MMS-Marketing-Strategy-munotes

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INTRODUCTION TO MARKETING
STRATEGY
Unit Structure :
1.0 Objectives
1.1 Introduction
1.2 Meaning of Strategy and Tactic
1.3 Stages of Strategy Development
1.4 Background of Marketing Strategy
1.5 Marketing Management and Components of Marketing Strateg ies
Marketing
1.6 The 5C’s of Analysis
1.7 The Aspiration Decision: Segmentation, Targeting and Positioning
1.8 Summary
1.9 Questions
1.10 References
1.0 OBJECTIVES
 To study the meaning of strategy and tactic
 To study the different levels of strategy
 To understand the key components of corporate , business, marketing
strategies
 To understand what is marketing management and the different parts of
a marketing process
 To understand the different C’s of analysis and the importance of
segmentation, targetin g and positioning
1.1 INTRODUCTION
What is "Strategy"?
It's being proactive, looking to the future, carrying out a plan, and doing
something that offers you an advantage.

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2 What do we stand to lose by not doing it?
• We will be aimless .
• We will miss the cha nce to ma ke a difference or have a bigger impact.
• We won't have a goal or direction.
1.2 MEANING OF STRATEGY AND TACTIC
• Strategy is a plan of action that will assist the organisation in achieving
its objectives. It is a long -term strategy outlining what t he compan y
hopes to accomplish. This has been created at the highest level. The
goal of strategy is always the future.
• A tactic is a precise course of action used to achieve a certain outcome
while pursuing a larger objective. At different organisational l evels,
strategies are planned and put into action. Tactics are always focused
on the current situation and are more reactive in nature. These have a
lot of flexibility, are scalable, etc.
A documented plan on marketing issues such as product development,
promotion, distribution and price strategy are known as a marketing
strategy.
It establishes the company's marketing objectives and details how the
company can meet those objectives. Marketing tactics aid in determining
the company's and its rivals' strengt hs and s hortcomings. The company's
marketing methods must be concentrated on certain areas, as identified by
the marketing strategy.
A strategy is a long -term plan to accomplish specific goals. Therefore, a
marketing strategy is a marketing plan created to accompl ish marketing
goals. For instance, a marketing purpose can have to do with dominating
the market by satisfying customers. Therefore, the strategic approach is
the in -depth planning that involves conducting marketing research and
creating a marketin g mix to win over customers. Every firm must have
specific marketing goals, and strategy will play a key role in determining
how to get there.
Clear goals and objectives must be established before a strategy can serve
as the foundation for a policy. An org anisatio n can develop its daily tools
and techniques to achieve the goals after establishing its strategy.
Therefore, marketing can be defined as the process of creating and putting
into practice a strategy to plan and co -ordinate ways to discover,
anticip ate, and satisfy customer requests in a way that generates profits.
The core of marketing is this process of strategic planning.
A marketing strategy is a method that enables a business or organisation to
concentrate its limited resources on the most promi sing pros pects for
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Introduction To Marketing Strategy
3 Marketing strategy encompasses all fundamental and long -term activities
in the field of marketing that are concerned with the analysis of a
company's strategic initial situati on as wel l as the formulation, evaluation,
and choice of market -oriented strategies. As a result, marketing strategy
supports the objectives of the company's marketing as well as its overall
goals.
1.3 STAGES OF STRATEGY DEVELOPMENT
• Setting realizable goa ls
• To an alyze the situation
• Making a Strategy
• Implementing the Strategy
• Keep an eye on the Strategy
There are different levels of strategy :
• Corporate level Strategy
• Business level Strategy
• Functional level Strategy
• Operational level Strategy
1. Corporate Strategy: This establishes the overall structure, systems,
and procedures for the company's business.
2. Business Strategy: Choosing important success elements, determining
how to compete, and recognising competitive advantage .
3. Functional Strategy: Aligning firm departments with the overall
business plan .
4. Operational Strategy: It involves co -ordinating efforts within a
specific department.
1. Corporate Strategy:
The highest level of strategic decision -making is at the corporate level,
which includes components deali ng with the firm's goal, resource
acquisition and allocation, and co -ordination of multiple SBUs' plans for
best performance. Such choices are made by the organization's top
management. Compared to decisions made at the business or functional
levels, strat egic dec isions are typically more value -oriented, conceptual,
and abstract. Single -business organizations benefit from focused and quick
responses, but they are more susceptible to issues specific to their sector.
While assessing business prospects in sect ors with complementary
activity, their corporate strategy must highlight the benefits of remaining
active in just one industry.
The corporate strategy must evaluate the return of a continued investment
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4 complementary businesses in order to optimise company operations,
profitability and growth. Managers must co -ordinate the operations of
several business units at the corporate level. The creation of superior
human, financial, and technological resou rces; th e design of efficient
organizational structures and procedures; and the pursuit of synergy
among the firm's various businesses are the main focuses of efforts to
create and maintain distinctive competencies at the corporate level. When
connected bu sinesses share R&D investments, product or production
methods, distribution networks, a shared sales force, and/or promotional
themes, synergy can give businesses a competitive advantage.
