that competitor is gone. This is illegal.
 Prices are used to access new markets/customers.

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Some businesses price products or services at or below cost to get customers into their businesses, who
then spend more money elsewhere. For example, big-box retailers might buy large quantities of tennis
balls, selling them at or below cost to entice affluent tennis players who use many cans of balls during the
year into their stores. By placing the low-cost balls at the back of the store, they hope to generate impulse
buys as the shopper walks to the sports area and back to the front. Restaurants offer low-margin specials
to offer a change-of-pace to regular diners to keep their normal business, or to let regulars bring friends
who want upscale dishes at a moderately priced eatery.
PRICING OBJECTIVES:
 Partial cost recovery: A company that has sources ofincome other than from the sale of products
may decide toimplement this pricing objective, which has the benefit ofproviding customers with
a quality product at a cost lowerthan expected. Competitors without other revenue streamsto
offset lower prices will likely not appreciate using this objectivefor products in direct competition
with one another.Therefore, this pricing objective is best reserved for specialsituations or
products.
 Profit margin maximization: Seeks to maximize the per-unitprofit margin of a product. This
objective is typically appliedwhen the total number of units sold is expected to be low.Profit
maximization seeks to garner the greatest dollaramount in profits. This objective is not
necessarily tied to theobjective of profit margin maximization.
 Revenue maximization: Seeks to maximize revenue fromthe sale of products without regard to
profit. This objectivecan be useful when introducing a new product into the marketwith the goals
of growing market share and establishinglong-term customer base.
 Quality leadership: Used to signal product quality to theconsumer by placing prices on products
that convey theirquality.
 Quantity maximization: Seeks to maximize the number ofitems sold. This objective may be
chosen if you have an underlyinggoal of taking advantage of economies of scale thatmay be
realized in the production or sales arenas.
 Status quo: Seeks to keep your product prices in line withthe same or similar products offered by
your competitorsto avoid starting a price war or to maintain a stable level ofprofit generated from
a particular product.
 Survival: It’s used in situations where a business needs toprice at a level that will just allow it to
stay in business and coveressential costs. For a short time, the goal of making a profit isset aside
for the goal of survival. Survival pricing is meant onlyto be used on a short-term or temporary

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basis. Once the situationthat initiated the survival pricing has passed, product pricesare returned
to previous or more appropriate levels.
 Maximize long-run profit 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 the manager attempts to maintain the same margin regardless of changes in cost.
 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
 company growth
 maintain price leadership
 desensitize customers to price
 discourage new entrants into the industry
 match competitors prices
 encourage the exit of marginal firms from the industry
 avoid government investigation or intervention
 obtain or maintain the loyalty and enthusiasm of distributors and other sales personnel
 enhance the image of the firm, brand, or product
 be perceived as “fair” by customers and potential customers
 create interest and excitement about a product
 discourage competitors from cutting price
 use price to make the product “visible"
 help prepare for the sale of the business (harvesting)
METHODS USED IN PRICING:
Here are some of the various methods that businesses implement when setting prices on their products
and services.
1. Pricing at a Premium: With premium pricing, businesses set costs higher than their competitors.
Premium pricing is often most effective in the early days of a product’s life cycle, and ideal for

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small businesses that sell unique goods. Because customers need to perceive products as being
worth the higher price tag, a business must work hard to create a value perception. Along with
creating a high-quality product, owners should ensure their marketing efforts, the product’s
packaging and the store’s décor all combine to support the premium price.
2. Pricing for Market Penetration:Penetration strategies aim to attract buyers by offering lower
prices on goods and services. While many new companies use this technique to draw attention
away from their competition, penetration pricing does tend to result in an initial loss of income
for the business.Over time, however, the increase in awareness can drive profits and help small
businesses to stand out from the crowd. In the long run, after sufficiently penetrating a market,
companies often wind up raising their prices to better reflect the state of their position within the
market.
3. Economy Pricing:Used by a wide range of businesses including generic food suppliers and
discount retailers, economy pricing aims to attract the most price-conscious of consumers. With
this strategy, businesses minimize the costs associated with marketing and production in order to
keep product prices down. As a result, customers can purchase the products they need without
frills.While economy pricing is incredibly effective for large companies like Wal-Mart and
Target, the technique can be dangerous for small businesses. Because small businesses lack the
sales volume of larger companies, they may struggle to generate a sufficient profit when prices
are too low. Still, selectively tailoring discounts to your most loyal customers can be a great way
to guarantee their patronage for years to come.
4. Price Skimming:Designed to help businesses maximize sales on new products and services,
price skimming involves setting rates high during the introductory phase. The company then
lowers prices gradually as competitor goods appear on the market.One of the benefits of price
skimming is that it allows businesses to maximize profits on early adopters before dropping
prices to attract more price-sensitive consumers. Not only does price skimming help a small
business recoup its development costs, but it also creates an illusion of quality and exclusivity
when your item is first introduced to the marketplace.
5. Psychology Pricing:With the economy still limping back to full health, price remains a major
concern for American consumers. Psychology pricing refers to techniques that marketers use to
encourage customers to respond on emotional levels rather than logical ones.For example, setting
the price of a watch at $199 is proven to attract more consumers than setting it at $200, even
though the true difference here is quite small. One explanation for this trend is that consumers

