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Unit Topic No Topic I 1. Introduction 2. Micro environment 3. Macro Environment 4. Global environment II 1. Consumer Markets and buyer behavior 2. Industrial Markets 3. Segmenting & Targeting 4. Positioning III 1. Building customer satisfaction 2. Product decisions 3. Developing new products 4. Life cycle strategies IV 1. Marketing of services 2. Distribution and channel decisions 3. Retailing 4. The Multi-Channel System V 1. Promotion Mix 2. Advertising & Sales Promotion 3. Relationship Marketing 4. Customer relationship Marketing

UNIT 1 : 

UNIT 1

UNIT I - 1Introduction to Marketing : 

UNIT I - 1Introduction to Marketing

What is a MARKET? : 

What is a MARKET? A market in business term is more than just a place where buyers and sellers meet. A market is people with needs and wants to be satisfied, who can afford and are wiling to spend. Kotler (2003) defines market as a set of all actual and potential buyers of products or services.

What is Marketing? : 

What is Marketing? Social definition A societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others

What is Marketing? : 

What is Marketing? Process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. More simply: Marketing is the delivery of customer satisfaction at a profit.

What is Marketing? : 

What is Marketing? Management definition It is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals.

Core Marketing Concepts : 

Core Marketing Concepts Products and Services Value, satisfaction, and quality Needs, wants, and demands Exchange, transactions, and relationships Markets Core Marketing Concepts

Needs and Wants : 

Needs and Wants Needs are basic human requirements Wants are needs directed to specific objects/services that might satisfy the need

NEEDS & WANTS : 

NEEDS & WANTS Want " is defined as having a strong desire for something. The word " need " is defined as lack of the means of subsistence.

This is a Need : 

This is a Need Needs - state of felt deprivation including physical, social, and individual needs.

This is a Want : 

This is a Want Wants – Needs become wants when they are directed to specific objects that might satisfy the need.

Slide 13: 

Wants are things people would like to have, such as… and toys. a CD player, a bicycle,

Slide 14: 

Other wants may be… a television, a car, or a video game.

Slide 15: 

Needs are things people must have to live, such as… food, shelter, clothing, and medical care.

Slide 16: 

Do you know the difference between wants and needs? Choose the one that is a need. a television food

Slide 17: 

Is this a want or a need? want

Slide 18: 

Is this a want or a need? want

Slide 19: 

Is this a want or a need? need

Slide 20: 

Is this a want or a need? Medical care is a need.

Slide 21: 

Needs Wants food shelter clothes medical care

Product : 

Product A product is any offering catered to satisfy needs and wants. A brand is when the product is from a known source.

: 

Products Anything that can be Offered to a Market to Satisfy a Need or Want Persons Places Organizations Ideas Information Services Activity or Benefit Offered for Sale That is Essentially Intangible and Does Not Result in the Ownership of Anything What Satisfies Consumers’ Needs and Wants? Experiences Events Properties

Demand : 

Demand This is the wants for specific products backed by an ability to pay.

This is Demand : 

This is Demand “Demand”

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.

Value and Satisfaction : 

Value and Satisfaction Value = Benefits/Costs Benefits = Functional Benefits + Emotional benefits Costs = Monetary costs + Time + Energy + Psychic costs

Exchange : 

Exchange Get something (product /service) by offering something in return. Eg. kind (barter) or money (value ) Exchange is a value creating process because it leaves both parties better off (win – win situation)

Transaction and Transfer : 

Transaction and Transfer A transaction is an exchange between two things of value on agreed conditions and a time and place of agreement. A transfer is a one way exchange without receiving anything in return.

Exchange & Transactions : 

Exchange & Transactions Exchange involves obtaining a desired product from someone by offering something in return. Five conditions must be satisfied for exchange to occur. It is value-creating process. There must be at least two participants in the process. Each party must offer something of value to the other. Both parties must want to deal with each other. Both participants have the right to accept or to reject the offer. Both groups must have the ability to communicate and deliver on the mutual agreement.

Transaction : 

Transaction Transaction is a trade of values between two or more parties. It involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

Relationship Marketing : 

Relationship Marketing Building long term mutually satisfying relations with customers, suppliers, distributors in order to retain their long term preference and business

Marketing Network : 

Marketing Network A marketing network is the relationships built with its stakeholders. Effective relationships make up an effective and strong network.

Marketing Channels : 

Marketing Channels Marketing channels are used to reach the target segment. Communication channels eg. Advertising, telephone enquiry system Distribution channels – trade, direct sales

Marketing Channels : 

Marketing Channels Marketing Channels-To reach Target market Communication channels Distribution channels Service channels Deliver messages to and receive messages from target buyers. Includes traditional media, non-verbal communication, and store atmospherics.

Marketing Channels : 

Marketing Channels Marketing Channels Communication channels Distribution channels Service channels Display or deliver the physical products or services to the buyer / user.

Marketing Channels : 

Marketing Channels Marketing Channels Communication channels Distribution channels Service channels Carry out transactions with potential buyers by facilitating the transaction.

Supply Chain : 

Supply Chain The supply chain represents a value delivery chain – from procurement of raw materials to final delivery of product to consumer.

Marketing Environment : 

Marketing Environment Competition Customers Govt. policies Suppliers Trade Product Import tariffs Trends Technology Politics

Marketing Mix : 

Marketing Mix It is the tools that an organization employs to pursue its marketing objectives in the target market Product, Price, Place, Promotion 4 C’s – Customer solution, Cost, Convenience, Communication

Marketing Mix : 

Marketing Mix

Slide 42: 

Product Price Place Promotion Marketing Mix (4p’s) The marketing mix principles are controllable variables which have to be carefully managed and must meet the needs of the defined target group. All elements of the mix are Linked and must support each other.

The Marketing Mix : 

The Marketing Mix

The Marketing Mix : 

The Marketing Mix The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives 7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment Traditional 4Ps extended to encompass growth of service industry

Slide 45: 

Marketing Mix (4p’s) Slide 3 Pricing Pricing Strategies Penetration Skimming Competition Product Line Bundle Psychological Pricing is the only mix which generates a turnover for the organisation. The remaining 3p’s are the variable cost for the organisation. It costs to produce and design a product, it costs to distribute a product and costs to promote it. Price must support these elements of the mix. Pricing is difficult and must reflect supply and demand relationship.

Price : 

Price Pricing Strategy Importance of: knowing the market elasticity keeping an eye on rivals Image copyright: www.freeimages.co.uk

Product : 

Product

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Marketing Mix (4p’s) Product Decisions Branding Quality Features We must remember that Marketing is fundamentally about providing the correct bundle of benefits to the end user, hence the saying ‘Marketing is not about providing products or services it is essentially about providing changing benefits to the changing needs and demands of the customer’ Benefits offered

Product : 

Product Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. Extension strategies Specialised versions New editions Improvements – real or otherwise! Changed packaging Technology, etc. Image copyright: www.freeimages.co.uk

Promotion : 

Promotion

Slide 51: 

Marketing Mix (4p’s) Promotion Promotional Mix Advertising Public Relations Sales Promotion Personal Selling Direct Mail Internet/ E-commerce A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional mix can consist of:

Promotion : 

Promotion Strategies to make the consumer aware of the existence of a product or service NOT just advertising

Place : 

Place

Slide 54: 

Marketing Mix (4p’s) Place Manufacturer Consumer Manufacturer Retailer Consumer Direct Distribution Indirect Distribution

Place : 

Place The means by which products and services get from producer to consumer and where they can be accessed by the consumer The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer?)

People : 

People

People : 

People People represent the business The image they present can be important First contact often human – what is the lasting image they provide to the customer? Extent of training and knowledge of the product/service concerned Mission statement – how relevant? Do staff represent the desired culture of the business?

Process : 

Process

Process : 

Process How do people consume services? What processes do they have to go through to acquire the services? Where do they find the availability of the service? Contact Reminders Registration Subscription Form filling Degree of technology

Physical Environment : 

Physical Environment

Physical Environment : 

Physical Environment The ambience, mood or physical presentation of the environment Smart/shabby? Trendy/retro/modern/old fashioned? Light/dark/bright/subdued? Romantic/chic/loud? Clean/dirty/unkempt/neat? Music? Smell?

Matching Mix Concepts (A & S) : 

Matching Mix Concepts (A & S) 4 A’s 4 S’s Acceptability Solution Affordable Sense Accessible Spread Awareness Supports

Concepts under which firms conduct marketing activities : 

Concepts under which firms conduct marketing activities Production concept Product Concept Selling Concept Marketing Concept Societal marketing Concept

Marketing Management Philosophies : 

Marketing Management Philosophies Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Customer-Driven

Production Concept : 

Production Concept Consumers will favour those products that are widely available and low in cost. Therefore increase production and cut down costs. And build profit through volume.