2. Business Strategy:
Apart from the requirement that it support co rporate strategic initiatives
targeted at the single business, a single -business company's business
strategy is similar to that of a business unit of a diversified organization.
The business plan identifies the measures the company must take to
maintain an d enhanc e its competitive advantages, examines the actions of
competitors, and establishes performance goals. Typical tactics include
setting low prices as the industry standard, differentiating yourself through
quality or other attractive qualities, or em phasizin g promotions. Business -
level strategy must be critically focused on how a business unit performs
within its industry. Sustainable competitive advantage is a key concern in
company strategy. What distinguishing skills might the business unit use
to its adva ntage?
Which of those competencies most closely resembles the requirements and
preferences of the target market for the company? Appropriate scope,
which includes how many and which market categories to compete in as
well as the total breadth of pr oduct of ferings and marketing initiatives to
appeal to these segments, is another crucial problem that a business -level
strategy must handle. Finally, it is important to look for synergy between
different product markets and organisational functional areas .
3. Fun ctional Strategy:
As implied by the title, functional strategy is concerned with a single
functional operation and the associated activities. Decisions made at this
organisational level are frequently referred to be tactical. Some
overarching strat egic con cerns serve as both a guide and a constraint for
such decisions.
Functional strategy is concerned with relatively small plans that provide
goals for a single function, allocate resources among various operations
within that functional area, and co -ordinate those operations for the best
possible contribution to the accomplishment of the SBU and corporate
level goals. As each function may be broken down into multiple sub
functions, there may be operations level strategies underneath the
functional -level strate gy. For instance, the functional strategy of marketing
can be further divided into the sub -strategies of promotion, sales,
distribution, and pricing, each of which contributes to the functional
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5 4. Operational Strategy :
In this section, we make d ecisions regarding the manufacturing strategies
employed by the department. It takes into account the techniques used in
product manufactur ing, such as plant location, layout, manufacturing
procedures, upholding quality standards, and optimum reso urce utilis ation.
1.4 BACKGROUND OF MARKETING STRATEGY
In the middle of the 1990s, conventional notions of marketing strategy
started to transform irrevocably. The world and the ways that marketers
reach potential customers have been irrevocably changed b y developme nts
in computer, communication, and information technology. After the dot -
com bubble burst in the late 1990s, the global economy saw a historic
collapse in 2008. In an economy characterised by continual change and
customer scepticism, the once -dominant bus inesses have withered and lost
significance. Think of how marketing, business, and our own buying
habits have fundamentally changed throughout the years:
1.4.1 Power Shift to Customers:
During the past two decades, the power has likely shifted f rom markete rs
to customers, which is arguably the most significant change.
Customers frequently influence businesses due to their access to
information, capacity to comparison shop, and power over their spending,
as opposed to businesses being able to do s o via techn ology. In a couple of
minutes, both individual consumers and commercial clients can evaluate
costs and product details. Customers can frequently set their own pricing,
as is the case when using Priceline.com to buy plane tickets. Additionally,
buyers can n ow communicate with one another since online retailers like
Amazon and eBay permit customers to voice their thoughts about the
value of a product and the dependability of its source. Marketers are
forced to make sure that their products are dist inctive and of the highest
calibre in order to provide customers a cause to buy them as power
continues to shift to consumers.
1.4.2 Massive Increase in Product Selection :
It is astounding how many different products and services are available for
purchas e both onli ne and in physical locations. Customers have a plethora
of choices in the cereal and soft drink aisles at grocery stores alone.
Customers can now meet their demands more quickly and conveniently
than before thanks to improved transaction efficie ncy (e.g., 24/7 access,
delivery to home or office). In addition, the abundance of information
available online has altered how we communicate, consume news, and
pass the time. Customers can now subscribe to RSS feeds (Really Simple
Syndication) from hundr eds of site s to receive news updates
automatically. Due to the drastically expanded availability and choice of
products, marketers are now vulnerable to threats from rivals all over the
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6 1.4.3 Audience and Media Fragmentation:
Marketers have been com pelled to r econsider how they interact with
prospective customers because of changes in media consumption and the
availability of new media venues. Since the introduction of cable
television in the 1970s, the audiences of major mass media have been
more di spersed. Te levision viewers, for instance, started tuning in to
ESPN, HGTV, Nickelodeon, and the Discovery Channel instead of the
main three networks (ABC, CBS, and NBC). As the internet, satellite
radio, and mobile communication all continue to increase, it is harde r and
harder for marketers to connect with a genuine mass audience. Due to (1)
the enormous variety of media options accessible to us today and (2) the
short attention spans most of us have for any one medium, media
audiences have become fragmen ted.
Custom ers now acquire news and information from Facebook and Twitter
more often than from The New York Times or CBS. More time than they
do reading publications or watching television, they are now spending
online or using mobile devices.
