Unit 8: Marketing Management mind map

What marketing is, the orientations and the marketing mix, customer value and relationships, and strategy tools such as BCG, Ansoff and Porter.

Core concepts

Orientations and the essence of marketing

Firms follow different orientations. The modern one starts from the customer.

• Production concept: the buyer is passive and accepts what is offered.
• Product concept stresses quality. Selling concept pushes. Marketing concept starts with customer needs.
• Societal marketing balances wants, profit and society's welfare.
• Levitt and Drucker: the essence of marketing is customer orientation.

Drucker said the aim of marketing is to make selling superfluous. Levitt coined marketing myopia: a railway firm that thinks it is in the railway business loses customers to airlines. A firm that stresses biodegradable, safe products shows the societal approach.

Marketing mix and the seven Ps

The marketing mix is the blend of tools a firm controls. For services, three more Ps are added.

• 4 Ps: product, price, place, promotion.
• Booms and Bitner added people, process and physical evidence.
• Politics is not one of the seven Ps.
• An effective mix matches customer needs, has a competitive advantage and fits corporate resources.

The 4 Ps are the firm's tools. A particular combination of product, price, promotion and place is the marketing mix. Integrated marketing requires price, communications, products and channels to work together.

Customer value, CLV and the marketing process

Customer value is the sum of perceived benefits and costs. Customer lifetime value is the present value of future profits from a customer.

• Customer value covers tangible and intangible benefits against costs.
• CLV = present value of future profits from the relationship.
• Process: understand needs, design strategy, build programme, engage customers, capture value.
• Activity-based costing is useful for lifetime value work.

A firm works within a network of partners to deliver value. Individual companies compete, but so do the entire value delivery networks. Marketing process in a firm: market research, planning, mix, implementation, control.

Relationship marketing, CRM and holistic marketing

Relationship marketing builds long-term bonds. CRM turns data into programmes. Holistic marketing takes a broad view.

• Relationship marketing: product benefit orientation, frequent contact, high concern for quality.
• CRM steps: collect data, analyse, identify targets, develop programmes, implement.
• Holistic marketing: relationship, integrated, internal and socially responsible marketing.
• A customer-centric firm is market driven and value driven.

Relationship marketing differs from transaction marketing, which stresses product features. Companies skilled in CRM develop programmes to attract and retain the right customers. Direct marketing and green marketing are not components of holistic marketing.

Social marketing, ethics, modern selling and market definition

Social marketing changes behaviour for society's good. Ethics guide marketers. Definitions of a business can be product or market oriented.

• Social marketing covers tobacco, family planning, public health and financial well-being.
• Swachh Bharat Abhiyan is social marketing.
• Marketing ethics: moral principles in product safety, honesty and pricing.
• Market-oriented definition: describes the need met, such as 'We supply energy'.

'We run a railroad' is product oriented. 'We help improve office productivity' is market oriented. Modern selling relies on database and knowledge management, CRM and satisfying needs. Markets are not homogeneous.

States of demand and the evolution of marketing

Marketing meets different states of demand. It has also moved through stages.

• Full demand: buyers adequately buy all that is offered.
• Latent demand: a need no product meets.
• Irregular demand: varies with time. Overfull demand: more than the firm can supply.
• Evolution: regional suppliers, mass marketing, segmentation, then customised marketing.

In the early era, small regional suppliers sold goods locally. Mass marketing brought standardised, branded goods nationally. Later firms differentiated by demographics and lifestyle. Production orientation belongs to an era when demand exceeded supply and producing large quantities was the focus.

Strategy tools

BCG matrix and Ansoff growth matrix

The BCG matrix classifies units by share and growth. The Ansoff matrix combines products and markets.

• BCG: stars, cash cows, question marks, dogs.
• Dogs: lost leadership, low-growth market.
• Ansoff: penetration, market development, product development, diversification.
• White elephant and crown jewel are not BCG quadrants.

Market penetration means existing products in existing markets. Market development means existing products in new markets. Product development means new products in existing markets. Diversification means new products in new markets.

Competitive strategies: leader, challenger, follower

Each market player uses its own strategies. The leader defends. The challenger attacks. The follower copies.