The Production Concept : 

The Production Concept A customer can have any colour he likes for his car so long as it's black’ Henry Ford

Product Concept : 

Product Concept Consumers will favor those products that offer the most quality, performance, or innovative features. Therefore, improve quality, performance and features. This would lead to increased sales and profits.

Marketing Myopia : 

Marketing Myopia Management’s failure to recognize a company’s scope of business. Sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the “wants” and lose sight of the “needs.”

The Selling Concept : 

The Selling Concept Consumers , if left alone , will not buy enough of company’s products. Therefore, promote sales aggressively. And,build profit through quick turnover.

The Marketing Concept : 

The Marketing Concept The key to achieving organizational goals consist in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors. And build profit through customer satisfaction and loyalty.

Marketing and Sales Concepts Contrasted : 

Marketing and Sales Concepts Contrasted

The Societal Marketing Concept : 

The Societal Marketing Concept The societal marketing concept holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being. - It addresses conflicts between consumer’s and firm’s short run wants and long term welfare.

Societal Marketing Concept : 

Societal Marketing Concept

Marketing ManagementPhilosophies : 

Marketing ManagementPhilosophies Production Concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Consumers favor products that are available and highly affordable Improve production and distribution Consumers favor products that offer the most quality, performance, and innovative features Consumers will buy products only if the company promotes/ sells these product Focuses on needs/ wants of target markets & delivering satisfaction better than competitors Focuses on needs/ wants of target markets & delivering superior value Society’s well-being

Marketing Management : 

Marketing Management Marketing Management Implementing programs to create exchanges with target buyers to achieve organizational goals Finding and increasing demand, also changing or reducing demand Demand Management Attracting new customers and retaining current customers Profitable Customer Relationships

Marketer & Prospect : 

Marketer & Prospect A marketer is someone seeking a response (attention, a purchase, a donation) from another party, called the prospect. If two parties are seeking to sell something to each other, we call both of them marketers.

Customer needs : 

Customer needs Stated needs Real needs Unstated needs Delight needs Secret Needs

Stated needs : 

Stated needs Stated needs are those that the customer clearly tells you about. They are the easiest to deal with.For example 'please could you book me on a train to Delhi?'

Real Needs : 

Real Needs 'Real Needs' in marketing are the actual needs of the customers which he may not be able to pinpoint/state to the salesperson and some probing needs to be done by the salesperson to find out the exact nature of the stated need by the customer. For example : A customer walks in to a car showroom and says he wants to buy a inexpensive car. Herein the stated need is that the customer wants a inexpensive car. But the real need could be that the customer wants a car which has a low operating/running cost and not a car with a low selling price. Thus the salesperson here will have to do a little bit of probing to understand the exact nature of the stated need of the customer.

Unstated needs : 

Unstated needs Are those needs by a customer, that aren't stated, which in other words are, good after sales service, good customer care etc, they are not state, but they are expected

Delight needs : 

Delight needs 'Delight needs' are that of the customer and what they are going to be looking for, and any extras which they are going to need to have. the customer would like the dealer to include an music system

Company Responses and Adjustments : 

Company Responses and Adjustments Reengineering Outsourcing E – Commerce Bench marking Alliances Partner – supplies Market centered Global/local Decentralization

New Marketing Challenges : 

Emerging Challenges Nonprofit Marketing New Marketing Landscape & Information Technology Ethical Concerns Globalization Changing World Economy New Marketing Challenges

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UNIT I - 2 MICRO ENVIRONMENT

Marketing Environment : 

Marketing Environment All the actors and forces influencing the company’s ability to transact business effectively with it’s target market. Includes: Microenvironment - forces close to the company that affect its ability to serve its customers. Microenvironment - larger societal forces that affect the whole microenvironment.

The Marketing Environment : 

The Marketing Environment Company Demographic Economic Natural Technological Political Cultural Company Customers Intermediaries Suppliers Competitors Publics

Micro Environment : 

Micro Environment Consists of six forces (actors) close to the company that affect its ability to serve its customers.

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The Microenvironment Company Customers Publics Suppliers Competitors Intermediaries Forces Affecting a Company’s Ability to Serve Customers

The Company’s Microenvironment : 

The Company’s Microenvironment Company’s Internal Environment- functional areas such as top management, finance, and manufacturing, etc. Suppliers - provide the resources needed to produce goods and services. Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers.

The Company’s Microenvironment : 

The Company’s Microenvironment Customers - five types of markets that purchase a company’s goods and services. Competitors - those who serve a target market with similar products and services. Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

Microenvironment : 

Marketing must consider other parts of the organization including finance, R&D, purchasing, operations and accounting Marketing decisions must relate to broader company goals and strategies Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

The company : 

The company the first actor is the company itself and the role its plays in the microenvironment are the ff: 1. Top Management is responsible for setting the company’s mission, objective, broad strategies and policies. 2. Marketing Managers must take decisions within the parameters established by top management 3. Marketing Managers must also wok closely with other company departments, since all all areas produce better results when aligned by comment objectives and goals. 4. All departments within the company must “think consumer”

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Top mgmt. Finance R & D Purchasing Manufacturing Accounting Marketing

Microenvironment : 

Marketers must watch supply availability and pricing Effective partnership relationship management with suppliers is essential Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

Suppliers : 

Suppliers are firms and individuals that provide the resources needed by the company and its Competitors to produce good and services. They are an important link in the company’s overall customer “value delivery system” Marketing Managers should: a. always watch supply availability (such as supply shortages) b. monitor price trends of key inputs.

Microenvironment : 

Help to promote, sell and distribute goods to final buyers Include resellers, physical distribution firms, marketing services agencies and financial intermediaries Effective partner relationship management is essential Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

Marketing intermediaries : 

Marketing intermediaries -are firms that help the company promote, sell and distribute goods to final buyers Intermediaries include: Resellers (one who buy and sell a product) Physical Distribution (warehouse to transportation firm, shipping of goods) Marketing Service Agencies (agencies responsible for promotion) Financial Intermediaries (responsible in financing transactions)

Microenvironment : 

The five types of customer markets Consumer Business Reseller Government International Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

Customer Markets : 

Customer Markets Company Consumer Markets International Markets Government Markets Business Markets Reseller Markets

Customers : 

Customers -there are five types of customer markets a company caters to Customer markets include: Consumer Market (individual who buys for personal consumption) Business Market (buys good and service for their production use) Government Market (buys god and service to provide for public use) International Market (buyers in other countries)

Microenvironment : 

Conducting competitor analysis is critical for success of the firm A marketer must monitor its competitors’ offerings to create strategic advantage Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

Competitors : 

Competitors Every company faces a wide range of competitors. So a company should remember: a. to secure a strategic advantage over competitors to be successful in the marketplace b. there is no single competitive strategy that is best for all companies

Microenvironment : 

A group that has an actual or potential interest in or impact on an organization Seven publics include: Financial Media Government Citizen-action Local General Internal Microenvironment Actors The company Suppliers Marketing intermediaries Customers Competitors Publics

Publics : 

Publics Is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. Generally publics can be identified as being: Financial Public: (influence ability to obtain funds) Media Public: (carry news, features and editorial opinion) Government Public: (must take government into account like truth in advertising/ issues of product safety) Citizen Action Public: (public relation department can help keep in touch with organizations and minority groups) Local Public : (includes neighborhood and community organizations) General Public: (the public image of the company) Internal Public: ( keeping the employees feel good about their company)

Publics : 

Publics . Company Financial Media Gov’t Citizen Action Local General Internal

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UNIT I - 3 MACRO ENVIRONMENT

The Macroenvironment : 

The Macroenvironment Demographic Technological Cultural Economic Political Natural Forces that Shape Opportunities and Pose Threats to a Company

The Company’s Macroenvironment : 

The Company’s Macroenvironment Demographic - monitors population in terms of age, sex, race, occupation, location and other statistics. Economic - factors that affect consumer buying power and patterns. Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

The Company’sMacroenvironment : 

The Company’sMacroenvironment Technological - forces that create new product and market opportunities. Political - laws, agencies and groups that influence or limit marketing actions. Cultural - forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Demographic Environment : 

Demographic Environment The study of human populations in terms of size, density, location, age, gender, race, occupation and other statistics It is important to focus on this factor, since demographic trends are constantly changing. (Growing population means more needs to satisfy)

Demographic Trends : 

Demographic Trends Changing Age Structure Population is getting older Changing Family Structure Marrying later, fewer children, working women, and nonfamily households Geographic Shifts Moving to the Sunbelt and suburbs (MSA’s) Increased Education Increased college attendance and white-collar workers Growing Ethnic and Racial Diversity 73% Caucasian, 12% African-American, 10% Hispanic & 3.4% Asian

Demographic Environment : 