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tend to put more attention on the first number on a price tag than the last. The goal of psychology
pricing is to increase demand by creating an illusion of enhanced value for the consumer.
6. Bundle Pricing:With bundle pricing, small businesses sell multiple products for a lower rate than
consumers would face if they purchased each item individually. Not only is bundling goods an
effective way of moving unsold items that are taking up space in your facility, but it can also
increase the value perception in the eyes of your customers, since you’re essentially giving them
something for free.Bundle pricing is more effective for companies that sell complimentary
products. For example, a restaurant can take advantage of bundle pricing by including dessert
with every entrée sold on a particular day of the week. Small businesses should keep in mind that
the profits they earn on the higher-value items must make up for the losses they take on the
lower-value product.
7. Absorption cost pricing: Used mainly in large department stores. The price of each product is
dependent on how many costs it creates.
8. Target pricing: A target price is made and then costs are adjusted so that that price can be
achieved.
9. Penetration pricing: Used for new products wanting to gain market share. The product is priced
low so that it is able to get a hold in the market.
10. Market skimming: When a new innovative product is bought out - during the first few months
high prices can be charged as there is little competition and the product is popular because it is
new.
11. Loss leader pricing: Charging below cost price to try and attract customers to other products
(normally in supermarkets).
12. Price discrimination: Charging different people different prices for effectively the same product.
Normally time based (charging different prices at different times of the day / week / year)
13. Discount pricing: Offering lower prices for a set time period to try and boost sales and sell off
unwanted stock.
FACTORS AFFECTING PRICING:

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Return on Investment (ROI): A firm may set as a marketing objective the requirement that all products
attain a certain percentage return on the organization’s spending on marketing the product. This level of
return along with an estimate of sales will help determine appropriate pricing levels needed to meet the
ROI objective.
Cash Flow: Firms may seek to set prices at a level that will insure that sales revenue will at least cover
product production and marketing costs. This is most likely to occur with new products where the
organizational objectives allow a new product to simply meet its expenses while efforts are made to
establish the product in the market. This objective allows the marketer to worry less about product
profitability and instead directs energies to building a market for the product.
Market Share: The pricing decision may be important when the firm has an objective of gaining a hold
in a new market or retaining a certain percent of an existing market. For new products under this objective
the price is set artificially low in order to capture a sizeable portion of the market and will be increased as
the product becomes more accepted by the target market (we will discuss this marketing strategy in
further detail in our next tutorial). For existing products, firms may use price decisions to insure they
retain market share in instances where there is a high level of market competition and competitors who
are willing to compete on price.
Maximize Profits: Older products that appeal to a market that is no longer growing may have a company
objective requiring the price be set at a level that optimizes profits. This is often the case when the
marketer has little incentive to introduce improvements to the product (e.g., demand for product is
declining) and will continue to sell the same product at a price premium for as long as some in the market
is willing to buy.
Direct Competitor Pricing: Almost all marketing decisions, including pricing, will include an evaluation
of competitors’ offerings. The impact of this information on the actual setting of price will depend on the
competitive nature of the market. For instance, products that dominate markets and are viewed as market
leaders may not be heavily influenced by competitor pricing since they are in a commanding position to
set prices as they see fit. On the other hand in markets where a clear leader does not exist, the pricing of
competitive products will be carefully considered. Marketers must not only research competitive prices
but must also pay close attention to how these companies will respond to the marketer’s pricing decisions.
For instance, in highly competitive industries, such as gasoline or airline travel, competitors may respond
quickly to competitors’ price adjustments thus reducing the effect of such changes.
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Related Product Pricing: Products that offer new ways for solving customer needs may look to pricing
of products that customers are currently using even though these other products may not appear to be
direct competitors. For example, a marketer of a new online golf instruction service that allows customers
to access golf instruction via their computer may look at prices charged by local golf professionals for in-
person instruction to gauge where to set their price. While on the surface online golf instruction may not
be a direct competitor to a golf instructor, marketers for the online service can use the cost of in-person
instruction as a reference point for setting price.
Primary Product Pricing: As we discussed in the Product Decisions tutorial, marketers may sell