1.4.4 Changi ng Value Pr opositions:
Energy, fuel, food and other necessities were becoming more expensive
for consumers and business customers even before "The Great Recession"
started in 2008. Buyers were therefore compelled to restrict their budgets
and look for alt ernative m ethods to reduce spending as the economy
continued to deteriorate.
This trend actually started as a result of consumers realising for the first
time that they could avoid some businesses and handle things on their own
after the dot -com bust.
For instance, e-commerce has severely impacted real estate agents and
travel agencies. Expedia and Travelocity are now frequently used by
clients in place of travel agents to make reservations for flights, cruises,
and hotels. Similar changes have occurred in the real e state market, where
more buyers are doing their house hunting online and more sellers are
going "for sale by owner" approach. As a result, many marketers
discovered a difficult lesson: When consumers view goods and services as
commodities, they w ill ch oose the most practical, least priced option.
In addition to rising costs, many of these same consumers now risk losing
their jobs or seeing their earnings decrease.
Consumer and company buyers have been compelled to reconsider value
offerings and co ncentr ate on the significance of frugality as a result of these
and other economic problems. The impact on business has been significant.
The launch of the wireless e -book readers from Amazon's Kindle and Barnes
& Noble's Nook paves the way for additional disrup tions in book publishing
and book selling. Due to the high degree of commoditization of books, people
frequently look for the best deals rather than the perks provided by
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7 paper. The goal of being frugal is to reduce spending on things that are not
necessary in life, and this is the essence of being frugal.
1.4.5 Shifting Demand Patterns :
Technology advancements have occasionally changed
consumer demand for particular product categ ories. One
well -known instance is news, where online and mobile news
continue to flourish while traditional newspapers slowly go
out of business. Currently, a lot of newspaper firms have
shut down, others are about to shut down, and others have
reduc ed the number of days they publish. Another
illustration is the rapid expansion of digital music and video
delivery. Demand for the recording and film industries has
changed significantly because of the popularity of Apple's
iPod and iTunes, YouTube, and N etflix , as well as the
ongoing integration of television and computers.
Hollywood's film industry is battling weak theatre
attendance and the waning appeal of DVDs as more and
more people turn to the internet for their entertainment.
1.4.6 Privacy, Securit y and Et hical Concerns:
Our culture is now considerably more open than it was in the past
due to technological advancements. Because of this, marketers
now have to address legitimate worries about security and privacy,
both online and off. Businesses have tradition ally routinely
gathered data on their clients. Customers are now far more aware
of these initiatives and the intended uses of the information.
Although customers value the convenience of online shopping,
they want guarantees that their information is secur e and private.
Concerns regarding online privacy and security are particularly
pressing when it comes to youngsters and contentious industries
like casinos or pornography.
Examples include Mrs. Fields (cookies), Sony BMG, and Hershey
Foods, all of whom hav e received fines for breaking the
requirements of the Children's Online Privacy Protection Act. For
gathering personal data from children under the age of 13 without
parental consent, Sony agreed to pay $1 million.
1.4.7 Ambiguous Jurisdiction:
Businesses that operate internationally, like many internet -based
businesses, can encounter problems due to different legal systems.
These days, businesses who conduct business in both China and
the United States are particularly sensitive to this distinctio n.
For in stance, Google finds it challenging to comply with the
censorship requirements of the Chinese government. Despite
being a U.S. company, Google must comply with the Chinese
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8 anything deem ed sensit ive by the Chinese government. Doing
business in China is problematic because Chinese laws do not
provide the same protections as those given in the US when it
comes to intellectual property rights. For instance, software piracy
in China and other Asian na tions cost American software
producers an estimated $14 billion in sales in 2007.
The collection of sales tax for internet transactions is a crucial
legal problem. At the beginning of the development of e -
commerce, many online retailers did not ch arge sale s taxes for
online purchases, which gave them a significant competitive edge
over retailers with physical stores. In fact, a 1992 ruling by the
U.S. Supreme Court barred out -of-state merchants from obtaining
sales taxes in states where they had no physical presence. States
argued that they were losing millions of dollars in tax income each
year but were ill -equipped to launch a collection operation. Major
retailers, including Walmart, Target, and Toys 'R' Us, agreed to
collect online sales taxes in 2003 as part of a deal with a group of
38 states and the District of Columbia. Many internet retailers did
not, however, charge sales taxes.
States are currently exploring for ways to compel the collection of
sales taxes for internet transactions as most state budgets are in
shambles due to the economic meltdown. New York's physical
presence regulations were amended to include online shops in
2008. Many more states are anticipated to do the same.
Though the full impact of these difficulties won't be seen f or a
while, the need to adapt marketing efforts at both the strategic and
tactical levels has driven organisations to move forward. We will
examine how current issues have impacted strategic planning in
these areas as we cover the key marketing ideas .