• Leader defences: position, flanking, pre-emptive, counter-offensive, mobile, contraction.
• Attack strategies: frontal, flanking, encirclement, bypass, guerrilla.
• Bypass: new products or technology that avoid a head-on clash.
• Follower options: counterfeiter, cloner, imitator, adapter.

Mobile defence stretches the leader over new territories through market broadening and diversification. Contraction defence gives up weaker markets and concentrates on the core. Position defence occupies the most desirable place in consumers' minds.

Porter's five forces, marketing control and structure

Porter's five forces judge how attractive a segment is. Marketing control checks performance.

• A segment is unattractive if it has many aggressive competitors or is stable or declining.
• Also unattractive if suppliers can raise prices or substitutes exist.
• Strategic control: are we pursuing the best opportunities?
• A matrix structure suits many products for many markets.

Annual-plan control checks results against the yearly plan. Profitability control checks profit by product and channel. Efficiency control checks the efficiency of spending. Strategic control looks at the fit with opportunities.

Marketing research

Data warehouse, feasibility and market demand

Marketing research feeds decisions. It uses data stores and structured studies.

• Data warehouse: a huge collection of data from internal and external sources.
• Data mining uses search techniques to find buying patterns.
• Market feasibility: estimate demand, forecast sales, estimate costs, then break-even.
• Current demand needs total market potential, area potential and market shares.

Past sales and the sales force's input help in forecasting future demand, not in estimating current demand. The feasibility study ends with calculating the break-even price and sales volume.

Why buyers buy: involvement, decision stages, influences and adoption, then how markets are divided, targeted and positioned.

Consumer behaviour

The buying decision process

A buyer moves through stages. A new product is accepted step by step.

• Need recognition, decision criteria, search for alternatives, evaluation, decision.
• Another form: need recognition, comprehension, attitude forming, legitimisation, adoption.
• Adoption stages: awareness, interest, evaluation, trial, adoption.
• After purchase, buyers feel cognitive dissonance, a feeling of uncertainty.

Involvement is high when the purchase is costly, risky or socially important. It is low when the product is seen to give little benefit. Consumer behaviour covers obtaining, consuming and disposing of products, not producing them.

Influences on buyers: culture, society and psychology

Kotler groups influences as cultural, social, personal and psychological. Culture is shown through symbols and rituals.

• Social factors: reference groups, family, roles and status.
• Culture and social class are cultural, not social factors, in the key.
• Perception: selecting, organising and interpreting information.
• Learning is change in behaviour from experience. A belief is a descriptive thought.

Symbols, icons, rituals and values are manifestations of culture. In marketing, perceptions matter more than reality because they drive behaviour. Consumers are not always rational and linear.

Adopter categories, generations and VALS

Adopters of a new product fall in five groups. VALS segments consumers by motivation and resources.

• Innovators, early adopters, early majority (34 per cent), late majority, laggards.
• Early adopters are opinion leaders who seek competitive advantage.
• Late majority are risk averse, technology shy and price sensitive.
• Gen X is pragmatic and individualistic. VALS uses primary motivation and resources.

The early majority are deliberate and rely on advertising and salespeople. In the product life cycle, innovators match introduction, early adopters match growth, the middle majority matches maturity and laggards match decline.

Segmentation, targeting and positioning

Levels of marketing and bases of segmentation

Markets can be served at different levels. Segmentation bases include geographic, demographic, psychographic and behavioural.

• Mass, segment, niche and micro (one-to-one) marketing.
• Demographic: age, gender, income. Predictability is low and measurement cost is low.
• Psychographic: lifestyle and values.
• Behavioural: user status, occasions, loyalty. It has the highest predictability.

Niche marketing puts all effort on a small, well-defined segment. Micro marketing treats each customer as a separate segment. Mass marketing offers one product to all and relies on advertising. An automobile market can be segmented on all four bases.

Criteria and steps of segmentation

A good segment can be measured, reached and is big enough. Segmentation follows set steps.

• Measurable, accessible, substantial, differentiable, actionable.
• Perishability is not a criterion.
• Steps: need-based segmentation, identification, attractiveness, profitability and positioning, acid test.
• Valid bases: customer-based, product-related, competition-related.

