Pricing

Price is all around us. You pay rent for your apartment, tuition for your education, and a fee to your dentist or physician. The airline, railways, taxi & bus agencies charge you a fare; the local utilities call their price a rate; and the local bank charges you interest for the money you borrow. In our day-to-day life, for every exchange of product and services we pay viz value of product is called price..

PRICE

1. It is unique element in Marketing Mix or rather perhaps first “P” of marketing mix. 
2. Price is the value express in money and cost of transferring the ownership.
3. Price means total product offering; like brand name, product benefits & features, after-sales-service, Distribution Channels, sales promotions, discount, personal selling etc.

Price brings in the revenues

• Price = Cost + Profit.
• Rs 250 = 200+ 50.
• This is the only element in the marketing mix that brings in the revenues and all the rest are costs.
• Price communicates the value positioning of the product.
• Price at some extent determined quality of product.
• Price what a consumer is willing to pay for a product.

Pricing policy

• Selecting the pricing objective. 
• Determining demand. 
• Estimating costs. 
• Analyzing competitors – costs, prices, offers. 
• Selecting a pricing method. 
• Selecting the final price.

The pricing objective

• Survival. 
• Sales volume 
• Maximum current profit 
• Maximum market share – penetration pricing 
• Maximum market skimming 
• Product quality leadership 
• Rate of Return On Investment

Determining Demand
In competitive market the market forces of demand (purchasing) and supply (selling) will determined the price of products. The most important element of the market would be the substitute, which plays very significant variable in pricing of the product. Hence demand would be;

• Price sensitivity 
• Price elasticity of demand

What influences price sensitivity?

• Shared cost 
• Sunk investment 
• Price – quality 
• Inventory effect 
• Productivity
• Unique value effect 
• Substitute awareness 
• Difficult comparison 
• End benefit 
• Total expenditure

What is price elasticity?

• This determines the changes in demand with unit change in price 
• If there is little or no change in deenmand, it is said to be price inelastic. 
• If there is significant change in demand, then it is said to be price elastic.

Demand is likely to be less elastic when;

• There are few or no substitutes 
• Buyers readily do not notice the higher price 
• Buyers are slow to change their buying habits 
• Buyers think that the higher prices are justified 
• No aggressive competitor in the market.

Estimating costs

• Fixed costs 
• Variable costs 
• Learning curve 
• Activity based costing 
• Target costing

Pricing methods

• Markup pricing 
• Target return pricing 
• Perceived value pricing 
• Value pricing 
• Going rate pricing 
• Sealed bid pricing

Psychological pricing

• It is used to lessen the impact of the actual pricing in the consumers mind. 
• It is used as a surrogate to indicate the product quality or esteem.

New methods of Pricing

• Group Pricing. 
• Gain and Risk sharing pricing.

Geographical Pricing

• Different pricing at different locations. 
• Could be in terms of barter, counter trade and foreign currency.

Discounts and Allowances

• Early payment 
• Off – season 
• Bulk purchase 
• Retail discount 
• Cash discount 
• Trade in allowance

Promotional Pricing

• Loss leader pricing 
• Special event pricing 
• Cash rebate 
• Low interest financing 
• Longer payment terms 
• Warranties and service contracts 
• Psychological discounting

Discriminatory Pricing

• Customer segment 
• Product form 
• Image pricing 
• Location pricing 
• Time pricing

Product Mix Pricing

• Product line pricing 
• Optional feature pricing 
• Captive product pricing 
• Two part pricing 
• Byproduct pricing 
• Product bundling pricing

Initiating Price cuts

• Excess plant capacity 
• Competition 
• Aggressive pricing 

Initiating price increases;

• When demand exceeds supply 
• When costs go up 
• Govt. policies 
• Reduce/remove discounts and rebates

Indirect price increases when;

• Shrinking pack size for same price 
• Substituting less expensive raw materials 
• Reducing product features 
• Removing product services 
• Using less expensive packaging material 
• Reducing the no. of packs and sizes offered 
• Creating new economy brands

Responding to competitor price changes

• Maintain price 
• Maintain price and add value 
• Reduce price 
• Increase price and quality 
• Launch a low price fighter

Consumer Behavior

Why study consumer behavior?

Until now, we have focused on consumer needs;

• Identifying needs through market research 
• Satisfying needs through product design 
• Make more profit by understanding what people want

Consumer behavior is about the psychological processes that underlie consumer choices.

• Identifying the simplifying choice rules consumers use 
• Discovering how "framing" of a decision affects preferences 
• Make more profit by understanding how they think

BUYER BEHAVIOUR
Focus on the consumer buyer behaviour

• Consumer Behaviour is very important and ticklish attitude of consumer & in todays marketing scenario, it is main tool in the process of buying decision. 
• Consumer buyer behaviour - the buying behaviour of final consumers = individuals and households who buy goods and services for personal consumption –Kotler-Amstrong- 
• Consumer = most important of the marketing environment, the marketer must know : WHAT, WHEN, HOW, WHY the customer buyes 

Do people choose what is best for them?



BUYER-AN ENIGMA








Consumer Buyer Models: Economic Model

In this model consumer will be looking for benefits & opportunities. Like;

a) lower the price bought more qty (price effect)

b) higher purchasing power, bought higher qty (income effect)

c) lower the price of the substitute product, lower the qty that will be brought(substitute effect)

d) higher the promotion expenses the higher the sales (communication effect)

Physiological Model of Maslow’s Five Level Hierarchy/Needs



Stimulation-Response Model/Pavlovian Learning Model (SRM)



Howard-Sheth Buyer Behavior Model



Should consumers be followed or led?
“Our plan is to lead the public with new products rather than ask them what kind of products they want. The public does not know what is possible, but we do. So instead of doing a lot of market research, we …try to create a market for a product by educating [the public about what the product can do for them]. ” (Akio Morita, CEO of Sony)

Market Position

COMPETITOR ANANLYSIS

Competitor analysis

• Competition is necessary evil in the market, which indicate health of the industry & reflect on the product. 
• Competition gives new products, better price & lot more to consumer.
• A systematic attempt to identify competitor’s strategy will be core focus in competition analysis.
• The best example of competition is ATM cards, CRM, Easy money, big retail formats etc.