1.5 MARKETING MANAGEMENT AND
COMPONENTS OF MARKETING STRATEGIES
Marketing is the process of creating, conveying, delivering, and
exchanging products and services that are valuable to customers, clients,
business partners, and society at large.
Target market s election and effective relationship -building are the art and
science of marketing management. It demands a thorough understanding
of the market and the consumers. By generating, delivering, and
conveying exceptional value, the goal is to find, attract, and grow a
customer base.


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9 Key components of Corporate , Business, Marketing Strategies
Corporate Business Marketing
Scope Which business
should we in?
Conglomerate
Diversification,
Vertical
Integration,
Acquisition &
Divesture Which product
market ?
Conce ntric
Diversification,
Market
development,
Product
development Target Market,
Product line depth
& Breadth,
Branding,
Market
development,
Line extension
Goals &
Objectives Objective
aggregate
across business
Revenue
growth, ROI,
EPS Constrained by
Corpora te
Objective
aggregate across
product market
entries in
business unit
Sales growth ,
ROI,
Strengthening
bases of
competitive
advantage Constrained by
Corporate &
Business
Goals
Objective for
specific
market entry,
sales,
market share,
contributi on
margin, customer
satisfaction


Allocation of
Resources Allocation
among business
in the corporate
portfolio.
Allocation
across function
shared by
multiple
businesses
(corporate
R&D, MIS) Allocation
among product
market entries in
the business
units. Al location
across
functional
department
within
businesses units Across component
of marketing plan
for a specific
market entry
(Marketing Mix)
Source of
Competitive
Advantage Financials,
Human
Resource, R&D,
Better
organizational
processes,
synergy across
all busines s
where firm
operates Competencies
relative to
competitors in
Industry Effective product
positioning.
Superiority of one
or more
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10
Source of
Synergy Shared
resources &
technology Shared
resources or
functional
competenci es
across product
market Shared marketing
resource
competencies or
activities across
product market
entries
Fig. 1.1: Corporate, Business and Marketing Strategies
The two main goals of marketing are customer acquisition and retention.
Relationships betwe en the six marketing process components
1. Implementation
2. Budgeting, assigning, and programming
3. Research and analysis
4. Marketing preparation
5. Creating a strategy
6. Checking and controlling









Fig. 1.2: Marketing Process
Schematic of Mark eting Strat egy formation process :
Every business aims to stand apart from a particular group of customers.
Organizations are therefore concentrating on the consumer rather than
producing a product for the broad market.
The process of choosing these custo mers, decid ing on a point of
differentiation to communicate to them, and creating a strategy to achieve
this are all parts of marketing strategy.
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Fig. 1.3: Marketing Strategy Formation Process
1.6 THE 5 C’s OF ANALYSIS
1. Customer analysis :
What is the Purchase d ecision -making unit (Initiator, Gatekeeper, Decider,
Influencer, Purchaser, and User)
What is the process used for decision making?
Customer research was used to try to create a product that would fit the
market.
Through corporate analysis, th e product i s made to fit the business.
2. Company analysis :
Hamel & Prahlad introduced the concept of unique talents, competencies,
and assets.
Making a major contribution to the production of perceived customer
value in products is one of the two compone nts of core competency.
The other is to be challenging for rivals to copy .
3. Collaborator : A supplier who works with the business.
4. Competitive analysis: List current and potential rivals and their value
propositions. Potential rivals come in two flavors : niche an d more general.
5. Contextual analysis : Contexts are dynamic. Similar to how culture,
technology, and legal considerations constrain what is achievable and
necessitate ongoing surveillance
1.7 SEGMENTATION, TARGETING AND
POSITIONING IN THE AS PIRATION DE CISION
Targeting and Segmentation
The fact that each client segment's purchase process is unique enables an
organization to precisely tailor its marketing mix to each segment's unique
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12 The rules and criteria for the customer's purchases wi ll govern t he
marketing game.
The section that best fits the target group's corporate goals will be chosen
by the company.
Segmentation is defined as the simultaneous usage of many variables.
Popular segmentation methods include demographic, geographic, a nd
lifestyl e.
Customer behavior or relationships with products, user status, user rate,
and loyalty status are examples of alternative segmentation.
Positioning : How do we want the members of the segment to perceive
us? Effective statement identifies the s ubsequent components
1. The segmentation variables' definition of the target consumer
2. The customer's preferences
3. The product category and type as perceived by the customer
4. The primary benefit to be offered to the target consumer
Marketing Mix Dec ision :
Product: Complete range of customer -value -creating opportunities,
including brand recognition, business standing, product use, and post -
purchase support.
a distinctive product that offers distinctive benefits and strong value
arguments.
Product surv eys and be ta tests are both used for testing. After a product is
introduced, we must manage its life cycle.
Promotion Knowledge, product attributes, product purchasing, and value
Market -Mission -Message -Media -Money -Measurement is the 6M model of
communica tion strate gy.