Born between 1946 and 1964 Represent 28% of the population; earn 50% of personal income Many mini-segments exist within the boomer group Entering peak earning years as they mature Baby Boomers Generation X Generation Y Key Generations Demographic Environment Goal 2: Learn how demographic & economic factors affect marketing

Demographic Environment : 

Born between 1965 and 1976 First latchkey children Maintain a cautious economic outlook Respond to socially responsible companies Will be primary buyers of most goods by 2010 Baby Boomers Generation X Generation Y Key Generations Demographic Environment Goal 2: Learn how demographic & economic factors affect marketing

Demographic Environment : 

Born between 1977 and 1994 72 million strong; almost as large a group as their baby boomer parents New products, services, and media cater to GenY Challenging target for marketers Baby Boomers Generation X Generation Y Key Generations Demographic Environment Goal 2: Learn how demographic & economic factors affect marketing

Economic Environment : 

Economic Environment Changes in Consumer Spending Patterns Economic Development Changes in Income Key Economic Concerns for Marketers

Natural Environment : 

Natural Environment Natural Environment: Involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities Trends Shortages of raw materials Increased pollution Increased government intervention

Natural Forces : 

Natural Forces Conserve natural habitats, resources, endangered species Minimise environmental impact Sustainable resource use Recycle Energy efficient products ‘The Polluter Pays Principle’

Natural Forces : 

Natural Forces it involves natural resources that are needed as inputs by marketers or that are affected by marketing activities Some areas of concern may be: a. Shortages of Raw Materials b. Increased Pollution is a worldwide problem c. Government intervention in the natural resource management

Natural Environment : 

Natural Environment Factors Affecting the Natural Environment More Government Intervention Shortages of Raw Material Increased Costs of Energy Higher Pollution Levels

Technological Environment : 

Technological Environment Rapid Pace of Change High R & D Budgets Focus on Minor Improvements Increased Regulation Issues in the Technological Environment

Technological Environment : 

Technological Environment The most dramatic force shaping our destiny Rapidly changing force which creates many new marketing opportunities but also turns many existing products extinct

Technological Environment : 

Technological Environment forces that create new technologies, as well as new product and market opportunities Technology is perhaps the most dramatic force shaping our destiny 2. New Technologies create new markets and opportunities, however every new technology replaces an old technology 3. The challenge is only technical, but also commercial to make practical, affordable Versions of the product.

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The Technological Environment Application of knowledge in science, inventions, and innovations to solve problems

Slide 124: 

2012 Auto Expo: Bajaj launches RE60

Slide 125: 

Tata to display concept electric car

Slide 126: 

Auto Expo: Firefox launches Rs 4.25 lakh bicycle

Political Environment : 

Political Environment Greater Concern for Ethics Increased Legislation Changing Enforcement Key Trends in the Political Environment

Political Environment : 

Political Environment Consists of laws, government agencies and pressure groups that influence or limit various organizations and individuals in a given society Legislation affecting businesses worldwide has increased Laws protect companies, consumers and the interests of society Increased emphasis on socially responsible actions

Political Environment : 

Political Environment -include laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society. Business is regulated by various form of legislation: Government develop public policies to guide commerce – sets of laws/regulation limiting business for the good of society as a whole. 2. Almost every marketing activity is subject t a wide range of laws and regulation

Political Environment : 

Political Environment Some trends in political environment include: 1. Increasing legislation to: Protect companies from each other Protect consumers from unfair business Protect interests of society against unrestrained business behavior 2.Changing government agency enforcement – new laws 3. Increased emphasis on ethics and socially responsible actions

Cause-Related Marketing : 

Cause-Related Marketing Marketers create link between brand and charitable organization Demonstrates social responsibility Helps build positive brand image Examples include General Mill’s Box Tops for Education, Tang and Mothers Against Drunk Driving, Eddie Bauer and local schools

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The Social-Cultural Environment The relationship between marketing and society and its culture Issues: Obesity in Children Negative Body Images Video Games Healthy Eating etc ..

Cultural Environment : 

Cultural Environment

Cultural Environment : 

Cultural Environment Made up of institutions and other forces that affect a society’s basic values, perceptions, preferences and behaviors. Institutions and other forces that affect society’s basic values, perceptions, preferences and behaviors Certain cultural characteristics can affect marketing decisions making. And the most dynamic cultural characteristic is persistence on cultural values – generation core values

Cultural Environment: Elements of Culture : 

Cultural Environment: Elements of Culture 1. Language 2. Manners & Customs 3. Technology & Material Culture 4. Social Institutions – business, family, political- Latin America 5. Education –transmitting values, skills, attitudes etc 6. Aesthetics – attitude toward beauty, art, music etc 7. Religion

Marketing Management : 

Marketing Management Themselves Identify with brands for self-expression Others Recent shift from “me” to “we” society Organizations Trend of decline in trust and loyalty to companies Society Patriotism on the rise Nature “lifestyles of health and sustainability” (LOHAS) consumer segment Universe Includes religion and spirituality Cultural Environment Includes people’s views of… Goal 4: Explore political and cultural environments

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Social Environment: Role of Families and Working Women Working women has had a greater effect on marketing than any other social change Increases in females in the workforce Purchasing power from dual-career families is rising Cost is more important to women. Quality is more important to men.

Responding to the Marketing Environment : 

Responding to the Marketing Environment “There are three kinds of companies: those who make things happen, those who watch things happen, and those who wonder what’s happened.”

Responding to the Marketing Environment : 

Responding to the Marketing Environment Environmental Management Perspective Taking a proactive approach to managing the microenvironment and the macro environment to affect changes that are favorable for the company. How? Hire lobbyists , run “advertorials”, file law suits and complaints, and form agreements.

Slide 140: 

UNIT I - 4 Global Marketing

Global Marketing in the 21st Century : 

Global Marketing in the 21st Century The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. International trade is booming and accounts for 25% of U.S. GDP. Global competition is intensifying. Higher risks with globalization.

U.S. Globalization : 

U.S. Globalization Many U.S. companies have made the world their market.

Major International Marketing Decisions : 

Major International Marketing Decisions

Looking at the Global Marketing Environment : 

Looking at the Global Marketing Environment The International Trade System: Restrictions—tariffs, quotas, embargos, exchange controls, and non-tariff trade barriers. The World Trade Organization and GATT: Helps Trade—reduces tariffs and other international trade barriers. Regional Free Trade Zones: Groups of nations organized to work toward common goals in the regulation of international trade.

Slide 145: 

What types of U.S. companies would like to see higher tariffs and what types would like to see lower tariffs or no tariffs? Why is this the case? Discussion Question

Industrial Structure : 

Industrial Structure Shapes a country’s product and service needs, income levels, and employment levels. Subsistence Economies Raw Material Exporting Economies Industrializing Economies Industrial Economies Income Distribution

Political-Legal Environment : 

Political-Legal Environment Attitudes Toward International Buying Government Bureaucracy Political Stability Monetary Regulations

Cultural Environment : 

Cultural Environment Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program. Business norms vary from country to country. Companies that understand cultural nuances can use them to advantage when positioning products internationally.

Cultural Differences : 

Cultural Differences When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.

Deciding Whether to Go Global : 

Deciding Whether to Go Global Reasons to consider going global: Foreign attacks on domestic markets Foreign markets with higher profit opportunities Stagnant or shrinking domestic markets Need larger customer base to achieve economies of scale Reduce dependency on single market Follow customers who are expanding

Deciding Which Markets to Enter : 

Deciding Which Markets to Enter Before going abroad, the company should try to define its international marketing objectives and policies. What Volume of Foreign Sales is Desired? How Many Countries to Market In? What Types of Countries to Enter? Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and Risk Level

Colgate Goes to China : 

Colgate Goes to China Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.

Market Entry Strategies : 

Market Entry Strategies

Market Entry Strategies : 

Market Entry Strategies Exporting: Indirect: working through independent international marketing intermediaries. Direct: company handles its own exports.

Market Entry Strategies : 

Market Entry Strategies Joint Venturing: Joining with foreign companies to produce or market products or services. Approaches: Licensing Contract manufacturing Management contracting Joint ownership

Joint Ownership : 

Joint Ownership KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi.

Market Entry Strategies : 

Market Entry Strategies Direct Investment: The development of foreign-based assembly or manufacturing facilities. This approach has both advantages and disadvantages.

Deciding on the Global Marketing Program : 

Deciding on the Global Marketing Program Standardized Marketing Mix: Selling largely the same products and using the same marketing approaches worldwide. Adapted Marketing Mix: Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.

Marketing Mix Adaptation : 

Marketing Mix Adaptation In India, McDonald’s serves chicken, fish, and vegetable burgers, and the Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame-seed bun.

Five Global Product and Promotion Strategies : 

Five Global Product and Promotion Strategies

Global Product Strategies : 

Global Product Strategies Straight Product Extension: Marketing a product in a foreign market without any change. Product Adaptation: Adapting a product to meet local conditions or wants in foreign markets. Product Invention: Creating new products or services for foreign markets.