Types of growth

Intensive growth:

• Market penetration.
• Market development.
• Product development. 

Diversified growth

• Integrative growth - backward, forward, horizontal.
• No growth - harvesting, entrenchment, withdrawal.

Porter’s Five Forces Model

1. Bargaining power of suppliers.
2. Bargaining power of customers.
3. Threat of new entrants.
4. Threat of substitute products or services.
5. Rivalry among current competitors.

The Five Forces of Competition Model




Concerns of an Organization’s competitive analysis

• Who are our competitors?
• How can our competitors be grouped meaningfully?
• What are our competitors’ strengths and weaknesses?
• What are our competitors’ objectives and strategies?
• How are our competitors likely to react to changes in the marketing environment? 

Competitor identification

Who are our competitors?

• Similar specific-same product, technology and target market
• Similar general-same product area, but different segments. 

e.g. Nirma powder Vs Wheel powder

• Different specific-same need satisfied by different means.

e.g. Water Vs Cold drinks

• Different general-competing for discretionary spend.

e.g. holiday vs. new car

How can our competitors be grouped meaningfully?

Different characteristics for identifying Strategic groupings



 What are competitive strengths and weaknesses 

• Requires use of various information sources.
• Consider in terms of critical success factors:

e.g. manufacturing, technical and financial strength, relationships with supplier and customer, its market and segment, product range, its volume, cash and profits etc.

• Information can be used to plan and launch attack.

What are our competitors’ objectives and strategies? 

Objectives – related to cash generation, market share, technological leadership, quality recognition , market expansion, penetration into new market, product modification, advertisement strategy and sales promotion strategy etc. Find clues in product portfolio to have better edge over on the competitors.

Strategy - related to its positioning, marketing mix etc.

How are our competitors likely to react to changes in the marketing environment?

• Learn by experience.
• Market survey/research.
• Customers feed back-segmentation.

Not easy to predict its reaction due to: its cost structures, relative market positions, product life cycle, industrial position etc.

Useful information about competitors


Generic strategies



Sources of Competitions

• Product – branding, innovation, quality, specification, design, image, patents;
• Price – price positions, price-value combinations
• Place – intensive, exclusive distributions
• Promotion – creativity, spending
• Service – strong trust with customer

Attacking and defending

• Aggressive strategies - frontal, flank, encirclement, bypass, and guerrilla attacks. 
• Defence strategies - fixed position, mobile, flanking, contraction, counter offensive.

Attack strategies

Defence strategies

Marketing Research

Marketing Research

• The success of any business venture lies in the existence of markets.
• Unless the entrepreneur identifies the existing needs or potential needs of the market he cannot translate these needs into products/services that would be acceptable by the market.
• In the past, the intuitive ability of the entrepreneur was a good enough method for understanding the needs of the consumer.
• Marketing research is the process of collecting information on any facts relevant to market.
• Marketing research is the systematic collection of information, its analysis and interpretation to strategize some relevant business decision.
• Marketing research is the systematic gathering, recording and analysing of data about marketing problems to facilitated decision-making.
• The marketing research is a tool of marketing information system which has become an important function of management.

Definitions

• American Marketing Association (AMA) – Defines marketing research as the systematic gathering, recording and analyzing of data about problems relating to the marketing of goods and services.
• Philip Kotler – Marketing research is the systematic problem analysis, model building and fact finding for the purpose of improved decision making and control in the marketing of goods and services.
• Richard D. Crisp – Defines Market Research as the systematic objectives and exhaustible search for the study of facts relevant to any problem in the field of marketing.
• Clark and Clark – Defines Marketing Research is the careful and objective study of product design, markets and such transfer activities as physical distribution, warehousing, advertising and sales management.
• Marketing management needs essential information regarding products, prices, market conditions of demand and supply, consumer needs and desires, selling methods, physical flow of goods, competitive decisions, external marketing environment and other factors of marketing management.
• Marketing research has proved an essential tool to meet all the needs of marketing management.
• Marketing research therefore, is the scientific and controlled process of gathering and analysis of marketing information to meet the needs of marketing management. 

Salient features of Market Research

1. Market Research consists of fact findings based on data 
2. Systematic collection of data
3. Market Research is objective
4. Market Research converts data into information
5. Market Research is a continuous process
6. Market Research draws heavily from different disciplines – multi-disciplinary subject
7. Market Research is only a tool to the Decision-making

1. MR consists of fact finding based on data

• These data relate to any area of marketing function
• From a study of the market place to a study of buyer behaviour.
• They cover an expanse of products, prices, distribution & promotion.
• The collection data analyzing data interpretation - for the use of the decision-makers.

2. Systematic collection of data

• The data are collected by a systematic procedure
• Firstly, identification of a problem – for example sales declining - poor advertising, prices, competition.
• Formulation of objectives
• Sample selection – collection of data
• Analyzing interpretation presentation in the form of report

3. Marketing Research is objective

• We do not pre-suppose things
• We just put forth a hypothesis collect data and either accept the hypothesis or reject it
• The research is never carried out to support a pre-determined result.

4. Market Research converts data into information

• Data as such are not meaningful
• But on processing by systematic record, analysis and interpretation.
• They become useful information for the decision-maker.