products viewed as complementary to a primary product. For example, Bluetooth headsets are considered
complementary to the primary product cellphones. The pricing of complementary products may be
affected by pricing changes made to the primary product since customers may compare the price for
complementary products based on the primary product price. For example, companies that sell accessory
products for the Apple iPod may do so at a cost that is only 10% of the purchase price of the iPod.
However, if Apple were to dramatically drop the price, for instance by 50%, the accessory at its present
price would now be 20% of the of iPod price. This may be perceived by the market as a doubling of the
accessory’s price. To maintain its perceived value the accessory marketer may need to respond to the iPod
price drop by also lowering the price of the accessory.
Government Regulation: Marketers must be aware of regulations that impact how price is set in the
markets in which their products are sold. These regulations are primarily government enacted meaning
that there may be legal ramifications if the rules are not followed. Price regulations can come from any
level of government and vary widely in their requirements. For instance, in some industries, government
regulation may set price ceilings (how high price may be set) while in other industries there may be price
floors (how low price may be set). Additional areas of potential regulation include: deceptive pricing,
price discrimination, predatory pricing and price fixing
PLACE/DISTRIBUTION:

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PROMOTION:
Promotion refers to raising customer awareness of a product or brand, generating sales, and creating brand
loyalty. It is one of the four basic elements of the market mix, which includes the four P's: price, product,
promotion, and place.
Fundamental objectives of promotion.

Some possible objectives of promotion for any company may include:
1. To present information to consumers and others.
2. To increase demand.
3. To differentiate a product.
Importance of promotion
Different organizations have different expectations from their promotional activities. These expectations
are developed into objectives which then shape the selection and execution of these activities. Promotion
is important to marketers because:
It Builds Awareness: Often, a product or brand may need to create an identity within the market. For the
most part, this applies to a new company, a new brand or a new product. But often it may also be needed
in times of rebranding or building up a failing product. The aim then is to select those promotional
activities that help inform the customer about the company and the product.
It Creates Interest:If the customer is already aware of the product or has been made aware through some
activities, it becomes necessary to move them along to actual purchasing behavior. The aim here is to
identify a need that the product fulfills and make sure that the customer recognizes this need as something
that is unfulfilled for them.
It Provides Information: Sometimes, a company may just need to provide necessary information
regarding the product, its benefits, features or usage to the consumer. This may be the case if a new
product is introduced into the market. Unique features or benefits may need to be explained. In other
cases, a new feature on an existing product may need to be highlighted. In some cases, such as in
instances where environmental impact or health scares may be in play, information about a change in
business practices and company policy may need to be communicated.
It Stimulates Demand:A company may seek to enhance its sales through promotion. If sales have been
lower than usual, then the aim may be to get them back up to target level by re-engaging old customers
and encouraging new ones to try a product out. In other instances, the aim may be to increase sales further
at certain times of the year such as near a major holiday. Free demonstrations or special deals may be
used to reach these ends.
It helps differentiate products: In situations where there are many competitors in the market, a company
may seek to use promotional activities to differentiate its product in the market and make it stand out