Positions of Major Communication Vehicles
Fig. 1.4: Major Communication Vehicles
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13 Key inputs to the pricing decision and calculating true economic value

Fig. 1.5: True Economic Value
True Economic value = Price of the next best alternati ve + Value of
the performance differential compared to the next best alternative
1.8 SUMMARY
It can be seen that the marketing strategy is the most crucial instrument for
defining the organization's entire business plan. The company must take
into account a variety o f elements while developing its marketing strategy,
including potential clients, market segmentation, its USP, current
circumstances, etc. An efficient marketing plan helps the business achieve
the highest level of customer satisfaction while al so getting to know its
customers. Thus, a successful marketing plan ultimately contributes to the
development of the company's corporate image. The business level
strategy should be developed from the corporate level strategy, whereas
the functional strate gy should b e created as a result of the business level
strategy.
1.9 QUESTIONS
1. What is marketing strategy? Explain briefly.
2. What are the different levels of strategy ?
3. What are the key components of Corporate , Business, Marketing
strategies?
4. What are the different C’s of analysis and the importance of
segmentation, targeting and positioning ?


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14 1.10 REFERENCES
 Marketing Management, Kotler, P. and Keller , K., Pearson
 The Marketing Pro cess, Harvard Business School, Benson Shapiro
 Framework for Marketing Strategy Formation , Robert J. Dolan
 Marketing Communications, Patrick & Others, Pearson
 Principles of Pricing: Harvard Business Review, Ro bert J. Do lan


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15 2
NEW PRODUCT DEVELOP MENT
PROCESS
Unit Structure
2.0 Objectives
2.1 Introduction
2.2 Why Study New Product Development?
2.3 Organizing for Product Development
2.4 Mistakes in NPD Plans
2.5 Factors contributing to New Product Development
2.6 SWOT A nalysis and PARTS Framework
2.7 Diffusion of Innovation
2.8 Challenges in New Product Development
2.9 Summary
2.10 Questions
2.11 References
2.0 OBJECTIVES
 To understand the steps in new product development process
 To study the rationale behind new product development
 To understand the mistakes and challenges in new product development
 To understand SWOT analysis and PARTS framework
2.1 INTRODUCTION
The entire process of introducing a new product to the market is known in
business as New Product Development (NPD). A bundle of benefits
supplied in exchange is referred to as a product, which can be either
tangible (i.e., something you can touch) or intangible (like a service,
experience, or belief). In the NPD process, there are two parallel paths:
one involves concept generation, product design, and detail engineering;
the other involves market research and marketing analysis.
1. Idea Generation: The first stage is to come up with a product idea.
Basic research might yield concepts for new products employing a SWOT
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16 insight into new product lines or product features, it may also be useful to
consult market and consumer trends, the company's R&D division,
competitors, focus groups, staff, sales representatives, trade exhibitions or
anthropological discovery methods (looking for user patterns and habits).
By developing ideas that take affordability, ROI, and extensive
distribution expenses into consideration, one can set themselves ap art from
the competition by using fundamental internal and external SWOT
analyses as well as current marketing trends.
Many concepts are developed regarding the new product. Many of these
concepts are put into practice. Ideas come to us in a variety of wa ys.
2. Idea Screening: Compile a list of potential product ideas and present it
to the relevant business decision -makers, such as the management team.
Based on their potential to generate money, as well as the time and
resources you have available to actua lly create the products, discuss the
benefits and drawbacks of each idea and reduce the list to only a few of
the finest ones. Prior to allocating resources to faulty conceptions, the goal
is to get rid of them.
3. Concept Development and Testing:
 Develop the engineering and marketing specifics
 Research intellectual property concerns
 Search patent databases
 Who is the intended audience for the product, and who makes the
purchasing decisions?
 What specifications for the product must be met?
 What advantages w ill the product offer?
 How will customers respond to the offering?
 How will the product be made in the most economical way?
 Establish viability through rapid prototyping and virtual computer -
aided rendering.
4. Business Analysis:
Business analysis is a cru cial stage in the creation of new products. A
thorough company study is conducted here. The business determines
whether or not the new product is commercially successful. The company
determines the following through business analysis:
a. Whether the new prod uct is financially profitable or not?
b. How much will the new product cost?
c. Does the new product have any demand?
d. Is this demand ongoing or seasonal?
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New Product
Developom ent Process
17 f. What will the new product's overall sales be?
g. What will be the costs associated with sales promotion, advertising,
etc.?
h. How much money the new item will make?
As a result, the company analyses the new product from a business
perspective. The new product will be accepted if it is profitable; else, it
will be rejected.
5. Market Testing:
To "test market" a new product is to release it into a very niche market on
a very limited scale. If the new product is a hit in this market, it is then
widely distributed. In contrast, if the product fails on the test market, the
company lea rns why it did not succeed. It updates the new product as
needed and reintroduces it to a niche market. The business will stop using
the new product if it fails once more. Large -scale marketing is less risky
when done in test mode.