5. Market Research is a continuous process

• Since marketing activities is a continuous one where there are changes in product mix, promotion mix, distribution channels & prices.
• Marketing Research also is carried out on a continuous basis.
• But in the light of changed environment the data also changes and so continuous monitoring is called for.

6. Market Research draws heavily from different disciplines

• Market Research draws heavily from Economics, Psychology, Sociology, Statistics, Operation Research, Computer Science and such other subjects.
• Market Research is a multi-dimensional cross – disciplinary subject.

7. MR is only a tool to the Decision-maker

• Market Research does not replace decision-making process
• Market Research only serves as an input to the decision-making process.
• Market Research is at best a tool that guides the decision-makers.

Objectives of Marketing Research

1. Help in the selection of right course of action.
2. Identify various opportunities or problems.
3. Evaluate the need of the customers.
4. Analyze the probable market for the product
5. Briefly study the competitors and the substitute products.
6. Identify the best sources of distributing the products.
7. Estimate future sales and expected share of the market.
8. Analyse the effectiveness of advertisement
9. Assess the sales representative efficiency.

Marketing Research Process

• The marketing research process involves identification of problems, research design, collection of data, sample design, analysis of data and interpretation of data for reporting the conclusions to solve specific problems.
• All research problems require their own special emphases and approaches.
• Since every marketing research problem is unique in some ways, the research process is typically tailored.
• However, there are some basic steps to be followed in each marketing research process.
• Each research process must be carefully planned, effectively coordinated and integrated.
• There are seven research steps involved in almost all types of market research
• Identification of research problems research design selection of data sample design analysis and interpretation report writing (preparation) Recommendation
• If all the steps are taken in a systematic manner the research conducted becomes quite effective.

Steps in Marketing Research

The marketing research process is carried out according to a designated series of steps which are required – chronological order

Step I Formulation of Problem

Step II Research Design

Step III Data collection

Step IV Sample Design

Step V Analysis and Interpretation

Step VI Report Writing

Step VII Recommendation

1. Identification of Problem

• In the first step in MR process is to define the problem chosen for investigation.
• This step is a very significant one and a problem well defined is half solved.
• On the other hand, if the problem is defined vaguely, a wrong problem is defined – research results may be completely useless for the management.
• When the problem is carefully and precisely defined, the research can provide a pertinent solution.
• The problem formation should be neither too broad nor too narrow.

2. Research Design

• Once the problem is defined, the next step, that is the research design, becomes easier.
• A research project conducted scientifically has a specific framework of research from the problems identification to preparation of the research report.
• It is a Master Plan or blue print according to which the research is to be conducted.
• Research can be conducted without a research design but it may not solve the problems.
• The research design specifies the methods for data collection and data analysis.
• The basic objective of research cannot be attained without proper research design – it leads to loss of money, energy and time.
• The success of good marketing research project is depends on good/sound research design.
• A good research design has the characteristics – problem formulation, specific methods of data collection and analysis, time required for research project, estimate of expenses to be incurred.
• The research design specifies the methods for data collection and data analysis
• The researcher specifically pin points that to carry out research properly

3. Selection of Sources of Data

• There are two types of data – primary and secondary data – fresh data and existed data
• Primary data - are original data from which the researcher directly collects data that have not been previously collected.
• Collection of data directly - on brand awareness, brand preferences, brand loyalty and other aspects of consumer behaviour.
• Primary data are directly collected by the researcher from their original sources.
• Secondary data means data which have be already been collected and analysed by some one else.
• Secondary data may either be published data or unpublished data.

4. Sample Design

• Sampling may be defined as the selection of some part of an aggregate or totality on the basis of judgment of aggregate.
• In other words, it is the process of obtaining information about an entire population by examining only a part of it.
• In most of the research work and surveys, the usual approach happens to be make generalizations or to draw inferences based on samples about the parameters of population.
• The researcher quite often selects only a few items from the universe for his study purposes.
• All this is done on the assumption that the sample data will enable him to estimate the population parameters.
• Sample should be truly representative of population characteristics without any bias.
• For example, we test the warmth of our coffee by taking a slip.
• In marketing research too, we try to draw conclusions on the basis of a sample for the whole group known as universe.

A. Simple Random Sampling

• Simple random sampling is a sampling technique in which each element of the population get equal chance of being selected.
• For example – sampling frame of 300 population each element theoretically has 1/300th chance of being selected.
• In a population of 300, each element has 1/300th chance of being selected.
• In a population of 1000, each element has 1/1000th chance of being selected.

B. Systematic sampling - chance

• In this case the sample numbers are chosen in a systematic manner from the entire population.
• Each member has a known chance of being selected but not necessarily equal one.
• We want to select a sample of 250 from a population of 2500 employee one out of every 10 since ratio of sample size to population size as show below

N 2500
n 250

C. Stratified Random Sampling

• A stratified random sampling is used when the researcher is particularly interested in certain specific categories within the total population.
• The population is divided into strata on the basis of measurable characteristics of its member – age, income and education.
• Stratified sampling is usually used when a large variation exists within a population and the researcher has some prior knowledge about natural subgroups. D. Cluster Sampling
• In cluster sampling, the population is first divided into clusters (sub-groups) that are convenient and economical for sampling.
• Next, clusters (sub-groups) are selected at random or systematic method.
• Finally, some of the times in the selected cluster are taken at random or by systematic method to make up the sample.

A cluster sample is useful in two situations –

1. When there is incomplete data on the composition of the population.
2. When it is desirable to save time and costs by limiting the study specific geographical areas.

Non Probability sampling

• In non-probability sampling, the chance of any particular unit in the population being selected is unknown.
• Since randomness is not involved in the selection process, an estimate of the sampling error cannot be made.