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from the crowd. The focus here remains on those features, functionalities or benefits that may not be
offered by a competitor or may not be offered so well.
It helps in Brand Reinforcement:One basic aim of a promotional activity may be to further strengthen
the brand and its place in the market. This helps turn a first time purchases into a life time purchaser. This
can also help create advocates for the product from within the customer base.
Promotion Elements:
There are various elements of promotion and a company may choose to use one or more of these in
harmony to ensure a clear, effective and direct message reaches the customer. The selection of the
portfolio of activities may depend on the company’s marketing and sales strategies and budget
allocations. These elements are:
Advertising: This mode of promotion is usually paid, with little or no personal message. Mass media
such as television, radio or newspapers and magazines is most often the carrier of these messages. Apart
from these, billboards, posters, web pages, brochures and direct mail also fall in the same category. While
this method has traditionally been one sided, advertisement over new media such as the internet may
allow for quick feedback.
Public Relations & Sponsorship: PR or publicity tries to increase positive mention of the product or
brand in influential media outlets. These could include newspapers, magazines, talk shows and new media
such as social networks and blogs. This could also mean allowing super users, or influencers to test the
product and speak positively about it to their peers. This type of advertisement may or may not be paid.
For example, sponsoring a major event and increasing brand visibility is a paid action. Sending free
samples to a blogger then depends on their discretion and opinion and is not usually swayed by payment.
Personal Selling: Also known as direct selling, it connects company representatives with the consumer.
These interactions can be in person, over the phone and over email or chat. This personal contact aims to
create a personal relationship between the client and the brand or product.
Direct Marketing: This channel targets specific influential potential users through telemarketing,
customized letters, emails and text messages.
Sales Promotions: These are usually short term strategic activities which aim to encourage a surge in
sales. These could be ‘buy one get one free’ options, seasonal discounts, contests, samples or even special
coupons with expiration dates.
Factors to be considered in Promotional Decisions:
Whenever a company sets out to design its promotional mix, it needs to consider the following points:
 Stage in the Product Lifecycle: During the beginning of the lifecycle, there may need to be
more aggressive and informational advertising, while a slowdown in promotions may be seen
during the later stages.
 Nature of the Product:If a product is not new in its usage or function, there may be less need for
information and more focus on brand equity creation as well as on emotional aspects of the
product.

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 The Allocated and Available Budge:A certain total budget is set for promotional activities and
these then need to be designed and executed within these constraints.
 Cultural Sensitivity:If a product is to be launched in a new international market or translated
across markets, it becomes imperative to take into consideration local affiliations and
sensitivities. These include both cultural and religious considerations. Often, these issues may
even present themselves within one country.
 Target Market Composition – The people who make up the target market need to be considered
before committing to a promotional mix. If a market is not tech savvy, then more traditional
means may need to be employed. Conversely, an internet generation used to instant gratification
may need to be provided more focused and targeted messages.
 Competitor Actions – The methods a competitor uses need to be taken into account as well.
There may not be a need to spend money on a radical advertising method if a customer is using
rudimentary methods for example.
CUSTOMER SERVICE:
Customer service is the provision of service to customers before, during and after a purchase. The
perception of success of such interactions is dependent on employees "who can adjust themselves to the
personality of the guest".
A customer support is a range of customer services to assist customers in making cost effective and
correct use of a product it includes assistance in planning, installation, training, trouble shooting,
maintenance, upgrading, and disposal of a product. These services even may be done at customer's side
where he/she uses the product or service. In this case it is called "at home customer services" or "at home
customer support
Objectives of customer care services:
 Establish effective customer service mechanisms
 Improve competitiveness
 Differentiate their offering via innovative customer services
 Build customer loyalty through positive customer service experience
 Increase customer retention
 Attract new customers via word of mouth
 Reduce marketing costs
 Increase service efficiency
 Reduce complaints and complaints handling resources and costs
 Improve compliance with consumer trading laws
 Improve services and accountability (especially for public sector organizations)

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 Develop and sustain organization-wide focus on customers and quality
 Improve ease of dealing with organization for customers
Principles of Customer service:
 Commitment (at all levels)
 Credibility (keep promises)
 Culture (customer service ethos)
 Competencies (of staff - in recruitment, training and assessment)
 Responsibility (clear and supported with suitable authority - with at least one person responsible
for customer problems)
 Resources (adequate for effectiveness)
 Identification and management of all customer service issues
 Quality (of customer service - relevant input and review)
 Feedback (enabled for customers and employees)
 Continual improvement (to meet or exceed customer expectations)
 Internal customers (establish concept and communications)
The Role of Customer care:

Although the role of customer care is typically entry-level, it is one of the most important roles of a small
business’ team. Interacting directly with customers at all stages of the business relationship, this service
often represents a firm communication with the customer. Remember tasks performed at this point can
effectively make or break the business’ relationship with the customer. Customer care has the following
roles in any organization:
 Customer Experience
A customer service agent is often the face of his employer. It is important for a customer service agent to
ensure that each potential and existing customer have a pleasant experience. Acting as an extension of the
firm’s brand and core values, this task is accomplished by treating each customer in a courteous manner,
greeting them and answering every question in a pleasant and efficient manner.
 Sales
In some environments, a customer service agent is required to make sales. In these circumstances, she
must speak with each customer and identify their needs. She then recommends the appropriate product or
service. She may also ring up the purchase, operating a cash register, processing credit cards and issuing
receipts.
 Issue Resolution