6. Technical Implementat ion:
• New program initiation
• Finalize quality management system
• Resource estimation
• Requirement publication
• Publish technical communications such as data sheets
• Engineering operations planning
• Department scheduling
• Supplier collaboration
• Logistics plan
• Reso urce plan publication
• Program review and monitoring
• Contingencies ‘what -if’ planning
7. Commercialization:
• Launch the product
• Produce and place advertisements and other promotions
• Fill the distribution pipeline with product
• Critical path analysis is most u seful at this stage
8. New Product Pricing:
• Impact of new product on the entire product portfolio
• Value Analysis
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18 • Differing value segments (price, value and need)
• Product Costs (fixed & variable)
• Forecas t of unit volumes, revenue, and profit
2.2 WHY STUDY NEW PRODUCT DEVELOPMENT ?
 In order to match latent client expectations and competitive offerings,
numerous crucial feature trade -offs must be made during the product
development process.
 Early product dev elopment stages are when the majority of a product's
characteristics and important features are decided. Their market range
may be pre -fixed.
 Early decisions can have a significant strategic and operational impact
on the launch success of the new product.
 Poor choices made early , may limit the number of clients for whom it
would be ideal.
 The role of the product developers is crucial in achieving two key
goals: (a) a product that is suitable and viable for users; and (b) a
product that is developed in the shortest amount of time.
Managing Product Development Process
How can the time to market be shortened while new products are still
meeting consumer and market demands?
1. Portfolio Management: acting morally and balancing the product line
2. Product Development Funnel and project management best practices
Portfolio Decision - Adding New Products
 Same or different brand? Fits the quality?
 Market: Are the customers the same? Is the occasion for use the same?
Is the value proposition the same?
 Is the price a premiu m? If so, does the premium make sense? Can you
drop the price if not?
 Price - Is the product affordable? Is the cost in check? Can you
eliminate any cost components?
 Can you use the same resources for operations?
 Can you utilize the same support for distri bution?
 What about the accoutrements? requirements for services?
 Is the existing Retail Design suitable for it?
 Is there competition at the product level? Alternatives? munotes.in

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New Product
Developom ent Process
19  Is there rivalry among components as well ? If so, there can be no
overcharging of that component.
 Does service competition exist as well ? If so, it is prohibited to
overcharge for these services.
Generating ideas from product issues
This occurs when either the target user
a. is unable to utilize the product
b. is aware of how to use the p roduct but is unable to use it.
c. The target user can use the product, but they have trouble doing so.
d. The customer finds using the product to be infuriating.
e. The user cannot utilize the product as intended.
f. The product doesn't suit the needs of the users.
Kano's M odel of User Preferences :
This model is an excellent resource for determining user needs. The
demands of different users have been determined. Kano divided the
preferences into five categories to demonstrate what was truly important to
the users and how. H e categorized user preferences into 5 categories
Must -have: It is crucial to incorporate them.
Attractive: Unexpected and possibly expensive
One-sided: Willing to spend more if necessary.
Indifferent: No effect and users won't pay
Reverse: Negative effect and users will not accept

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20 Quality Function Deployment:
1. Determine what customers want
2. Explain how the product or service will fulfil customer needs.
3. Link client needs to product features
4. Establish connections between the com pany's hows
5. Create customer priority ratings
6. Examine rival products
7. Evaluate performance against desired technical characteristics
1. Identify customer wants
2. Identify how the good/service will satisfy customer wants
3. Develop customer importance ratings
4. Evaluat e compe ting products
5. Compare performance to desirable technical attributes
2.3 ORGANIZING FOR PRODUCT DEVELOPMENT
Important considerations for choosing an organizational structure for new
product development include:
1. Which department needs to take the init iative, according to the focus
and level of change?
2. How much integration across departments is necessary? Is it greater in
complicated projects?
3. Is there a requirement for strong teamwork and effective
communication throughout the company? If yes, is it wi th more
intricate, long -term enterprises.
Organizing for Product Development
 Co-locating individuals with various specialties.
 Changing personnel between departments over time.
 Gate decisions made jointly by departments.
 Informal gatherings and meetings fo r the d iscussion and approval of
new product concepts.
 Rewards and incentives from several departments for assistance with
projects' odd duties.
 Project or team structures that have a reputation for being more
successful for particular NPD initiatives
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21 Building M arkets for Products/Services
Why aren't customers purchasing what the corporation believes to be a
very good product offer?
 Businesses can create new markets by addressing the problems
preventing people from purchasing their goods even though they n eed
them and can afford them.
 Businesses must search for covert substitutes and potential rivals to the
good or service they now provide.
 Keep an eye out for cultural inconsistencies with the user. Additionally,
it is crucial to correct all the supporting g oods o r services that make a
product useable.
 These include the inability to follow usage instructions and the scarcity
of replacement parts or nearby repairs.
 Businesses must look beyond the stated or obvious assumptions and
justifications in order to dis cover and address the fundamental causes
of the problem.