Global Promotion Strategies : 

Global Promotion Strategies Can use a standardized theme globally, but may have to make adjustments for language or cultural differences. Communication Adaptation: Fully adapting an advertising message for local markets. Changes may have to be made due to media availability.

Global Pricing Strategies : 

Global Pricing Strategies Companies face many problems in setting their international prices. Possible approaches include: Charge a uniform price all around the world. Charge what consumers in each country will pay. Use a standard markup of costs everywhere. International prices tend to be higher than domestic prices because of price escalation. Companies may become guilty of dumping –a foreign subsidiary charges less than its costs or less than it charges in its home market.

International Pricing : 

International Pricing Twelve European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe.

Whole-Channel Concept for International Marketing : 

Whole-Channel Concept for International Marketing

Deciding on the Global Marketing Organization : 

Deciding on the Global Marketing Organization Organize an export department Create international divisions Geographical organizations World product groups International subsidiaries Become a global organization

Global Integration Forces : 

Global Integration Forces Driving Forces Technology Culture Market Needs Costs Free Markets Economic Integration Peace Strategic Intent Management Vision, Strategy and Action

Global Integration Forces : 

Global Integration Forces Restraining Forces Culture Market Differences Costs National Controls Nationalism Peace vs. War/ Stability Management Myopia Organization History Domestic Focus

Challenges : 

Challenges Markets can present higher profit opportunities than present markets. Markets can offer size but not profits. Company needs a larger customer base for economies of scale. Present customers are needing service and products as they go international.

Major Decisions : 

Major Decisions Deciding to go abroad Deciding which markets Deciding how to enter markets Deciding on marketing programs Deciding on marketing organization

Global Marketing : 

Global Marketing Denotes the use of advertising and marketing on a global basis. Marketing is at the threshold of a new and exciting era: e-business, e-commerce and e-marketing Business has two basic functions: marketing and innovation (Drucker) New era of competition, demanding customers More stakeholders (customers, employees, media).

Global Marketing : 

Global Marketing Companies need new set of guidelines, values and insight Marketing is a Strategic Business Concept Marketing is too important to be left to the Marketing Department. (David Packard) Formulated, integrated, long-term Hold to the responsibilities of customers, employees, investors

Global Marketing : 

Global Marketing Advantages, especially if the companies emphasize selection, availability, quality, reliability and lower prices. Economies of scale. Lower marketing and advertising costs in planning and control. Lower advertising production costs. Exploiting your best ideas on a worldwide basis.

Global Marketing : 

Global Marketing Deciding How to Enter a Market Indirect Export-Thru export and thru others. Direct Export-Handle own exports. Licensing-License a foreign company to use trademark, manufacturing process, trade secret, or other item for a fee or royalty. Joint Ventures- Join with local investors Direct Investment- Direct ownership.

Global Marketing : 

Global Marketing Joint Ventures-- Join with local investors to create venture. Coca-Cola and Nestle joined forces in “ready to drink” coffee and tea. P&G with rival, Fater, in Italy and Great Britain. Whirlpool formed venture with Dutch electronic group Philip’s on white-goods business to leapfrog into European market.

Global Marketing : 

Global Marketing Direct Investment--Ultimate form is direct ownership of foreign-based assembly or manufacturing facilities. Can buy part or full interest in a local company.

Global Marketing : 

Global Marketing Principle of Research Understand the consumer-behavior perspectives. Be sure you are asking right questions. Use appropriate research techniques and controls. Present clear, comprehensive and “actionable” results. We study people using geographics, demographics, psychographics, lifestyles, and behaviors.

UNIT II : 

UNIT II

1Consumer Markets and Consumer Buying Behavior : 

1Consumer Markets and Consumer Buying Behavior “Consumers are individuals and households who buy services and products for personal consumption”

CONSUMER BEHAVIOR : 

CONSUMER BEHAVIOR BUAD 307 MARKETING FUNDAMENTALS

What is Consumer Behaviour? : 

What is Consumer Behaviour? Those activities directly involved in obtaining , consuming and disposing of products and services, including the decision processes that precede and follow these actions

Consumer Buying Behavior : 

Consumer Buying Behavior Consumer Buying Behavior refers to the buying behavior of final consumers (individuals & households) who buy goods and services for personal consumption. Study consumer behavior to answer: “How do consumers respond to marketing efforts the company might use?”

True or False? : 

True or False? If you have bad breath, you cannot smell it yourself. If you eat a balanced diet, you do not need vitamin supplements. Using a razor with five blades will reduce the likelihood of cutting yourself and will result in less skin irritation. Dell Computers tend to be of higher quality than those made by HP and Sony. Rust stains on clothes can be removed with the use of lemon juice. Bleach actually makes these stains worse.

Questions Faced By Consumers : 

Questions Faced By Consumers Are veggie burgers actually healthy? What makeup should you use to get an “even” skin tone? Do I get any useful benefits from spending more than $125 on a digital camera? Should I get a “make-over?” What am I looking for? What should I do? Is my mechanic honest? Which tie should I wear for a job interview? Should I give my wife roses, chocolate, or software?

Consumer Problems and Recognition : 

Consumer Problems and Recognition Consumer problem: Discrepancy between ideal and actual state--e.g., consumer: Has insufficient hair Is hungry Has run out of ink in his or her inkjet cartridge Problems can be solved in several ways--e.g., stress reduction <----- vacation, movie, hot bath, medication

Model of Consumer Behavior : 

Model of Consumer Behavior Marketing and Other Stimuli Buyer’s Black Box Buyer’s Response Product Price Place Promotion Economic Technological Political Cultural Characteristics Affecting Consumer Behavior Buyer’s Decision Process Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount

Characteristics Affecting Consumer Behavior : 

Characteristics Affecting Consumer Behavior Buyer Psychological Personal Social Culture

Factors Influencing Consumer Behavior : 

Social Reference groups Family Roles and status Personal Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Psycho- logical Motivation Perception Learning Beliefs and attitudes Buyer Factors Influencing Consumer Behavior

Factors Affecting Consumer Behavior:Culture : 

Factors Affecting Consumer Behavior:Culture Social Class People within a social class tend to exhibit similar buying behavior. Occupation Income Education Wealth Most basic cause of a person's wants and behavior. Values Perceptions Subculture Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers

Cultural Factors : 

Cultural Factors Culture is the most basic determinant of a person’s wants and behavior. Culture is expressed through tangible items, such as food, architecture, clothing and art. Culture is an integral part of the hospitality and travel business. Culture is dynamic and adopting to the environment Subculture is smaller groups’ culture of a major culture Subcultures include, nationalities, religions, racial groups, geographic regions (Hispanic, African Americans, Asian Americans)

Cultural Factors : 

Cultural Factors International cultures: the values, attitudes, and behaviors can vary dramatically by country. Germany United Kingdom Saudi Arabia Japan International restaurant chains modify their products Social class: relatively permanent and ordered divisions in a society whose members share similar values, interests, and behaviors. Seven American Social Classes

Factors Affecting Consumer Behavior:Social : 

Factors Affecting Consumer Behavior:Social Groups Membership Reference Family Husband, wife, kids Influencer, buyer, user Roles and Status Social Factors

Social Factors : 

Social Factors Strongly affect consumer responses, companies must take them into account when designing marketing strategies Reference Groups Membership groups Aspirational groups Opinion leaders Family Roles and status

Factors Affecting Consumer Behavior:Personal : 

Factors Affecting Consumer Behavior:Personal Personal Influences Age and Family Life Cycle Stage Occupation Economic Situation Lifestyle Identification Activities Opinions Interests Personality & Self-Concept

Personal Factors : 

Personal Factors Age and Family Life-Cycle Stage Occupation Economic situation Lifestyle Believers Achievers Blue-Chip Blues Personality and self-concept Personality – distinguishing psychological characteristics Self Concept or self-image

VALS 2 : 

VALS 2 Principle Oriented Status Oriented Action Oriented Achievers Actualizers Strugglers Strivers Fulfillers Believers Experiencers Makers Abundant Resources Minimal Resources

Psychological Factors : 

Psychological Factors Affecting Buyers Choices Motivation Perception Learning Beliefs and Attitudes Psychological Factors

Slide 198: 

Factors Affecting Consumer Behavior:Psychological Psychological Factors Motivation Perception Learning Beliefs and Attitudes

Slide 199: 

Psychological - Motivation Biological needs: arising from hunger, thirst, and discomfort Psychological needs: arising from states of tension, such as recognition, esteem, or belonging A motive is a need that has a sufficient level of intensity. Creating a tension state that drives the person to act. Satisfying the need reduces the felt tension.