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The resolution of customer issues and complaints are typically the responsibility of the customer service
agent. In accordance with the old adage “the customer is always right,” the agent must treat even the most
disgruntled customer with calmness and respect. He must identify the issues as quickly as possible,
offering an appropriate resolution that satisfies the customer and is in compliance with company
regulations. When issues are determined to be of a serious nature, he must collect all relevant information
and relay it to the appropriate manager. All the while, he must actively work to calm the customer,
assuring them the problem will be efficiently addressed.
 Business Development
Even within environments where a sales team is in place, a customer service agent must consciously seek
out opportunities for revenue generation. While speaking with a customer for a fulfillment related issue,
for instance, a customer service agent should up sell the customer, offering them products or services
which may complement those that have already been purchased. In addition, she should actively listen for
clues given during the conversation that may indicate a future business needs. This should then be
communicated to the sales team.
 Customer Records
In many cases, a customer service agent is responsible for collecting all relevant customer data. This may
include contact information, credit card or billing information, as well as detailed notes regarding the
customer’s purchase history. This data is incredibly important, as it is often used by other areas of the
firm, such as the marketing team, in an effort to generate future revenue through brochure mailings and
other initiatives.
 Handling Problems
Customer inquiries often involve some form of complaint that the customer service representative must
handle in accordance with the company’s guidelines and policies. Sometimes, the representatives may
attempt to solve the problems or at least propose some solutions. Some representatives may also be
authorized to send customers their replacement products or reverse erroneous fees. Others may function
like gatekeepers, getting information on the problem and passing it along to someone else to solve.
Customer service representatives must make sure that first the complaints made are valid and must do
whatever they can within the bounds of their authority to make sure that the customer is satisfied when he
hangs up the phone.
 Assisting in Sales
Selling the company’s products and services may be part of a customer service representative’s job, even
though he may not be part of the sales division. Some representatives may provide product or service
information to assist customers in making a decision about a product to buy. Customer service
representatives may also help generate sales leads. For instance, after addressing a customer’s inquiry, the
representative may attempt to sell them some new products upgrades.
 Clerical Tasks
The job of a customer service representative may also involve clerical responsibilities. Such duties may
involve answering telephone calls and making the appropriate transfers. For example, when a customer
makes an inquiry about Internet broadband, the representative can transfer the call to a technical service

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representative. Other duties include processing new client accounts, maintaining customer accounts,
implementing changes to existing accounts, and filing documents and other paperwork.
 Job Specific Responsibilities
Almost all types of organizations employ customer service representatives and often their duties and
responsibilities vary depending on the type of the organization and industry. For example, customer
service representatives who work in banks may have similar duties to bank tellers, counting money,
cashing checks and servicing accounts. Those working in insurance companies may be required to handle
paperwork dealing with policy renewals. Customer service representatives who work for communication
and utility companies may assist customers who have outage or other service problems.
Customer service executives use their skills and experience to ensure that a company delivers the highest
standards of service to customers. Depending on the size of the business, the executive may deal directly
with customers’ inquiries and complaints, or manage a team of customer service representatives. Either
way, the customer service executive aims to maximize customer satisfaction.
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Standards
Executives establish and monitor standards for customer service in the company using a recognized
benchmark, such as the International Customer Service Standard promoted by the Customer Service
Institute of America. Standards like that help executives to measure a company’s performance against
industry benchmarks and identify areas for improvement. They specify individual metrics for different
aspects of service, such as time to respond to an inquiry, the number of calls a representative handles in a
given period of time or the percentage of late deliveries.
Leadership
Customer service executives encourage all employees to display the highest standards of service at all
times. They identify tasks that are critical to maintaining customer satisfaction levels and communicate
with employees to raise awareness of their individual roles in delivering satisfaction. This is an important
role because employees may not understand their contribution to customer satisfaction. Administrative
staff who make frequent mistakes in order processing or invoicing, for example, can damage customer
relations.
Management
Customer service executives manage teams of customer service representatives, taking responsibility for
recruiting, selecting and training new team members. Executives deploy their teams to meet changing
levels of demand from customers at different times of the day. The aim is to maximize productivity and
minimize costs while maintaining a high standard of customer service. Executives must also motivate