There are three types of non-probability sampling –
1.Judgment Sampling
2.Convenience Sampling and
3.Quota Sampling

A. Judgment Sampling

• Judgment sampling method in which the sample items are selected by using a researcher’s personal judgment.
• It is usually in expensive to implement and takes little time to administers.

B. Convenience Sampling

• Sometimes when researchers want to obtain information, there is little time or money available to perform an elaborate study.
• In these cases, researchers may do convenience sampling selection.
• In this method, the same units are chosen primarily on the basis of the convenience to the investigator.

C. Quota Sampling
In quota sampling method is similar to stratified sampling where the population is divided on the basis of characteristics of population – age, income, race, gender and so on.

5. Analysis and Interpretation

• The raw and crude data is collected from the field may not be useful.
• It should be analysed but before analysis it should be edited, coded and tabulated.
• The types of statistical tests to be employed for the analysis and interpretation are edited, coded and tabulated.
• The types of statistical tests to be employed for analysis and interpretations and dependent upon the methods of data collection. 
• The data analysis can be conducted by using simple statistical tools – percentages, averages and measures of dispersion.
• Alternatively, the collected data may be analysed by using diagrams, graphs, charts, pictures etc.
• Data may be cross-tabulated to produce useful relationships among the variables involved.
• Various statistical tests – t, F, Z, X2 etc.
• The most complicated and sophisticate analysis uses – multiple-regression analysis, multiple correlation analysis, discriminate analysis, factor analysis, cluster analysis etc
• The conclusion, summary and recommendations of research are based on the statistical analysis. 6. Report Writing
• After the collected data is analysed and interpreted, the job of marketing researcher is to present research results in the form of systematically typed printed report.
• A specifically designed format must be used for research report preparation and result presentation. 7. Recommendation Follow up
• Research follow up is essential for the validity of marketing research
• The validity appropriateness, acceptability and control are the essential factors of recommendation follow up. 
• Control requires some check on various aspects such as time, cost, quality of work and so on.
• The marketing researcher should audit its performance validity, meaning the correctness of various aspects of the research process.
• Errors should be prevented to the greatest possible extent.
• The findings should be derived as per the objective.
• The findings should be acceptable to the executives

MARKETING INFORMATION SYSTEM

A marketing information system ( MkiS ) consists of people, equipment and procedures to gather, SWOT analyse, evaluate and distribute needed, timely and accurate information to marketing decision makers .

Why do we need market information?

• To take better decisions.
• To measure demand forecast more accurately.
• To be ahead in the market.
• To avoid customer defection.
• To have better market share.—
• To craft better marketing mix and product mix.

The Marketing Intelligence System

A Marketing Intelligence System is a set of procedures and sources used by managers to obtain everyday information about developments in the marketing environment.

Areas of market research

TARGET MARKET

TARGET MARKET

Very rarely does a product cater to the entire market. Most products are designed to cater to a group of customers who specifically want such a product. This group of customers is the target market which is a slice of the total market. We say it is the market segment.

Target Market based on demand




SEGMENTATION–TARGETING

MARKET SEGMENTATION

Dividing the market into distinct groups with distinct needs, characteristics or behaviour who might require separate products.

TARGET MARKETING

The process of evaluating each market segment’s attractiveness and selecting one or more segments for mass marketing & niche marketing.

Market Targeting—

• Single segment concentration 
• —Selective specialization 
• —Product specialization 
• —Market specialization

—Full Market coverage - undifferentiated marketing differentiated marketing

Steps; Market Targeting



Target Market Strategy
The major strategy used in the target marketing is the further classification of market into sub group such as,

• Mass marketing strategy.
• Concentrated marketing strategy.
• Differentiated marketing strategy.
• Personalized marketing. 

Differentiation

• —For the successful marketing; three key factors i.e. Segmentation, Differentiation and positioning. 
• —Determine the major differentiating attributes available to firms . 
• —Describe the marketing strategies that are applied at each stage of the product life cycle. 
• —Now let us see how most of the Marketing Authors have defined differentiation as: An act of designing a set of meaningful differences to distinguish the company’s offering from its competitor’s offerings. 
• —The concept of “differentiation” is an important piece of the marketing puzzle. 

Companies can differentiate its market offering dimensions of;
1.Product,
2.Service,
3.Personnel,
4.Image,
5.Price,
6.Distribution,
7.Promotion in order to distinguish the company from its competitors.
—
— Positioning of product 

• Keller defines positioning as the process of identifying and establishing points of parity and difference to establish the right brand identity and to create proper brand image. 
• Kotler defines brand positioning as an act of designing the company’s offer and image so that it occupies a distinct and valuable place in the target consumer’s mind.

Positioning

• —Positioning is a concept in marketing which was first popularized by Al Ries and Jack Trout in their bestseller book " Positioning - a battle for your mind“ in the year 1969. 
• —Positioning is all about ‘perception’. As perception differs from person to person, so do the results of the positioning map e.g. what you perceive as quality, value for money in terms of worth. Something (perception) that happens in the minds of the target market.
• —Positioning is defined as the act of designing the company’s offering and image to occupy distinctive place in the target market’s mind.—
• —Thus the end result of a positioning strategy is a Distinct Value Proposition over the other competitors products–a reason for which the customer would buy the product. 