Slide 200: 

Psychological - Motivation Two of the Most Popular Motivation Theories Maslow’s Theory of Motivation Human needs are arranged in a hierarchy, from the most pressing to the least pressing. Herzberg’s Theory-Two Factor Theory Dissatisfiers Factors that cause dissatisfaction Satisfiers Factors that cause satisfaction

Maslow’s Hierarchy of Needs : 

Maslow’s Hierarchy of Needs Esteem Needs (self-esteem, status) Social Needs (sense of belonging, love) Safety Needs (security, protection) Physiological Needs (hunger, thirst) Self Actualization (Self-development)

Slide 202: 

Psychological-Perception Perception How a person acts is influenced by his/her perception of the situation. Why do people have different perceptions on the same situation?? Interpretation is individual!! Selective Attention Current need, anticipation, size of deviation Selective Distortion Tendency to twist information Selective Retention Retain information that support attitudes and beliefs

Slide 203: 

Psychological-Perception Learning Learning describes changing behaviors arising from experience. Site selection committee members visit hotels, examine the hotel’s features. Hotels should help guests to learn about the quality of their facilities and services Tours to first-time guests

Slide 204: 

Beliefs and Attitudes Attitude: Relatively consistent evaluations, feelings, and tendencies toward an object or idea. Liking or disliking things Healthy food – eat chicken Customers develop negative or positive attitude towards some products or places. Difficult to change Belief: A descriptive thought that a person holds about something X hotels have the best facilities. A particular airline has poor maintenance A particular country has unhealthy food-handling standards

Measurement of Attitude Components : 

Measurement of Attitude Components Beliefs Semantic Differential Scales Good -------------------Bad Fast --------------------Slow Reliable-----------------Unreliable Feelings Likert Scales (Strongly agree … Strongly Disagree) “This product makes me happy.”

Types of Buying Decisions : 

Types of Buying Decisions Complex Buying Behavior Dissonance- Reducing Buying Behavior Variety- Seeking Behavior Habitual Buying Behavior High Involvement Significant differences between brands Few differences between brands Low Involvement

Types of Buying Decision Behavior : 

Types of Buying Decision Behavior Complex Highly involved, significant brand differences Example – computer Dissonance-reducing Highly involved, little brand differences Example – carpeting Habitual Low involvement, little brand differences Example – salt Variety-seeking Low involvement, significant perceived brand differences Example – cookies Goal 3: Understand types of buying decisions and stages in the process

The Buyer Decision Process : 

The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior

CONSUMER DECISIONS:Theory and Reality in Consumer Buying : 

CONSUMER DECISIONS:Theory and Reality in Consumer Buying INFORMATION SEARCH PROBLEM RECOGNITION EVALUATION OF ALTERNATIVES PURCHASE POSTPURCHASE EVALUATION/ BEHAVIORS Theory Complications

Approaches to Search for Problem Solutions : 

Approaches to Search for Problem Solutions INTERNAL EXTERNAL Memory Thinking Word of mouth, media, store visits, trial CATALOG

Slide 211: 

The Buyer Decision ProcessStep 1. Need Recognition External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment Internal Stimuli Hunger Thirst A person’s normal needs Need Recognition Difference between an actual state and a desired state

Slide 212: 

Need Recognition The buying process starts when the buyer recognizes a problem or need. Actual state ~ desired state The need can be triggered by internal stimuli The need can also be triggered by external stimuli Gift certificates

The Buyer Decision ProcessStep 2. Information Search : 

The Buyer Decision ProcessStep 2. Information Search Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product Personal Sources Commercial Sources Public Sources Experiential Sources

Slide 214: 

The Buyer Decision ProcessStep 3. Evaluation of Alternatives Product Attributes Evaluation of Quality, Price, & Features Degree of Importance Which attributes matter most to me? Brand Beliefs What do I believe about each available brand? Total Product Satisfaction Based on what I’m looking for, how satisfied would I be with each product? Evaluation Procedures Choosing a product (and brand) based on one or more attributes.

Evaluation Type : 

Evaluation Type Compensatory: Decision based on overall value of alternatives (good attribute can outweigh bad ones) Non-compensatory: Absolutely must meet at least one important criterion (e.g., car must have automatic transmission) Hybrid: Combination of the two (e.g., one non-compensatory measure, then compensatory tradeoffs on other attributes Abandoned strategy: Consumer finds initial criteria unrealistic and proceeds to less desirable solution IMPORTANT LESS IMPORTANT

The Buyer Decision ProcessStep 4. Purchase Decision : 

The Buyer Decision ProcessStep 4. Purchase Decision Purchase Intention Desire to buy the most preferred brand Purchase Decision Attitudes of others Unexpected situational factors

Slide 217: 

The Buyer Decision Process Step 5. Postpurchase Behavior Consumer’s Expectations of Product’s Performance Dissatisfied Customer Satisfied Customer! Product’s Perceived Performance Cognitive Dissonance

Stages in the Adoption Process : 

Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

Adoption of Innovations : 

Adoption of Innovations Percentage of Adopters Time of Adoption Early Late Innovators Early Adopters Early Majority 2.5% 13.5% 34% 34% 16% Laggards Late Majority

Influences on the Rate of Adoptionof New Products : 

Influences on the Rate of Adoptionof New Products Divisibility Can the innovation be used on a trial basis? Compatibility Does the innovation fit the values and experience of the target market? Complexity Is the innovation difficult to understand or use? Relative Advantage Is the innovation superior to existing products? Communicability Can results be easily observed or described to others? Product Characteristics

Buyer Decision Process for New Products : 

Stages in the Adoption Process Buyer Decision Process for New Products Awareness Evaluation Interest Trial Adoption Goal 4: Comprehend the diffusion & adoption process for new products

Buyer Decision Process for New Products : 

Buyer Decision Process for New Products International Consumer Behavior Values, attitudes and behaviors differ greatly in other countries. Physical differences exist which require changes in the marketing mix. Customs vary from country to country. Marketers must decide the degree to which they will adapt their marketing efforts. Goal 4: Comprehend the diffusion & adoption process for new products

Slide 223: 

Think of a recent important purchase– briefly draw a flowchart of the steps you recall moving through from the awareness of need to post purchase What influenced you at each step?

Slide 224: 

Buyer Behavior Initiator: the person who first suggests or thinks of the idea of buying a particular product or service. Influencer: a person whose views or advice carry weight in making the final buying decision Decider: the person who ultimately makes the final buying decision or any part of it Buyer: the person who makes the actual purchase User: the person who consumes the product or service Other people often influence a consumers purchase decision. The marketer needs to know which people are involved in the buying decision and what role each person plays, so that marketing strategies can also be aimed at these people. (Kotler et al, 1994). Note: teens are increasingly assuming more of these roles Think about your past purchase– who was in which role?

Slide 225: 

Consumer decision making varies with the level of involvement in the purchasing decision Extensive: problem solving occurs when buyers purchase more expensive, less frequently purchased products in an unfamiliar product category requiring information search & evaluation; may experience cognitive dissonance. Limited: problem solving occurs when buyers are confronted with an unfamiliar brand in a familiar product category Routine: response behavior occurs when buyers purchase low cost, low risk, brand loyal, frequently purchased, low personal identification or relevance, items with which they are familiar. Increase in Consumer evaluation processes

Slide 226: 

Factors affecting Consumer involvement Offer extensive information on high involvement products In-store promotion & placement is important for low involvement products Linking low-involvement product to high-involvement issue can increase sales So…

Slide 227: 

Types of consumer involvement and decision making

Slide 228: 

Postpurchase Behavior Can minimize through: Effective Communication Follow-up GuaranteesWarranties Underpromise & overdeliver Marketing

Slide 229: 

Sour Grapes– a story of cognitive dissonance …after being unable to reach the grapes the fox said, “these grapes are probably sour, and if I had them I would not eat them.” --Aesop

Slide 230: 

Cognitive Dissonance psychological discomfort caused by inconsistencies among a person’s beliefs, attitudes, and actions varies in intensity based on importance of issue and degree of inconsistency induces a “drive state” to avoid or reduce dissonance by changing beliefs, attitudes, or behaviors and thereby restore consistency Tendency to avoid information can be countered by eliciting interest, norm of fairness, or perceive usefulness of information Post-decision “buyer’s remorse” may be increased by importance or difficulty or irreversibility of decision Counter-attitudinal action, freely chosen with little incentive or justification, leads to attitude change (e.g., new product at special low price) Applications:

UNIT II - 2Industrial Markets : 

UNIT II - 2Industrial Markets

Industrial Marketing : 

Industrial Marketing Also called: Business-to-Business (B2B) and Organizational Marketing. Definition: the creation and management of mutually beneficial relationships between organizational suppliers and organizational customers. Customer can be private firm, public agency, or nonprofit organization.