Technology-oriented segmentation is not a recognised basis. The segment acid test checks whether the segment makes sense in practice.

Targeting, positioning and perceptual maps

Targeting selects segments. Positioning places the brand in the buyer's mind. A perceptual map shows the positions.

• Target compatibility: ability to create superior customer value.
• Target attractiveness: ability of the segment to create value for the company.
• Positioning tasks: decide the locus, analyse rivals, check infrastructure, develop the proposition.
• Perceptual map: category brands, competing brands, attributes, scores, plot.

In tactical targeting the customer profile has demographic facts, like income, and behavioural facts, like purchase frequency, quantity and price sensitivity.

What a firm sells and how it names and prices it: product classes, life cycle, new products, brands, and the pricing methods.

Product decisions

Consumer goods and product levels

Goods are classed by how buyers shop for them. A product has layers of value.

• Convenience goods: bought often, quickly, with little effort.
• Shopping goods: compared on price, quality and style before buying.
• Specialty goods: buyers insist on a particular brand.
• Unsought goods: buyers do not normally think of buying.

Soap is a convenience good. A refrigerator is a shopping good. A luxury watch of one brand is a specialty good. Life insurance is an unsought good. The core benefit is what the buyer really wants. The actual product adds brand, features and packaging.

Product life cycle

A product passes through stages with different sales and profit.

• Stages: introduction, growth, maturity, decline.
• Introduction: low sales, losses or low profit, high promotion cost.
• Growth: sales and profit rise fast, competitors enter.
• Maturity: sales peak and stabilise, price competition rises.

In decline sales fall, so firms cut costs, harvest or drop the product. Managers match marketing action to the stage: build awareness early, build preference in growth, defend share at maturity.

New product development

A new product moves through a series of screening steps before launch.

• Idea generation, screening, concept testing, business analysis.
• Then product development, test marketing, commercialisation.
• Screening drops weak ideas early, which saves cost.
• Test marketing tests the full plan in a small real market.

Business analysis estimates sales, cost and profit. Commercialisation is the last step, when the product is launched in full. A concept is a detailed version of the idea in meaningful consumer terms.

Product mix, line and portfolio labels

A product mix has width, length, depth and consistency. Strategies extend or trim it.

• Width: number of product lines. Length: total items in all lines.
• Depth: versions of each product. Consistency: how closely lines are related.
• Line stretching goes up, down or both ways.
• Line filling adds items within the current range.

Packaging protects, promotes and informs. Labelling identifies and describes the product. A company with soap, shampoo and toothpaste has a width of three lines.

Branding

Brand terms and brand equity

A brand is a name, term, sign or design that identifies a seller's goods.

• Brand name is the part that can be spoken.
• Brand mark is the part that is seen but not spoken.
• Trade mark is a brand given legal protection.
• Brand equity is the extra value a brand adds to a product.

A logo is a brand mark. Brand loyalty is the repeated choice of one brand. A brand extension uses an existing name for a new product. A family brand carries one name over many products.

Brand strategies

Firms choose how to name their products. Each way has a trade-off.

• Line extension: new flavours or sizes under the same brand.
• Brand extension: the same name goes to a new category.
• Multi-brand: many brands in one category.
• New brand: a new name for a new category.

Multi-branding gains more shelf space and fits different segments, but each brand earns a small share. A risk of extension is that a failed product harms the parent brand.

Pricing decisions

Pricing objectives and approaches

Price must cover cost, match demand and reflect rivals. Firms set objectives first.

• Objectives: survival, profit maximisation, market share leadership, quality leadership.
• Cost-based pricing adds a margin to cost.
• Demand-based pricing follows what the buyer will pay.
• Competition-based pricing follows rivals' prices.

Cost-plus pricing adds a standard mark-up to cost. Going-rate pricing keeps close to competitors. Sealed-bid pricing is used in tenders, where the firm guesses what rivals will quote.

Skimming and penetration pricing

For a new product the firm may start high or start low.

• Skimming: high price at first, lowered over time.
• Skimming suits a unique product with buyers willing to pay.
• Penetration: low price to win a large share fast.
• Penetration suits price-sensitive markets where costs fall with volume.

A new gadget sold first at a high price to enthusiasts is skimming. A new detergent priced low to win share quickly is penetration. Skimming needs a product rivals cannot copy easily.