Product positioning process/steps

• Defining the market. 
• —Identifying the attributes. 
• —Analyze the attributes of competitors & customers perceptions. 
• —Determine each product's share of mind
• —Determine each product's current location in the product space
• —Determine the target market's preferred combination of attributes.
• —Examine and position of your product

Positioning concepts

Three types of positioning concepts:
A. Functional positions

• —Solve problems 
• —Provide benefits to customers 
• —Get favorable perception by investors & lenders 

B. Symbolic positions

• —Self-image enhancement 
• —Ego identification 
• —Belongingness and social meaningfulness 
• —Affective fulfillment 

C.Experiential positions

• —Provide sensory stimulation 
• —Provide cognitive stimulation 

The Tata Gesture

• ——Taj Hotel Mumbai, on 26th November, a significant part of the hotel was burnt down and destroyed the hotel was re-opened on 21st December and all the employees of the hotel were paraded in front of the guests. 
• —All category of employees including those who had completed even 1 day as casuals were treated on duty during the time the hotel was closed. 
• —Relief and assistance to all those who were injured and killed.
• The relief and assistance was extended to all those who died at the railway station, surroundings including the Pav-Bhaji vendor and the pan shop owners. 
• —During the time the hotel was closed, the salaries were sent by money order. 
• —A psychiatric cell was established in collaboration with Tata Institute of Social Sciences to counsel those who needed such help. 
• —The thoughts and anxieties going on peoples mind was constantly tracked and where needed psychological help provided 
• —Employee outreach centers were opened where all help, food, water, sanitation, first aid and counseling was provided. 1600 employees were covered by this facility. 
• —Every employee was assigned to one mentor and it was that person's responsibility to act as a single window clearance for any help that the person required. 
• —Ratan Tata himself asked the families and dependents as to what they wanted him to do. 
• — —The dependents of the employees were flown from outside Mumbai to Mumbai and taken care of in terms of ensuring mental assurance and peace. They were all accommodated in Hotel President for 3 weeks. 
• —Ratan Tata personally visited the families of all the 80 employees who in some manner either through injury or getting killed were affected. 
• — —In a record time of 20 days, a new trust was created by the Tatas for the purpose of relief of employees. 
• —What is unique is that even the other people, the railway employees, the police staff, the pedestrians who had nothing to do with Tatas were covered by compensation. Each one of them was provided subsistence allowance of Rs. 10K per month for all these people for 6 months. 
• —A 4 year old granddaughter of a vendor got 4 bullets in her and only one was removed in the Government hospital. She was taken to Bombay hospital and several lacs were spent by the Tatas on her for full recovery. 
• —New hand carts were provided to several vendors who lost their carts. 
• —Tatas will take responsibility of life education of 46 children of the victims of the terror. 
• —This was the most trying period in the life of the organization. Senior managers including Ratan Tata were visiting funeral to funeral over the 3 days that were most horrible. 
• —The settlement for every deceased member ranged from Rs. 36 to 85 lacs in addition to lot more benefits. 

How TATA has Position the concepts
A.Functional positions
B.Symbolic positions
C.Experiential positions

*** Target Market***

Also Read Market Segmentation Market Analysis Marketing Environment Marketing Process

Market Segmentation

Market Segmentation 

—Identify the “potential and prospective consumers” in their marketing territory. Such prudent identification keeps the marketing process on up trend.

Thus, some marketing experts and researchers have described market segmentation as the strategy of “Dividing the market in order to conquer them”

As a management student and a marketer has to look for the best ROI-Return On Investment- if S/he does not do that, then it is great defeat of the object. Hence segmentation gives direct focus on the following narrated points to get more yield,

• To get more return on market-spending.
• To do niche marketing.
• Keep vibrant presence in market.
• Create brand equity in the market.
• Generate better stock turn-over-ratio.
• Register good sales performance year-after-year.
• Use of available resources in efficient way on potential & perspective consumers

These are the obvious reason why a business tycoon look for segmentation and it is very important tool of marketing to do best marketing. Now let us go into the application of the segmentation based on the various significant variables of the market.


Application of the Market Segmentation
The major market segment are based on the needs of the segments. When needs of segment is determined, the market will be targeted and products will be positioned in the market. Major Market Chart is shown below,

Basis for market segmentations
The further gridding market segmentation is based on the various variables, the significant variables are shown below,

• Geographic segmentation.
• Demographic segmentation.
• Economic Segmentation.
• Psychographic segmentation.
• Behavioral segmentation.
• Volume segmentation.
• Benefit segmentation.

Much use segmentations

• Demographic Segmentation is much in use, however it differ from product to product and subject to various market condition. 
• For the niche and brand sensitive customer the Psychographic Segmentation is used. 
• The Indian market has classified into Four Tier market based on the income, the same is depicted herein. 

Psychographic Segmentation

Psychographic is study of life style, personality traits, interest social status, society belongingness etc., One of the popular method of psychographic study is AIO Framework (Activities, Interest and Opinion) with profiling demographic explanation. Recently Stanford Research Institute has developed second popular model known as VALS ( Value and Life Style )
Now let us know what are effective element are required for the effective market segmentation. 

Effective element of market segmentation

Marketer need to do effective, productive and prudent market segmentation to fetch best results over the competitors and as well as to suit the requirement of the organization. The major criteria are,

• Identify. 
• Accessibility. 
• Responsiveness. 
• Size. 
• Nature of Demand. 
• Measurability. 
• Profitable.

*** MARKET SEGMENTATION ***

Market Analysis

—In market analysis, you will study and understand;
1.Market Segmentation
2.Target Market.
3.Positioning and Differentiation.
4.Market Research.
5.Market Information System.
6.Competition Analysis.
—

 Market Segment
—A large identifiable group within a market with similar wants, purchasing power, geographical locations, buying attitudes.
—In precise, market segmentation is all about classifying of heterogeneous market into homogeneous market, in which a set of group of people/customers have a similar need and demand pattern.

Niche Marketing
—What is an attractive niche ?
—A distinct set of needs
—A premium can be charged
—Not likely to attract competition
—Gains certain economies through specialization
—Sufficient size, profit and growth potential

Local Marketing
—When the marketing mix is altered to suit the local conditions e.g., Giving a higher/ lower discount than what’s prevailing in the rest of the markets or implementing a different promotion scheme.