Organisational Buyer Behaviour : 

Organisational Buyer Behaviour ‘The decision-making process by which formal organisations establish the need for purchased products and services, and identify, evaluate, and choose among alternative brands and suppliers’ Kotler and Armstrong 1989

The Marketing Concept : 

The Marketing Concept Creating value for customers with goods and services that address organizational needs and objectives.

Marketing Concept : 

Marketing Concept Three major components: All company activities should begin with, and be based on, the recognition of a fundamental customer need. A customer orientation should be integrated throughout the functional areas of the firm: production, engineering, finance, R&D. Customer satisfaction is viewed as the means to long-term profitability goals.

Marketing Activities : 

Marketing Activities Identify customer needs Research customer behavior Divide market into manageable segments Develop new products/services Establish/negotiate prices Deliver, install, service products Ensure adequate and timely supply of products at correct place Allocate resources across product lines Communicate with customers Evaluate/control marketing programs

Marketing Mix : 

Marketing Mix Limited number of variables under Marketing’s control to create position that is attractive to the target market segment. Four Ps Product Price Promotion Place (Distribution)

External Environment : 

External Environment Six Environments Technological Economic Social/Cultural (Customer) Political/Legal Natural/Climatic Competitive

So what’s different about B2B? : 

So what’s different about B2B? Marketing Concept Marketing Mix Market Segmentation Product Life Cycle All apply in both B2C and B2B.

So what’s different about B2B? : 

So what’s different about B2B? The technical characteristics of the product are important. These products directly affect the operations and economic health of the customer. The customer is an organization rather than an individual consumer, or family.

Five Major DifferencesBetween B2B and B2C : 

Five Major DifferencesBetween B2B and B2C Products/Services being marketed Nature of demand How the customer buys Communication process Economic/Financial factors

Products/Services : 

Products/Services More complex Functional vs. Symbolic Attributes Large unit dollar value/Large quantities Custom/Tailored Various Stages from raw material to finished goods. Foundation, Entering, Facilitating Goods

Slide 243: 

Raw Material Extraction Material Processing Manufacturing Parts/Subassembly Assembly Distribution Wholesale/Retail Trade Final Consumers Facilitators Firms in Production Chain

Nature of Demand : 

Nature of Demand Derived Joint/Shared Concentrated Inelastic

How Customer Buys : 

How Customer Buys Group Process Formal Lengthy Loyal Decisions based on risk and opportunity

Communication : 

Communication Personal selling more important than mass paid advertising Support sales with other promotional activities: advertising in trade journals, catalogs, trade shows, direct mail, WWW. Message focused on technical, factual, and descriptive content. Multiple audience members.

Economic/Financial Factors : 

Economic/Financial Factors Competition oligopolistic Power/Dependency relationships Reciprocity:Doing business with companies that do business with them. Economic variables: interest rates, inflation, business cycle

Slide 248: 

248 Industrial Market Vs Consumer Market Market Structure Industrial Market Geographically conc. Fewer buyers (relatively) Big buyers ( small number of large buyers) Consumer Markets Geographically dispersed Mass markets Free Market (large number of buyers) Understanding Industrial markets

Slide 249: 

249 Industrial Market Vs Consumer Market Market Structure - Example Industrial Market ( Rutile for Paints) Major ten cities. Fewer buyers (example 500) Oligopolistic buyers with clout To access international market (Asian, Nerolac, ICI etc.) Consumer Markets (paints) Even in small villages Mass markets ( 1 billion ) Small customers normally competition is within the country. Understanding Industrial markets

Slide 250: 

250 Industrial Market Vs Consumer Market Buyer Behavior Industrial Market *Evaluated for functionality rational/task motive to buying. *Purchasers are experts & focus is more on performance/service. *Higher interaction with the supplier. * Formal processes. Consumer Market *Social / psychological factors are important. *Family involvement & focus more on product per se. *Nor personal relationship with the supplier. * Less of formal processes. Understanding Industrial markets

Slide 251: 

251 Industrial Market Vs Consumer Market Products Industrial Market * Technical complexity and customized. * Service, delivery and availability is very important. Customer Markets * Standardized. *. Service, delivery and availability is somewhat important. Understanding Industrial markets

Slide 252: 

252 Industrial Market Vs Consumer Market Products - Example Samsonite Outsourcing soft luggage * Each component is as per Samsonite specification. * Service, delivery and availability is very important as it affects supply chain of the company. Customer for Samsonite soft Luggage * Standardized product range to select from. *. Service, delivery and availability is somewhat important, can wait for a Specific color / size. Understanding Industrial markets

Slide 253: 

253 Industrial Market Vs Consumer Market Decision making Industrial Market * Distinct observable stages * Multiple influencers and decision makers. Consumer Market * Unobservable mental stages, not very clear pattern. Understanding Industrial markets

Slide 254: 

254 Industrial Market Vs Consumer Market Decision making - Example Industrial Buyer – Soaps for Workers canteen * Need identification, selection, procurement etc. * O.K. from the workers union, agreement by contractor, purchase departments negotiation & placing order. Customer * Low involvement buying and impulse purchase (the exact choice criteria difficult to identify) & varies from situation to situation. Understanding Industrial markets

Slide 255: 

255 Industrial Market Vs Consumer Market Distribution channel characteristics Industrial Markets * Shorter, more direct & fewer linkages between seller and buyers. Consumer Markets * Indirect and multiple linkages Understanding Industrial markets

Slide 256: 

256 Industrial Market Vs Consumer Market Distribution channel characteristics -Example Hotel buying Cold Drinks * Supplied directly by the distributor, may even be serviced by company employee or a regular basis. Customer for Cold drinks * Normal distribution style of distributor to retailer to customer. Virtually no interaction with company. Understanding Industrial markets

Slide 257: 

257 Industrial Market Vs Consumer Market Promotion Industrial Markets * Emphasis on personal selling or one to one dealing. Example : Selling fridges with decals. You go and deal with Coke or Pepsi H.O. Consumer Markets * Emphasis on mass market promotion. Example : You plan an adv. campaign to highlight decals and generate customer flow. Understanding Industrial markets

Slide 258: 

258 Industrial Market Vs Consumer Market Pricing Industrial Markets * Competitive bidding & multistage negotiation. * Sharing of cost data & budgeting of acceptable profits in many cases. Consumer Markets * Normally MRP & MOP * Concept of list price & its implementation. Understanding Industrial markets

Slide 259: 

259 Industrial Market Vs Consumer Market Pricing - Example Industrial (CSD purchase Of Rum ) * Competitive bidding & selection on basis of L1. * Sharing of production and overhead cost data with CSD and price based on cost + margin. Consumer Markets for Rum * Normally MRP & MOP * Concept of list price & its implementation in the trade. Understanding Industrial markets

Slide 260: 

260 A big reseller can be treated as a Industrial Buyer Example: Shoppers Stop / Ebony / Kids Kemp for an apparel manufacturer. Purchase : Not for consumption but for business. Market characteristics : Very few of them and they are big in size and have centralized purchasing. Product characteristics : Specific private labels. Buyer characteristics : Technical evaluation / rational process / multiple buying influencers. Understanding Industrial markets

Slide 261: 

261 Organizational Customer Type of purchasing organization Commercial Enterprise Industrial Dealers & Distributors – Essentially their objective is to trade on the items. ( relatively narrow scope ). OEM – These consumers use the products as component of their own output. The stakes are high as their final output depends on your product. ( Maruti as a user of headlights ). In emergency, they can make the vehicle & fit headlights later. Users ( consumers ) – They are the final consumers of the product and their total operation depends on you. Example: Eastern Coal Fields for Tisco. No coal => No Steel. Understanding Industrial markets

Slide 262: 

262 Organizational Customer Type of purchasing organization Government agency Standard procurement processes – Registration, Tender, L1 etc. Public accountability – everything by rule books as far as documentation. Understanding Industrial markets

Slide 263: 

263 Organizational Customer Type of purchasing organization Institutions ( Private & Public Sector ) 1. Tisco giving its workers, watches as Diwali gifts. 2. XIM-B purchasing air-conditioners for faculty offices. 3. DSP cooperative buying suitcases for their members. Characteristics : Normally one time deals, large orders, less of technical evaluation, non – specialist buyers. Understanding Industrial markets

Slide 264: 

264 Materials and parts Raw materials ( natural gas, HDPE etc.) Manufactured materials ( copper wire, steel sheets ) Component parts ( switches, motors or customized gears ) Characteristics : Normally large custom made orders are sold By the manufacturers & standard products by industrial. distributors. Organizational Customer Based on Type of products purchased Understanding Industrial markets

Slide 265: 

265 Capital Items Installations ( buildings, computers, machinery etc.) Accessories ( PC, Office furniture) Characteristics: Normally major installations, because of extensive interaction required and long negotiation time required, the manufacturers deal directly with the customer & accessories are sold by industrial. distributors. Organizational Customer Based on Type of products purchased Understanding Industrial markets