Creating New Demand for Existing Products
1. Utility? Can we add or remove features?
2. Efficiency? Can we improve how it functions?
3. Safety? Can we make it more secure to use or keep?
4. Aesthetics? Can we im prove the appearance?
5. Ergonomics? Can we make it more user -friendly?
Choosing between Product Options
1. First, take advantage of already -existing resources to add additional
value for current consumers at a cheap cost and minimal risk.
2. Add, new resources next and produce new value for the user base
already in place - high cost + low risk.
3. Next, build new value for new users using existing resources at low
cost and high risk.
4. Finally, create new resources and value for new target users at a
significant cost and risk.
Before pursuing option 4, prevent confrontation with already successful
items.


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22 2.4 MISTAKES IN NPD PLANS
Customer Related Mistakes in NPD Plans
 Lack of in -depth client insight
 Opting for the most convenient markets over the best.
 Pursuing "me to o" instead of value creation.
 Targeting a broader segment when a specialization is preferable.
 Not viewing quality from a customer's perspective.
 Not providing customers with enough pricing options.
 Underpricing as opposed to value -based pricing.
 Failing t o accomplish what will win you the customers
Cost Related Mistakes in NPD Plans
 Excessive, illogical start -up capital needs.
 Purchasing property when borrowing or renting is an option.
 Taking up more workplace space than is really necessary.
 Wasting resources like larger businesses do.
 Paying big wages rather than a modest wage with a bonus.
 Paid commercials versus unpaid press coverage.
 Too high a fixed cost and too low a variable cost.
Why are strategy consultants required?
Now more than ever, companies are t urning to strategy consultants for
analyses and thoughts on new products for the following reasons.
1. A client firm has an unidentified performance issue that it is unable to
identify internally, strategy/business consultants are needed.
2. A client company has a known strategy issue and thinks it understands
the issue.
3. A client company is faced with a challenging strategic decision and is
unsure on how to proceed.
2.5 FACTORS CONTRIBUTING TO NEW PRODUCT
DEVELOPMENT
The development of new products is influenced by numerous factors. The
majority of new product development factors are tied to external
environmental factors, but the most crucial internal element is any
potential surplus capacity that a company may have at any particular time.
New product developmen t is influenced by a variety of environmental
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23 1. The Mission and Vision of the Organization:
Since it represents their target environment or client segmentation, it is
essential to examine the purpose and vision o f these firms.
2. Competitive Edge:
The process of developing new products in an organization is influenced
by the organization's age and the time of entry. It is also crucial to keep in
mind that joining a market that is less developed (with little to no rivalry)
presents a chance for the development of new products.
3. Preferences of the Clientele:
The changing customer lifestyle, which results in a shift in the customer's
tastes and expectations, is the driving factor behind new product
development. Cust omers' expectations and tastes are changing as a result
of the changing role of women, development in the nuclear and solitary
family's level of education and income, and an enormous expansion in
electronic media.
4. Technological Changes:
The technologica l advancements in the market and business are another
consideration. The company must produce items that keep up with the
rapid developments in technology.
5. Governmental Strategy:
The development of new products may also be encouraged or facilitated
by government policy. An example of a government policy that can spur
businesses to introduce new products is one that promotes competition and
entrepreneurship.
6. The Competition:
The business must take into account how your offering differs or is similar
to that of the rivals. The company can learn how to promote its own
product successfully by observing what marketing strategies the
competitor may be doing and not using. The company must put itself in
the position of potential customers when presenting a ne w product to the
market (such as an invention) and think about the advantages the product
offers them or the demand it satisfies.
7. Selecting the Ideal Client:
The target market for a company's marketing initiatives should be the
consumer most likely to p urchase its goods. The company must think
about why a customer might need or want its product and use this
information in its marketing communications. Instead of attempting to
build a market for a product, it is far simpler to target the ideal consumer
who has a need and desire for the product.
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24 8. A Differentiating Feature :
Customers are drawn to you because of your unique selling proposition
(USP), not your competitors. Analyze how your product meets a need
more effectively, more quickly, or more easily than the competition.
Utilize your USP to develop marketing messages, establish a brand for
your product, and set it apart from competing or comparable products.
9. Product Testing:
It's possible that how you see the product and how potential customers see
it are very different. Your marketing efforts can be directed by gauging
customer opinion through focus groups or by getting testers' input. If a
focus group reveals that the product packaging's colors are not appealing
to potential customers, you can cha nge them.
10. Public Relations and Media Involvement:
Public relations and media coverage can be quite important when we have
to introduce the product. Buzz building is aided by media coverage in
publications like magazines and newspapers or on news progr ams that
appeal to your target demographic. A lot of people can consider publicity
to be more valuable than the commercials and marketing materials that
they are aware your company produces. It is a third -party endorsement for
your goods.
11. The Product L ife Cycle :
Every product has a life cycle. The cycle's stages are introduction,
development, growth, maturity, and decline. The marketing efforts that are
made during the stage are directly impacted by knowing and keeping track
of where your product is in its life cycle. For instance, marketing during
the initial phase is focused on reaching the target while growth phase deals
with making the product preferred by the customers.