Psychological and discount pricing

Small changes in price shape how buyers feel. Discounts reward behaviour.

• Odd pricing: Rs 99 instead of Rs 100.
• Prestige pricing: a high price to signal quality.
• Cash discount rewards quick payment.
• Quantity discount rewards large orders. Seasonal discount rewards buying off-season.

Price lining sets a few price points for a range. Bundle pricing sells several items together for less. Promotional pricing cuts price for a short time to draw buyers.

How a firm talks to buyers and reaches them, and how marketing changes for services, villages and foreign markets.

Promotion

The promotion mix and hierarchy of effects

Promotion has five main tools. Buyers move through steps from awareness to purchase.

• Tools: advertising, sales promotion, public relations, personal selling, direct marketing.
• Advertising is paid, impersonal communication by an identified sponsor.
• Publicity is not paid for by the sponsor.
• Hierarchy: awareness, knowledge, liking, preference, conviction, purchase.

Push strategy pushes the product through the channel to the final buyer. Pull strategy builds consumer demand so buyers ask the shop for the product. Sales promotion gives short-term incentives such as coupons and samples.

Promotion tools: strengths and sales promotion methods

Each promotion tool has one big strength. Sales promotion offers short-term rewards to buyers or to the trade.

• Highest reach: advertising. Most persuasive: personal selling.
• Immediate effect on sales: sales promotion. No cost involved: publicity.
• Consumer tools: coupons, refunds, premiums, sampling, event sponsorship.
• Trade tools: stock allowances and off-invoice deals.

Loyalty points are sales promotion because they reward buying. Advertising can use brochures and booklets. Word of mouth uses blogs. Personal selling uses sales meetings. In the growth stage of the product life cycle a firm can cut sales promotion, since demand is already strong.

Personal selling

Steps of personal selling

A sale follows a set order from finding buyers to follow-up.

• Prospecting: find and qualify likely buyers.
• Pre-approach: learn about the buyer before the visit.
• Approach, presentation and demonstration, handling objections.
• Closing the sale, then follow-up.

Handling objections means treating a buyer's doubts as requests for more information. Follow-up after the sale builds satisfaction and repeat orders. Personal selling is the costliest tool per contact but the most flexible.

Direct selling and generating sales leads

Direct selling meets the buyer away from a shop. Salespeople find leads in set ways.

• Direct selling involves personal contact away from a store.
• Direct marketing uses advertising so buyers purchase without visiting a store.
• Lead sources: referrals, networking, cold calls.
• Coupons are a sales promotion device, not a way to generate leads.

Eureka Forbes, Amway India and Modicare sell directly to consumers. Hindustan Unilever sells mainly through distributors and retailers, so it is not a direct selling company in this sense.

Digital marketing

Digital and online marketing

Digital marketing reaches buyers through the internet and mobile.

• Tools: search engine marketing, social media, email, content, display ads.
• Search engine optimisation improves unpaid ranking.
• Pay-per-click charges only when someone clicks.
• It allows low cost, quick feedback and exact targeting.

Social media marketing builds a community and invites two-way talk. Viral marketing spreads a message as buyers share it. Email marketing is cheap but can annoy buyers if overused.

Distribution

Channel levels and intermediaries

A channel moves goods from maker to buyer. Levels count the intermediaries.

• Zero-level (direct): maker sells straight to the consumer.
• One-level: maker, retailer, consumer.
• Two-level: maker, wholesaler, retailer, consumer.
• Merchants take title to goods. Agents do not.

A wholesaler buys in bulk and sells to retailers. A retailer sells to the final buyer. Agents such as brokers negotiate but never own the goods. Intermediaries cut the number of contacts needed.

Retailing and distribution intensity

Retailers differ in service and size. Firms choose how widely to distribute.

• Intensive: as many outlets as possible. Suits convenience goods.
• Selective: a limited number of outlets.
• Exclusive: one dealer in an area. Suits specialty goods.
• Franchising: the owner licenses the system to a franchisee.

Supermarkets sell food and household goods on self-service. Department stores carry many lines under one roof. Vertical marketing systems join producer, wholesaler and retailer as one unit.