Individualized Marketing
—When the firm deals with each customer on a one – to – one basis
—When products are customized for the customer

Behavioral variables—Occasions – birthdays, lunch time, vacations
—Benefits – eg.travel – business, vacation, educational
—User status – non users, ex users, first time users, regular users, potential users
—Usage rate – light, medium, heavy
—Loyalty status – die hard, shifters ,switchers
—Buyer Readiness – unaware – aware – informed – interested – desire – intention to buy
—Attitude – enthusiastic, positive, indifferent, negative, hostile

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Marketing Environment

Marketing Environment

—Marketing environment is divided in to two broad categories- micro environment, that is specific to the given business, and macro environment, specific to the overall industry.

—Micro Environment – Factors that an organization has direct control over
—Macro Environment – Factors on which organization has no control at all.

—The firm covers both these parts in its environmental analysis. Thus it involves the diagnosis of the mega environment as well as the environment that is specific to the given business. —Under the mega or the macro environment the firm studies the political, demographic, and the other environmental factors. As regards the environment that is specific to the given business, the firm studies the position of the industry concerned, especially aspects such as the structure of the industry, the nature of competition, the scope for invasion by substitute products, etc. It also studies factors relating to the customer and factors relating to demand.

— —Marketing Environment is nothing but external forces which influence on the marketing kit of the company and ultimately consumer will be benefitted out of the Marketing Environment.
— The government policies plays core role along with the technological intrinsic element of opportunity and other factors as part of marketing environment.
—Marketing Environment has lots of in-depend and un-controllable variables of the social and economic factors, which matters most on the marketing mix of the company.

— —According to Philip Kotler, “The company’s marketing environment is made up of the sectors & forces outside the firm are marketing function which infringe upon the ability of marketing management to develop & maintain a successful relationship with the firms target audience”.
—The marketer has to do lot of forecasting of his product strategy both micro as well as macro level and draw a suitable marketing strategy to market his products.
—Indian market has un-controllable variables & factors. Economic, Cultural, Social, Political, Technological, Legal, Demographic & lot more Factors.

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—A particular market environment and formulating strategies is mainly based on the SWOT Analysis tool.
—SWOT Analysis: When you are planning strategically based on the environment with any company it is useful to complete an analysis that takes into account not only your own business, but your competitor’s businesses and the current business environment as well. Completing a SWOT analysis helps you to identify ways to minimize the effect of weaknesses in your business while maximizing your strengths. Ideally, you will match your strengths against market opportunities that result from your competitors’ weaknesses or voids.

Marketing Environment- A SWOT Analysis






—Performing SWOT or Situation Analysis

—Organization identifies internal strengths and weaknesses & external opportunities and threats. It seeks to answer two general questions:

1. Where is the firm now?
2. In what direction is it headed?

—As a matter of fact the situation analysis accomplishes the following:

• —It recognizes strengths and weaknesses relative to competitors.
• It searches the environment for opportunities and threats.
• It assesses an organization’s ability to capitalize on opportunities and to minimize threats.
• It anticipates competitors’ responses to company strategies.

— The Marketing Environment

External Environment: Outside factors that influence marketing programs by posing opportunities or threats

Five environmental factors:

• —Political-Legal Environment
• —Social-Cultural Environment
• —Technological Environment
• —Economic Environment

—Competitive EnvironmentApplication of SWOT Analysis

—Situation analysis can, and should be, conducted at any point in an organization’s life. Based on the total analysis, a product can be plan.



The Industry Life Cycle
The Industry Life cycle reflects the changes that take place in an industry over a period of time.

Birth stage: firms seek to develop a winning technology.

—Growth stage: Product gains customer acceptance and grows rapidly. New firms enter industry, production improves, distributors emerge.

—Shakeout stage: at end of growth, there is a slowing customer demand. Competitor rivalry increases, prices fall. —Least efficient firms fail and leave industry.

—Maturity stage: most customers have bought the product, growth is slow. Relationships between suppliers, distributors more stable. Usually, industry dominated by a few, large firms.

—Decline stage: falling demand for the product. —Prices fall, weaker firms leave the industry.

*** Marketing Environment ***

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Marketing Process

Marketing Process

—Marketing is an ongoing dynamic process involving a set of interacting activities dealing with a market offering by the producers to consumers.
—Marketing process involves the sales and demand forecasts methodology and application of marketing mix. The entire marketing process differs from company to company, product to product, but always it confined to the company’s corporate goals and corporate capabilities.
—The marketing process brings together producers and consumers – the two participants in exchange. The marketing process involves three major activities; the same is known as heart of marketing.

The marketing process involves three major activities; the same is known as heart of marketing.

1. —Concentration 
2. —Dispersion 
3. —Equalization 

Marketing research is the starting point in the marketing process to ascertain and identify consumer needs and desires through market analysis and investigation.
— —Marketing Process Model

The marketing process model can be used to help you to decide how to take a new offer to market. It can also be used to test your existing marketing strategy. Whether you are considering a new or existing offer, following steps will help,

1. Start by identifying the product or service that you want to analyze.

2. Try asking "why" and "what if" questions too, to challenge your offer e.g ask why your target audience needs a particular feature. What if you drop your price by 5%? What if you offer more colors? Why sell through wholesalers rather than direct channels? What if you improve PR rather than rely on TV advertising?

—3. Now go through and answers the 4 Ps questions.

4. Once you have a well-defined marketing mix, try "testing" the overall offer from the customer's perspective, by asking customer focused questions:
—Does it meet their needs? (product)
—Will they find it where they shop? (place)
—Will they consider it's priced favorably? (price)
—And will the marketing communications reach them? (promotion)
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 5. Keep on asking questions and making changes to your mix until you are satisfied that you have optimized your marketing mix, given the information and facts and figures you have available.