Slide 266: 

266 Supplies and services Supplies ( soaps, stationery etc.) Services ( maintenance, canteen etc.) Characteristics : Normally industrial distributors are used & services are provided by the individual contractors ). Organizational Customer Based on Type of products purchased Understanding Industrial markets

Slide 267: 

267 Example : Procurement of Injection Moulding Machine R & D : Designs the moulds which are to be used. Production : Output levels, installation needs. HRD : Manpower implications, skills to be imparted. Quality Assurance : Responsible for output consistency. Maintenance : Ease of operation, availability of spares, AMC etc. Finance : Long & short term financial implication. Purchase department : Price, payment terms, delivery terms. Characteristics of Organizational Procurement Multiple Influences Understanding Industrial markets

Slide 268: 

268 Example : Procurement of Rutile for paints Material Planning : Exact forecasting of demand, factoring of international prices Vs domestic prices, foreign exchange implication, inventory carrying cost etc. Supplier rating : Based on the the quality reports, delivery records , price factor, payment terms etc. the suppliers are rated and Economic order quantity : The quantity to order, frequency of ordering etc. are planned so as to optimize the profitability of the organization. Characteristics of Organizational Procurement Technical sophistication Understanding Industrial markets

Slide 269: 

269 Example : Procurement of Rutile for paints Value Analysis : The option of using a lesser quantity of costly Rutile for getting the same output level by change of formulation is explored. In absence of the raw materials, whether any alternative can be used is worked out. How the option of airlifting impact cost etc. is worked out before decision making. Characteristics of Organizational Procurement Technical sophistication Concept of optimization w.r.t constraints Understanding Industrial markets

Slide 270: 

270 Large number of buying center : Government departments are everywhere. A lot of them purchase locally. 2. Political interference : Specified govt. contracts : a) Rate contracts b) DRDO / ISRO Dev. Job cost + effort cost c) 131 Orders Characteristics of Organizational Procurement Government purchases Skills required are specialized Understanding Industrial markets

Slide 271: 

271 Industrial Marketing Environment Buyer Seller Interface Publics Macro Environment Govt. influences Understanding Industrial markets

Slide 272: 

272 Industrial Marketing Environment Buyer seller interface Labour Capital R.M. Components Equipment Mafg. Dist. / Dlrs. Compt. Manufacturer’ rep Dist / Dlrs Transporters Warehousing firms Mktg. Research firms Bankers & insurers Suppliers Buyers Facilitators Market segments Govt. Commercial Enterprises Industrial Distributors Understanding Industrial markets

Slide 273: 

273 Industrial Marketing Environment Publics Financial publics – FI / Stockbrokers / Individual Stock Holder ( Stock prices, confidence in company ) Independent press – Impact on reputation of company ( Dhabol power corporation ) Public interest groups – Environmentalists ( Euro II , CNG vehicles, Narmada bachao) 4. General publics – MacDonald's coating French fries with beef tallow Business serves the society Understanding Industrial markets

Slide 274: 

274 Industrial Marketing Environment Macro Environment Economics - Increased demand for oil led to increase in prices of oil in the world markets. Changes the cost base of most oil based companies. Also changed the demand pattern of automobile ( petrol to diesel ). Government policies like subsidizing diesel at the cost of petrol. Ecological influences - The concern for the environment so emission norms are stringent & industry has to adjust. Bhopal gas tragedy, changes in the law to use MIC as an intermediary. “Right to Know”  Companies have to furnish details of the hazardous products made & used by them. Understanding Industrial markets

Slide 275: 

275 Industrial Marketing Environment Macro Environment Physical environmental Influences – Steel plants need iron ore, water & lime stone deposits for setting up. MP, Bihar and Orissa have the concentration of steel plants. . 4. Politico / Cultural influences – Hire and fire policy of west Vs militant trade unionism & job protection in India. Technological influences – Typewriters manufacturers had to shift market focus, change products etc after PC’s and word processors became common. Understanding Industrial markets

Slide 276: 

276 Industrial Marketing Environment Macro Environment Government influences – Anticipating governments action: WTO treaty signing and IMF loans linkages for govt. The govt. needs the loan so it is likely to sign the treaty. Influencing Govt. actions: Lobby for reduction in excise duty (to create level playing field). Lifting of Liquor ban in A.P. ( a lot of lobbying ). CNG buses for Delhi …. Understanding Industrial markets

Slide 277: 

277 Environment Management Strategies Independent Strategies Competitive aggression a. Create Product differentiator (Bonding power of cement Gujrat Ambuja Cement – compressive strength) b. Aggressive pricing (coal based power plants Vs Gas based power plants) c. Comparative advertising - Dhabol Power Corporation came up with the very good adv telling the good the plant has brought about in the area, water supply, school, employment, plus electricity generation cost (compared with other plants etc.) Understanding Industrial markets

Slide 278: 

278 Environment Management Strategies Independent Strategies 2. Competitive pacification a. Improved competitive relations - (Auto companies do not fight on discount to trade @4%, they do not spoil the trade, focus on end users ). b. Industry promotion – Doodh, Egg & LPG campaign. ( Increase the pie rather than fight for the same pie). c. Price Umbrella’s – The transporter’s union finalizing rates for each destination ex- Mohali. Understanding Industrial markets

Slide 279: 

279 Environment Management Strategies Independent Strategies 3. Building Public Opinion a. Corporate Image advertising – ISO 9000 Accreditation. b. Voluntary environmental control – ISO 14000 Accreditation Making green products & advertising it. c. Commitment to interest groups – Archies cards giving part of institutional revenue to fund the NGO’s. This help them charge higher & get business. Understanding Industrial markets

Slide 280: 

280 Environment Management Strategies Independent Strategies 4. Political / Legal a. Directly lobbying with the govt. & law enforcers. Steel Industries lobbying for more development work, reduction in excise etc. b. Issue advertising through the direct paid media or even influencing the media to highlight the issue ( may or may not be funded directly ). Understanding Industrial markets

Slide 281: 

281 Environment Management Strategies Co-operative strategies a. Contracting : Allwyn is part of Electrolux, but supplies refrigerators to LG. b. Co-optation : Absorption of relevant Publics on board of directors. IIMC & XLRI directors in the board of directors of XIM. c. Coalition : Industry association ( Specially used to lobby with the government ) FMA decision to have max 7 years warrantee on fans. Understanding Industrial markets

Slide 282: 

282 Environment Management Strategies Strategic Maneuvering a. Domain Selection : Focusing on areas of strong competitive advantage. Cray  Supercomputers ICI Worldwide  Light chemicals with high margins. b. Diversification : Reliance into telecom sector. May be the idea is to be part of a high growth industry which has good future potential. Understanding Industrial markets

Organizational Buying Process : 

Organizational Buying Process Problem Recognition General Description of Need Product Specifications Supplier Search Acquisition and Analysis of Proposals Supplier Selection Selection of Order Routine

Slide 284: 

NATURE OF THE BUSINESS MARKET • Companies also buy services, such as legal, accounting, office-cleaning, and other services. • Some firms focus entirely on business markets. • Example: Caterpillar, which makes construction and mining equipment. • Diverse market, everything from a box of paper clips to thousands of parts for an automobile manufacturer.

Slide 285: 

COMPONENTS OF THE BUSINESS MARKET • Four main components: • Commercial market Individuals and firms that acquire products to support, directly or indirectly, production of other goods and services. • Largest segment of the business market. • Trade industries Retailers or wholesalers that purchase products for resale to others. • Also called resellers, marketing intermediaries that operate in the trade sector. • Government—all domestic levels (federal, state, local) and foreign governments; also act as sellers—e.g., confiscated goods. • Public and private institutions, such as hospitals, churches, colleges and universities, and museums.

Slide 286: 

B2B MARKETS: THE INTERNET CONNECTION • More than 94 percent of all Internet sales are B2B transactions. • Opens up foreign markets to sellers. • Largest segment of the business market. DIFFERENCES IN FOREIGN BUSINESS MARKETS • May differ due to variations in regulations and cultural practices. • Businesses must be willing to adapt to local customs and business practices and research cultural preferences.

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SEGMENTING B2B MARKETS • Segmentation helps marketers develop the most appropriate strategy. SEGMENTATION BY DEMOGRAPHIC CHARACTERISTICS • Grouping by size based on sales revenues or number of employees. SEGMENTATION BY CUSTOMER TYPE • Grouping in broad categories, such as by industry. • Customer-based segmentation Dividing a business-to-business market into homogeneous groups based on buyers’ product specifications.