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their teams to continue delivering a quality service, particularly when representatives are working in
stressful conditions dealing with customer complaints.
Analysis
Customer service executives analyze records of customer inquiries, purchases, service requests and
complaints to identify trends. They may invest in customer relationship management software that
enables customer service teams to record and analyze customer behavior and identify trends. To maintain
standards, executives use customer data to focus resources on improving performance. If a company
receives a high number of complaints about the time it takes to answer calls, for example, customer
service executives review options such as increasing staffing levels, providing training in call handling or
investing in technology to automate aspects of call handling
A Dozen Best Practices
1. Drive everything in your business with a customer focus. If we were to operate with only one best
practice, this would be it. If all decisions, all services and all products were based upon a customer focus,
customer service would be excellent. In a customer driven business, management and employees remain
committed to satisfying the needs and expectations of the customer. In these companies, rewards,
recognition and training are all strategies for ensuring excellent customer service. In these companies, the
customer is the job or business and whatever the customer wants, needs or does provides the energy for
everything else.
2. Ask the right questions. This best practice requires that owners and employees constantly ask
questions, collect, analyze and use data. Feedback from the customer is a source of constant business
renewal and adjustment. As the business environment changes and as customer needs shift, continuous
feedback allows a business to adjust and change accordingly. The critical question is, “What do my
customers need, and how can I best provide it?” There are many ways to collect data, and every customer
should be considered a source of data. Everyday conversations with customers provide a continuous flow
of useful information. Employees should learn the art of asking openended questions in order to give the
customer opportunities to express perceptions, attitudes and both positive and negative feelings about the
business and its quality of service. Another way to collect data is the use of focus groups; these are small
groups of three to seven individuals who focus on a specific issue or topic that is of interest to the
business. Focus groups may also be used to propose solutions to problems and to resolve critical issues.
Written questionnaires and surveys are other techniques for collecting information. Care must be taken to
ensure that questionnaires are as short as possible in order not to waste valuable customer time.
Telephone surveys are another useful tool in the collection of information about customer service and
products. Many companies have found the use of advisory committees as another helpful tool for data
gathering. The formation of a formal advisory board not only offers customers an avenue for expressing
feelings, attitudes, and sharing information, it helps to create ownership for the company among the
advisory board members. It 2 cannot be overly emphasized that the collection of data is not enough.
These data must be thoroughly analyzed and used in order to improve customer service. Furthermore,
customer feedback information needs to be thoroughly shared throughout the company so that all can
benefit from a constant linkage with the customer.
3. Exceed customer needs and expectations. In a highly competitive service environment, meeting
customer expectations may not be enough. Successful companies strive to not just meet, but to exceed

96
customer needs and expectations. Nothing impresses a customer more than an employee who goes,
“above and beyond the call of duty” to ensure total customer satisfaction. According to Lisa Ford, (1997),
customer service has changed during the last decade. Before this change, if customers needed service,
they may have the option of going to the customer service department or demanding to see someone in
management. The unspoken message to the customer was, “customer service is an extra. If you want it,
you’ll have to go to extra trouble.” The philosophy of these customer service units was to explain to the
customer why customer needs, wants, and expectations could not be met. The goal was to do this as
quickly as possible and to get the customers on their way. Today, customers expect something more than
this traditional customer service. They not only expect, they demand exceptional customer service. They
are particularly pleased when businesses exceed their expectations, show that they care about them
personally, and employees work swiftly and effectively on their behalf. Sam Walton, founder of Wal-
Mart, is often quoted as saying, “There is only one boss – the customer. Customers can fire everybody in
the company from the chairman on down simply by spending their money somewhere else.” Exceeding
customer needs and expectations can keep employees and the chairmen employed in their jobs and can
keep a business profitable and growing.
4. Maintain happy employees. Happy employees mean happy customers. In most businesses, especially
service oriented businesses, the employees’ attitudes and behaviors determine the quality of customer
service. Herb Kelleher, former Chief Executive Officer of Southwest Airlines, argues, “Put employees
first and customers second.” At first this may seem contrary to the notion of having a company that is
customer focused. But, if we adhere to the notion of “A happy employee makes a happy customer,” then
this makes sense. Southwest Airlines has been successful in a very competitive business. Southwest has
instilled a spirit of entrepreneurship in all its employees. The philosophy is that Southwest Airlines is in
the people business and it just happens to run an airline. Companies that consider they are in the people
business are companies that provide excellent customer service. Tom Peters, (1999), says that we should
make work fun. In a company that makes work fun, employees look forward to their job where they are
valued and appreciated. If employees are treated as customers, the employee wins, the customer wins and
the business wins. Everybody wins!
5. Create and use service standards. Successful companies that provide excellent customer service clearly
define the service standards that are essential for business success. Service standards serve two purposes.
First, they are a powerful force for shaping the image that your customers have of you. Secondly, they are
a great tool for measuring how well each employee in your business meets the levels of service, which are
essential for your business success. Service standards should be measurable because you can manage and
train for things that you can measure. Many would argue that it is difficult to measure service qualities for
excellence. For example, people say, “You can’t measure friendly.” This is true. You can’t measure
friendly, but you can measure smiles. In addition, you can measure customer greetings such as “good
morning” or “good afternoon.” You can measure sending customers on their way with “have a nice day.”
You can measure the number of times that employees use a customer’s name. For example, it’s
recommended that employees use a customer’s name at least twice during a conversation. By taking time
to observe these measurable items, you can essentially measure friendly. There are seven criteria for
developing standards according to Leland & Bailey, (1995). According to these experts, standards should
be specific, concise, measurable, based on customer requirements, written into job descriptions and
performance reviews, jointly created with employees, and fairly enforced throughout the organization.
The Malcolm Baldridge National Quality Award, created by an act of congress in 1987, was designed to
promote the following: (1) awareness of quality as an increasing important element in competitiveness;