6. Review you marketing mix regularly, as some elements will need to change as the product or service, and its market, grow, mature and adapt in an ever-changing competitive environment.
—Thus marketing process is nothing but Concentration, Dispersion and Equalization to meet the customers demand and have better share of the market.

—*** Marketing Process ***

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MARKETING ORGANIZATION

—Marketing Organization
Marketing organization is a specified structural entity in the organization. It executes and carries out multiple responsibilities on mutually agreed business goals, to achieve group/department goal by discharging the assigned roles, responsibility and job.
—A proper Marketing organization function as a vehicle for achieving both the organization and individual’s goals in term of higher sales, market share, customers loyalty and brand image in the market.
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— —Developing a company-wide passion for customers. Organizing around customer segments instead of products
—Understanding customers through qualitative and quantitative research.
—The foremost function of MO is to undertake the effective marketing of products. It should ensure timely distribution of products to the customers in an economical and efficient manner. It should strengthen the all logistic and supply channel/chain more effective.


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 Designing of Marketing Organization:

—Marketing organization can be refer to any system, group of people, comprising various system and sub- systems or parts which are interrelated and or interdependent on each other for achieving organization’s marketing goals.
—A Marketing Organization has a structure with various levels of hierarchy with job responsibility and accountability. It has designed information flow system and reporting system. Irrespective of the nature of the organization it has to have the following principles in the structure of organization.
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 Principles of the Marketing Organization

1 Specialization:

On basis of division of labor a specified activity will be assigned to a group to carry-out the job.

2 Departmentalization:

It involves integration of specialized group into department.

3 Standardization:

It refers to the existence of procedure, systems, rules and regulation for the entire organization.

4 Formulization:

It refers to the above set of rules and regulation, system procedure laid down in writing, so that it acquire substantial life span than any other person. (E.g. Constitution of India)
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— 5 Centralization:

It indicates the authority for the decision-making is concentrated. It has designed reporting system and control process.

6 Evaluation:

It refers to the appraisal and reward & compensation system.

7 Structure:

It refers to total configuration or arrangement of system, individual, groups and reporting system etc., will give a complete and specific shape.

MO, it can be a firm or company, a non-business organization such as University, Institutions, Hospitals, a social organization, charitable trust or a government agencies, which has a set of marketing goals.

Changing Role of Marketing Organization:

—At the early period marketing is known as selling of products, which are produces by the factory and it was functioning as adjunct to the production. There was one line marketing organization, which is shown herein,
—Mktg Organization role change from simple to complex with more number of function. Let us study the same.

1. Simple Sales Department

2. Sales Deptt with Mktg function.

3. Separate Marketing Department

4. Integrated Marketing Department

5. Marketing Oriented Organization.

— Marketing Oriented Organization has distinctive quality of understanding customer & guided by customer’s need & taste.
—MOO, it is headed by Director Marketing/Vice-President Marketing The need of the organization is based on nature of industry, area of functioning and products line etc.,

—Types of Marketing Organizations:

 The formulation of marketing organization totally based on need of organization and its marketing environment and its product lines & area of marketing. In marketing we have two types of method to sell the products viz;

Direct Sales and Indirect Selling

—In the direct selling manufacture selling the finished products to the end customer directly, mostly it happens in the industry products, and in the indirect selling, the manufacture uses some agencies like distributors, wholesalers, middlemen and retailers to sell the products to the end customer. Thus a Marketing 

Organization may be classified into;

— —One line Organization.

In this system all the marketing decisions are taken by the top person and it flow down the line for execution. It always happens in the small firms and family based organization.

—Geographic Organization.

In this system entire area is divided into the Regions, Zones and other segment based on the different characteristic of the market. Such Organization again will have demographic classification to cover the market efficiently to have better share of sales.

 —Functional Organization.

Functional Chart and Organization is based on the functions like market research, advertisement, information systems, product development and sales service. The model of function chart we have seen in the above marketing oriented organization.

—Product line Organization. 

In this organization, the authority and accountability is made based on the products of the organization e.g., Liril product, Lux product, Nano product, Usha fan product etc,. All the marketing hierarchy will be based on the products than corporate hierarchy.

Sales Vs Marketing

SALES: 

1. Emphasis is on the product

2. Company Manufactures the product first

3. Management is sales volume oriented

4. Planning is short-run-oriented in terms of today’s products and markets

5. Stresses needs of seller
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6. Views business as a good producing process

7. Emphasis on staying with existing technology & reducing costs

8. Different departments work as in a highly separate water tight compartments

9. Cost determines Price

10. Selling views customer as a last link in business

MARKETING:

1. Emphasis on consumer needs and wants

2. Company first determines customers needs and wants and then decides how to deliver a product to satisfy.

3. Management is profit oriented

4. Planning is long-run-oriented in today’s products and new products, tomorrow’s markets and future growth

5. Stresses needs and wants of buyers

6. Views business as consumer producing process satisfying process

7. Emphasis on innovation and technology on providing better costs value to the customer with superior technology

8. All departments of the business integrated manner, the sole purpose being generation of consumer satisfaction

9. Consumer determine price, price determines cost

10. Marketing views the customer the first and last link in business as the very purpose of the business
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                                                            *** Marketing Organization ***

MARKETING MIX

MARKETING MIX
In marketing management, segmentation and targeting plays vital role and preparation of marketing-mix based on variables of market is more significant for the successful marketing. According to the element of market variables, the marketer makes up the marketing mix, the market variables are (Marketing Mix) ;



1.Decision on products or service.
2.Decision on price.
3.Decision on promotion.
4.Decision on distribution / place.