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SEGMENTATION BY END-USE APPLICATION • End-use application segmentation Segmenting a business-to-business market based on how industrial purchasers will use the product. • Example: A supplier of industrial gases that sells hydrogen to some companies and carbon dioxide to others. SEGMENTATION BY PURCHASE CATEGORIES • Segmenting according to organizational buyer characteristics. • Example: Whether a company has a designated central purchasing department or each unit within the company handles its own purchasing. • Businesses increasingly segment customers according to the stage in their relationship. • Example: Whether a customer is new or a long-term partner.

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CHARACTERISTICS OF THE B2B MARKET GEOGRAPHIC MARKET CONCENTRATION • Business market more concentrated than consumer market. • Example: Companies that sell to the federal government are often located near Washington, D.C. • Businesses becoming less geographically concentrated as Internet technology improves. SIZES AND NUMBER OF BUYERS • Business market has smaller number of buyers than consumer market. • Many buyers are large organizations, such as Boeing, which buys jet engines.

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BUSINESS MARKET DEMAND • Demand characteristics vary from market to market.

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DERIVED DEMAND • The linkage between demand for a company’s output and its purchases of resources such as machinery, components, supplies, and raw materials. • Example: Demand for computer microprocessor chips is derived from demand for personal computers. • Organizational buyers purchase two types of items: • Capital items—long-lived business aspects that depreciate. • Expense items—items consumed within short time periods. VOLATILE DEMAND • Derived demand creates volatility. • Example: Demand for gasoline pumps may be reduced if demand for gasoline slows.

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JOINT DEMAND • Results when the demand for one business product is related to the demand for another business product used in combination with the first item. • Example: If lumber supply falls, then decrease in construction will affect concrete market. INELASTIC DEMAND • Demand throughout an industry will not change significantly due to a price change. • Example: Construction firms will not necessarily buy more lumber if prices fall unless overall housing demand also increases.

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INVENTORY ADJUSTMENTS • Just-in-time (JIT) inventory policies boost efficiency by cutting inventory and requiring vendors to deliver inputs as they are needed. • Often use sole sourcing, buying a firm’s entire stock of a product from just one supplier. • Latest inventory trend: JIT II, suppliers to place representatives at the customer’s facility to work as part of an integrated, on-site customer–supplier team. • Inventory adjustments are also vital to wholesalers and retailers.

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THE MAKE, BUY, OR LEASE DECISION • Firms acquiring needed products can get them in one of three ways: • Make the good or provide the service in-house. • Purchase it from another organization. • Lease it from another organization. • Producing the item may be cheapest route, but most firms cannot make all of the products they need. • Many companies purchase many of the goods they need. • Companies can spread out costs through leasing.

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THE RISE OF OFFSHORING AND OUTSOURCING • Offshoring Movement of high-wage jobs from one country to lower-cost overseas locations. • Example: China makes two-thirds of the world’s copiers, microwaves, DVD players, and shoes, and virtually all of the world’s toys. • Allows firms to concentrate their resources on their core business and access specialized talent or expertise. • Nearshoring Moving jobs to vendors in countries close to the business’s home country. • U.S. firms often nearshore in Canada or Mexico. • Outshoring Using outside vendors to provide goods and services formerly produced in-house. • Commonly outshore for three reasons: cost reduction, quality and speed of software maintenance and development, and greater value.

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PROBLEMS WITH OFFSHORING AND OUTSOURCING • Many companies discover their cost savings are less than expected. • Can raise security concerns over proprietary technology or customer data. • Can reduce flexibility to respond quickly to marketplace. • Can create conflicts with unions, even leading to shutdowns and strikes. • Can negatively affect employee morale and loyalty.

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MODEL OF THE ORGANIZATIONAL BUYING PROCESS

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Stage 1: Anticipate a Problem/Need/Opportunity and a General Solution • Example: Need to provide employees with a good cup of coffee to enhance productivity. Stage 2: Determine the Characteristics and Quantity of a Needed Good or Service • Example: Offering a coffee system that brews one cup of coffee at a time according to each employee’s preference. Stage 3: Describe Characteristics and the Quantity of a Needed Good or Service • Example: Firms need a simple system for brewing a good cup of coffee; quantity requirements are easily correlated to the number of coffee drinkers.

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Stage 4: Search for and Qualify Potential Sources • Choice of supplier may be fairly straightforward or very complex. Stage 5: Acquire and Analyze Proposals • May involve competitive bidding, especially if the buyer is the government or a public agency. Stage 6: Evaluate Proposals and Select Suppliers • Buyers choose proposal best suited to their needs. • Final choice may involve trade-offs between feature such as price, reliability, quality, and order accuracy.

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Stage 7: Select an Order Routine • Buyer and vendor work out best way to process future purchases. Stage 8: Obtain Feedback and Evaluate Performance • Buyers measure vendors’ performance. • Larger firms are more likely to use formal evaluation procedures. • Some firms rely on outside organizations to gather quality feedback and summarize results. • Example: J. D. Power and Associates

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CLASSIFYING BUSINESS BUYING SITUATIONS • Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made. Straight Rebuying • A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. • Purchaser see little reason to assess competing options. • Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys. • High-quality products. • Superior service. • Prompt delivery.

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Modified Rebuying • Purchaser willing to reevaluate available options. • May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance. New-Task Buying • First-time or unique purchase situations that require considerable effort by the decision makers. • Most complex category of business buying. • Often requires purchaser to consider alternative offerings and vendors.

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Reciprocity • Practice of buying from suppliers that are also customers. • In U.S., Department of Justice and the Federal Trade Commission view reciprocity as an attempt to reduce competition. ANALYSIS TOOLS • Value analysis—examines each component of a purchase in an attempt to either delete the item or replace it with a more cost-effective substitute. • Vendor analysis—an ongoing evaluation of a supplier’s performance in categories such as price, EDI capability, back orders, delivery times, liability insurance, and attention to special requests.

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THE BUYING CENTER CONCEPT • Buying center Participants in an organizational buying action. BUYING CENTER ROLES

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INTERNATIONAL BUYING CENTERS • Marketers may have difficulty identifying members of foreign buying centers. • Foreign buying centers often include more participants than those in U.S. • Marketers who can quickly identify decision makers have an advantage over competition. TEAM SELLING • Combining several sales associates or other staff to help the lead account representative reach all those who influence the purchase decision. • May include members of the seller firm’s own supply network in the sales situation. • Example: Reseller of specialized computer applications whose clients require access to training.

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CHALLENGES OF INSTITUTIONAL MARKETS • Institutional buyers include schools, hospitals, libraries, foundations, and others. • Have widely diverse buying practices among, and even within, institutions. • Multiple buying influences can affect buying decisions, such as conflicts between professional staff and purchasing departments. CHALLENGES OF INTERNATIONAL MARKETS • Marketers must consider buyers’ attitudes and cultural patterns. • Local industries, economic conditions, geographic characteristics, and legal restrictions must also be considered. • Remanufacturing, or restoring worn-out products to like-new condition, can be an important strategy in places that cannot afford new products. • Foreign governments are also an important market.

Purchase Types : 

Purchase Types New Task Problem or need is different from anything previously experienced Lack well-defined criteria and supplier loyalty Buying decision approaches Judgmental new task situations Strategic new task decisions Business Marketer Strategy

Purchase Types : 

Purchase Types Straight Rebuy Continuing or recurring requirements Routine problem solving Operational resources Buying decision approaches Causal purchases Routine low priority Business Marketer Strategy In-supplier Out-supplier

Purchase Types : 

Purchase Types Modified Rebuy Believe can derive significant benefits by reevaluating alternatives Limited problem solving Buying decision approaches Simple modified rebuy Complex modified rebuy Business Marketer Strategy In-supplier Out-supplier

Forces Shaping Organizational Buying Behavior : 

Forces Shaping Organizational Buying Behavior Environmental Forces Organizational Forces Group Forces Individual Forces

Forces on Organizational Buying : 

Forces on Organizational Buying Environmental Forces Economic influences ↓economy= Selective shifts Technological influences Foresee changes

Forces on Organizational Buying : 

Forces on Organizational Buying Organizational Forces Role of purchasing agents Should it be centralized? Benefits Better integrate purchasing Cut costs Favorable terms Work better with engineers Specialization When to centralize or decentralize?

Forces on Organizational Buying : 

Forces on Organizational Buying Group Forces Buying Center Different people play different roles New task Straight rebuy/modified rebuy Predicting Composition Why?

Forces on Organizational Buying : 

Forces on Organizational Buying Group Forces (cont’d) Buying center influences Users Gatekeepers Influencers Deciders Buyers Identifying patterns of behavior Isolate personal stakeholders Follow flow of information Identify experts Trace connections to the top Understand purchasing’s role

Individual Forces : 

Individual Forces Differing Evaluative Criteria Responsive Marketing Strategy Information-processing Selective processing Selective exposure Selective attention Selective perception Selective retention Risk-reduction strategies Perceived risk Two components