97
(2) understanding the requirements for quality excellence; (3) sharing of information 3 on successful
quality strategies. The Baldridge award is based on seven categories of criteria or standards. Among these
standards, customer satisfaction is the leader. Developing service standards requires defining the specific
service sequences, mapping out the steps that lead to service, determining which customer experiences
enhance service, and converting the experience enhancers into measurable standards. Examples of
standards for hotel services might be: (1) promptness; (2) friendliness; (3) recognition and attentiveness;
(4) initiative and (5) ensuring quality of the guest’s positive experience.
6. Have a written plan for ensuring excellence in customer service. A written plan helps to ensure a total
organizational culture of excellence in customer service. Especially critical is developing a mission and
visionary plan that stresses the importance of customer service. The mission statement for the customer-
oriented company clearly puts the customer in the spotlight. If a company cannot clearly identify the
customer within its mission, the mission statement does not contribute toward the goal of customer
service. The visionary plan should be developed among all employees with leadership from the owner or
chief executive officer (CEO). It should have a limited number of goals that powerfully speak to the
direction of the business and its emphasis on customer service. It’s recommended that not more than five
to seven goals be developed. Customer service may be incorporated into one of the major goals or it may
be inherent but clearly recognizable in all the goals. Having a plan in writing and frequently making
reference to the plan is a way to put customer service in the forefront of a company’s business plan. This
written plan should be based on customer input. The customer should be involved in the development of
the plan, and it should be continuously updated and adjusted, as customer needs and expectations change
in the changing environment.
7. Deal effectively with the difficult customer. Recently the author heard a local entrepreneur state that he
considered the difficult customer a positive resource for his company. Dissatisfied customers, “tell it like
it is.” Information is likely to come forth in the heat of the moment that otherwise might be kept private.
Employees should be trained and experienced in handling difficult customers. Handling the difficult
customer is everybody’s job, not just managers or customer service departments. Common sense
approaches like showing empathy, looking directly at the customer and using the mirror technique are
strategies that work for many. The mirror technique involves reflecting or stating back to the customer
what he or she is saying to you. Do this in a way that the customer knows that you are listening and feels
that you care. Employees who treat dissatisfied customers as a positive resource embrace the concerns of
a customer and deal with those concerns one at a time. Customer complaints are addressed with empathy
and honesty. Difficult customers can be an asset for excellence.
8. Use follow up communications as a way to keep in touch with the customer. A telephone call or a
letter written in a timely fashion after a service has been performed shows the customer that the business
cares about their satisfaction. A friendly voice on the telephone or a well-written letter are excellent tools
for maintaining good public relations with your customers. Follow up telephone calls or even personal
visits can also be a source of information and feedback about how the business is perceived and how well
the service is valued. Research shows that follow up is one of the most effective ways for developing
customer loyalty. Through customer loyalty, the business can emphasize in its service menu those things
that are most important and most critical to the customer. The business can invest time and other
resources in the important things that matter, and it can deemphasize the unimportant. This is where
customer centered-strategy has the biggest payoff.