Retail store formats

Retailers differ in how wide and how deep their range is. Breadth is the number of product lines. Depth is the choice within a line.

• Discount store: broad and shallow, low prices.
• Specialty store: very narrow and deep.
• Category killer: narrow and very deep.
• Supermarket: broad and deep.

A convenience store sells a limited line near the buyer's home. Discount retailers keep costs low, with cheap locations and few services. Their major selling point is low price. Large retailers and e-commerce firms run mega sales on days like Republic Day and Black Friday.

Channel conflict, vertical marketing systems and multi-channel

Channel members often disagree. Systems and multiple channels are used to manage this.

• Vertical conflict: between levels, such as maker and wholesaler.
• Horizontal conflict: between members at the same level.
• Corporate VMS: single ownership. Contractual VMS: franchises. Administered VMS: a leader without ownership.
• Multi-channel: selling through online, stores and sales agents together.

Channels differ in value added to a sale. In increasing order the key gives internet, retail store, distributors, value-added partners and sales force. The retail supply chain includes manufacturers, wholesalers and retailers, but not regulators.

Logistics

Physical distribution and logistics

Logistics manages the flow of goods from source to user at the lowest cost.

• Main functions: order processing, warehousing, inventory, transport.
• Order processing starts the flow. Transport moves the goods.
• Inventory balances stock-outs against carrying cost.
• Total cost approach looks at all logistics costs together.

Faster transport costs more but cuts inventory cost. A firm may pay more for air freight to hold less stock. Supply chain management links suppliers, makers and buyers as one system.

Services

Features of services and SERVQUAL

Services differ from goods in four ways. Quality is judged on five dimensions.

• IVIP: intangibility, variability, inseparability, perishability.
• Services cannot be stored, so demand and supply must be matched.
• SERVQUAL dimensions: reliability, responsiveness, assurance, empathy, tangibles.
• Gap 1: customer expectation versus management perception.

Inseparability means production and consumption happen together. Variability means quality changes with who gives the service and when. Reliability is the ability to perform the promised service dependably.

Rural markets

Rural marketing in India

Rural markets are large but need a different approach.

• Low literacy, scattered villages and weak transport raise cost.
• Demand is linked to the monsoon and the harvest.
• Weekly haats and melas are key points of contact.
• Brands should use local languages, small packs and low unit prices.

A myth is that rural buyers care only about price. They also value quality and brand. Sachets let buyers try a product cheaply. Cooperatives and self-help groups can help deliver goods.

International

Entering foreign markets

A firm can enter foreign markets with low or high commitment.

• Exporting is the lowest-risk way in.
• Licensing gives rights to a foreign firm for a fee.
• Joint venture shares ownership and risk with a local partner.
• Wholly owned subsidiary needs the most investment and control.

Risk and control both rise as the firm moves from exporting to direct investment. A global firm adapts the mix to local culture, law and income. Standardising the mix cuts cost but can miss local taste.

Services marketing mix and service quality gaps

Services need three extra Ps. Quality gaps show where service fails.

• Extra Ps: people, process, physical evidence.
• Physical evidence makes an intangible service visible, such as a clean branch.
• Gap 1: customer expectation versus management perception.
• Gap 5: expected service versus perceived service.

Internal marketing treats employees as the first customers, since staff deliver the service. Service recovery means fixing a failure quickly and fairly, which can build loyalty.

Rural market myths and challenges

Several beliefs about villages are wrong. Real challenges are access and awareness.

• Myth: rural buyers want only cheap goods. They also value quality.
• Rural income is linked to farm output and the monsoon.
• Challenges: poor roads, thin media reach, many languages.
• Fairs, haats, wall paintings and van campaigns help to reach buyers.

Rural marketing has grown through rising incomes, better roads and mobile phones. Companies design low-priced durable products and use village-level agents for sales.

Global marketing environment and strategy

Global firms must read each country's culture, law and income.

• Standardisation uses one mix everywhere and saves cost.
• Adaptation changes the mix to local needs.
• Export marketing sells home-made goods abroad.
• Tariffs, quotas and exchange rates affect foreign trade.

Many global firms use a middle path: a global brand with local tweaks in flavour, language and pack size. A multinational has operations in several countries.