The Marketing Mix (The 4 P's of Marketing); with the help of the marketing mix, marketer need to understand how to position the offering in the market.

What is marketing?
The definition that many marketers learn as they start out in the industry is: Putting the right product in the right place, at the right price, at the right time.

—It's simple! You just need to create a product that a particularly group of people want, put it on sale some place that those same people visit regularly, and price it at a level which matches the value they feel they get out of it; and do all that at a time they want to buy. Then you've got it made!
— —
The term "marketing mix" became popularized after Neil H. Borden published his article in 1964. The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's. The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding analysis.

—E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below:

Understanding the Marketing Mix Tool



Discussion on Marketing Mix

—Product Decisions;

It refers to tangible, physical products & services. Examples of the product decisions to be made: 

• —Brand name 
• —Functionality 
• —Quality & Styling 
• —Safety &Warranty 
• —Packaging 
• —Repairs and Support 
• —Accessories and services 

—Price Decisions; 

Some examples of pricing decisions include:

• —Pricing strategy -skim, penetration 
• —Suggested retail & wholesale price 
• —Volume discounts & Cash discounts 
• —Seasonal pricing 
• —Bundling 
• —Price flexibility 
• —Price discrimination 

Distribution (Place) Decisions;
Examples includes;

• —Distribution channels
• —Market coverage (inclusive, selective, or exclusive distribution)
• —Specific channel members
• —Inventory management & Warehousing
• —Distribution centers &Order processing
• —Transportation & Reverse logistics

—Promotion Decisions;

Various aspects of Mktg communication, the information about the product. It decisions include:

•  —Promotional strategy (push, pull, etc) 
• —Advertising & Sales promotions 
• —Personal selling & sales force 
• —Public relations & publicity 
• — Marketing communications budget

Limitations of the Marketing Mix Framework
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Marketing mix framework was particularly useful in the early days, when physical products represented a larger portion of the economy.
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Today, marketing is more integrated into organizations & wider variety of products & markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc.
Marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.

—Four Ps Vs Cs
The Four Ps is replaced by the Four Cs model, consisting of consumer, cost, convenience, and communication. The Four Cs model is more consumer-oriented and fits better in the movement from mass marketing to niche marketing. Cs Model provides a demand/customer centric version alternative to the well-known four Ps supply side model of marketing management.

4P's

• Product 
• Price
• —Place
• Promotion 

4C's

• Customer Solution
• Customer Cost
• Convenience
• Communication

—In the practice most of the companies considered marketing mix viz P’s in their marketing function for instance; Coca-Cola considered marketing mix as;

1.Product.
2.Price.
3.Promotion.
4.Place.
5.Potential.
6.Penetration, and
7.Profit.

Four Cs in 7Cs Compass Model 

7Cs Compass Model is in a customer oriented Mktg Mix.
—(C1) Corporation (Competitor)
—(C2) Commodity
—(C3) Cost
— (C4) Communication
— (C5) Channel
—(C6)Consumer
—(C7) Circumstances

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Compass
—Consumer: N = Needs, W = Wants, S = Security, E = Education
—Circumstances: N = National and International, W=Weather, S = Social and Cultural, E = Economic
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7Cs Compass Model is customer oriented marketing mix.

—(C1) Corporation ( and competitor) is the core of 4Cs. 
—1) It is necessary to place more emphases on the organization of the companies;
—2) It is necessary to execute marketing plans in conjunction with the company's objectives;
—3) It is necessary to tackle the internal communication related problems like corporate communication or corporate identity system(CIS), etc. In the market, there are the companies of the same business, the competitors.
— —At the time of economics downturn,
—companies or corporations (CI) produce the convenient (C2) “commodities” for the consumers with the consideration of the total marketing (C3) “cost” and gain their consents through the sufficient (C4) “communications” and then their confidences by selecting the effective (C5) “channels” in conjunction with the uncontrollable external circumstances. This is the way to survive in the period of low growth economics.
— —(C6) Consumers are those people encircling the companies. Instead of just the customers of 4P marketing model, they are the ordinary citizens nurtured by the motto of the consumerism. However of course they are also including the customers and the potential customers.
—(C7) Circumstances, besides the customers, there are also various uncontrollable external environmental factors encircling the companies.

----------------------------MARKETING MIX-----------------------
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MARKETING STRATEGY

—A well known management authority, P. Drucker, believes that marketing is not merely a function of business enterprises, but it is the business and it is synonymous with whole the business unit as economic organ to provide goods and services. The primary function of a business (marketing company) is to create and maintain a satisfied customer. No longer profit is the effective marketing performance. Profit will be the reward for the skillful delivery of satisfaction. Marketing management shall give emphasis upon delivery customer satisfaction through real consumer concerns and profit will accrue only through service demand.
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 —As we know the existence of human being is based on some needs hence there will always, consumption which need goods and services. But the aim of marketing is to strategize selling superfluous and converting consumer into hindous by add on features to the products. The aim is to know and understand the customers well that the product or service fits him and sells it-self. Ideally, marketing should result in a customer who is ready to buy.

—Marketing Department need to strategizes best marketing strategy to get edge over other competitors and gain better market share. Hence optimally utilization of marketing mix will be the best knock to formulate marketing strategy.


— —An organization business success largely depends on how efficiently the products and services are delivered to customers and how differently do the customers perceive the difference in delivery in comparison to the competitors. This is true of all firms – from large business enterprises to small firms, from multinationals operating in different countries to small firms operating in small markets, from giant enterprises like Sony, Lever, General Motors to the next-door kirana shop. Quality production and efficient marketing are the key success factors in building sustainable competitive edge for ever business corporation.

Marketing Strategy

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