98
9. Learn from your competitors and use their successes in your business. The successful customer service
oriented business is a business that studies the competition. Ask, observe, analyze and study information
about the success of other companies that are your strongest competitors. Ask the question – “What are
these companies doing that makes them successful?” Identify those practices, which seem to pay off and
give them a try in your company. Study the organization, the service and the products that seem to be
most successful. Learn from the competition, emulate their successes and avoid their mistakes. Start with
the most successful business competitors in your area and learn everything you can about those
businesses. Consider your competition a valuable business resource. 4
10. Smash the barriers to excellence. It seems to be the natural tendency for organizations and businesses
to develop a bureaucracy over time. The longer a business has been in existence, the more rules, policies,
and regulations it seems to have in the rulebook. Frequently, these rules, regulations and policies are
barriers to customer service excellence. In the book describing the Nordstrom culture, the author
encourages business owners to remove barriers and restrictions that will set employees free to provide
excellent customer service. The author argues that employees must be freed of the shackles of too many
rules, too many regulations, too much paperwork, and overly restricted communication channels. Only
then, will employees be free to truly focus on the customer and provide excellent customer service. The
employees themselves are the best data source for identifying and eliminating these barriers, but the
customers too can be an excellent source of this critical information.
11. Offer your customers options. If you can’t satisfy your customers’ needs and expectations, the next
best thing is to offer options for other sources of service, even if it is a competitor. This shows the
customer that you truly care about them and not just in selling your service. In addition to offering
options, you will need to give them the information that they need to make the best decision for their
situation. According to the literature, most customers like just two or three options. Too many options
cause confusion and only make the customer more frustrated. Offering options puts the service provider
in the role of consultant and this is a role that customers value highly.
12. Walk the talk at the top. It is critical that the owner or chief executive officer of the business
demonstrates a genuine concern and desire to provide excellent customer service. The CEO who is “out
and about” helping customers, finding and filling customer needs, is the CEO who operates a company
with excellent customer service. Former Southwest Airlines CEO, Herb Kelleher says, “Treat employees
with care and concern if that is the way you want them to treat each other and your customers.” He goes
to say that part of success of Southwest Airlines is his personal philosophy, “Make sure that good enough
is never good enough.” The effective Chief Executive Officer (CEO) who walks the talk is a lifelong
learner. Training and development are constantly a part of the CEO’s mode of operations. The effective
CEO develops a learning culture in the business that brings employees and customers together frequently
to solve problems and to develop strategies for continuous improvement in customer service.

99

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PRINCIPLES AND PRACTICE OF MARKETING (DSCM MODULE II)

PRINCIPLES AND PRACTICE OF

DIPLOMA IN SUPPLIES CHAIN

principles and practices of marketing notes: prepared and compiled by

COURSE UNIT: PRINCIPLES AND PRACTICE OF MARKETING

principles and practices of marketing notes: prepared and compiled by

Objectives a) Apply the principals, concepts and marketing tools in performing

principles and practices of marketing notes: prepared and compiled by

iii. Product decisions

Emerging trends and

NATURE AND SCOPE OF SALES AND MARKETING

principles and practices of marketing notes: prepared and compiled by

THE MARKETING PROCESS:

The Marketing Process involves the following steps:

1. Analysis of the opportunities in the market.

2. Selection of the target market.

3. Development of marketing mix.

4. Management of marketing efforts.

1. Analysis of the Opportunities in the Market:

principles and practices of marketing notes: prepared and compiled by

2. Selection of the Target Market:

principles and practices of marketing notes: prepared and compiled by

3. Development of Marketing Mix:

 Product: means any offering (goods or services) to the market by the company.

 Product means Customer Solution

 Price means Customer Cost

 Place means Convenience

principles and practices of marketing notes: prepared and compiled by

4. Management of Marketing Efforts:

 Build brand awareness

 Grow market share

 Launch new products or services

 Target new customers

 Enter new markets internationally or locally

 Improve stakeholder relations

 Enhance customer relationships

 Improve internal communications

principles and practices of marketing notes: prepared and compiled by

 The production concept

principles and practices of marketing notes: prepared and compiled by

The Social Marketing Concept:

HISTORICAL DEVELOPMENT OF MARKETING:

principles and practices of marketing notes: prepared and compiled by

principles and practices of marketing notes: prepared and compiled by

ROLE OF MARKETING IN ECONOMIC DEVELOPMENT:

 Marketing Enables Profitable Transactions to Occur

 Marketing Delivers Value

principles and practices of marketing notes: prepared and compiled by

 Marketing Benefits Society

 Marketing enables consumers to make informed decisions

 Marketing Costs Money

 Marketing Offers People Career Opportunities

principles and practices of marketing notes: prepared and compiled by

principles and practices of marketing notes: prepared and compiled by

CRITICISMS OF MARKETING:

Among the issues cited by those who criticize marketing are:

 Marketing Encourages People to Purchase What They Do Not Need

 Marketers embellish (exaggerate) Product Claims

principles and practices of marketing notes: prepared and compiled by