2.6 SWOT ANAYSIS AND PARTS FRAMEWORK
a. SWOT Analysis :
Strengths :
What are you good at?
What special resources are available to you?
What qualities do others think you possess?
Weaknesses :
What might you change?
Where do you lack resources more than others do?
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New Product
Developom ent Process
25 Opportunities :
What opti ons are available to you?
What trends might you use to your advantage?
How can you make the most of your advantages?
Threats :
What dangers pose a risk to you?
What are your rivals doing?
What vulnerabilities expose you to threats?
b. PARTS Framework :
 P - Players, important participants in your sector may include rivals,
clients, suppliers, and complementors (firms that may help you). You
need to be aware of who they are and how they might benefit or hurt
your company.
 A - Added Value, which each participant can contribute. If you can
lessen or negate this value -add, you can lessen their influence or power.
Those who can add more value may also have greater influence or
power.
 R - Rules , represents the organizational structure of the sector in which
you are eng aged. For instance, the "one price for all" rule is used in
some businesses. You must be aware of all regulations (particularly
unwritten)
 T - Tactics , Moves and countermoves to take the upper hand.
 S - Scope , How much you want to compete with or work with , upend
or support current players (also consider consequences)
2.7 DIFFUSION OF INNOVATION

Fig. 2.2: Diffusion of Innovation
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26 Innovation via Alliances :
Organizations innovate by turning ideas into products, which gives them a
competitive advantage a nd allows them to stand out from the competition.
This method heavily relies on alliances.


Fig. 2.3: Type of Alliances
Innovation through Alliances
 Functional Acquisitions: This type of relationship is severe. Gaining
and retaining control in this situa tion is crucial.
 Marketing Alliances: In this type, suppliers may join forces to boost
their marketing influence, expand their distribution network, pool
resources, launch new products, etc. These partnerships could have
little impact on innovation. Owner ship a nd control are not given much
attention.
 Joint ventures : In this type , innovation may be the main focus. These
emphasize merging or enhancing resources, experience , and
knowledge.
 Rese arch and Development Alliances: In this scenario, potential
partne rs genuinely c omplement one another and collaborate to
innovate. The emphasis in this case is not on ownership or control.
The bell -curve -based technology adoption curve model explains how
consumers respond to, adapt, and accept new innovations.
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Developom ent Process
27
Followin g are the 5 st ages of Technology adoption curve -
 Innovators (2.5%)
 Early Adopters (13.5%)
 Early Majority (34%)
 Late Majority (34%)
 Laggards (16%)

Fig. 2.4: Innovation and Market Share
2.8 CHALLENGES IN NEW PRODU CT DEVELOPMENT
Planning for product develop ment is still essential to an organization's
sustainability. The following are some major obstacles and, consequently,
success factors:
1. Social Challenges:
Product development aims to satisfy a certain need or desire. The
economic growth of other nati ons varies, th us the need or desire we have
could not have materialized in other nations to support a viable target
market. Varied cultures mean different tastes in cuisine, grooming
routines, living arrangements, leisure activities, lifestyles, and clothi ng.
2. Rapidit y of Development:
Product development is driven by the mantra "Faster and Faster." Utilizing
digital design, analysis, and collaboration technologies can help
companies develop goods more quickly and get them to market. Engineers
can convert concepts into digitalized virtual designs for testing and
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Marketing Strategy
28 years by using collaboration software, file -sharing software, and other
tools.
3. Platform Adaptability:
A product's platform fl exibility is a crucial success factor in the market.
This is the effect of adopting modular product architecture to provide
clients a wider range of products. Tools for computer -aided engineering
and design make it simple to reuse previously finished desig n files. With
the help of all these files, product design is now more rapid, affordable,
and efficient than ever.
4. Complexity Management:
A product's complexity sets it apart from an application. By analyzing
interaction networks, complex systems are en gineered. Netw ork modelling
techniques have been established as a consequence of research to look at a
network of interconnected components that make up developing complex
systems. The difficulty of designing multi -component, complex systems,
also known as systems engin eering, continues to be a crucial success
element.
5. Offshoring and Outsourcing:
Optimizing internal capabilities, supplier skills and capacity, global
operations, and new markets is the biggest obstacle still to be overcome.
Sometimes outso urcing results in significant cost savings, other times it
results in small cost savings, but more importantly, it truly aids in utilizing
international product development networks, primarily to access new
markets in other regions and utilize internationa l talent pools .
6. Global Competition:
Global competition frequently has a significant impact on the difficulties
in developing new products. A business may make significant investments
in a new product without being aware that a rival company in another
country will s oon introduce a similar one. Because product creators want
to launch their new products before their rivals, shepherding them from
concept to market is sometimes done under extreme time pressure.
7. Time:
One of the main obstacles to the dev elopment of ne w products for
businesses today is time. The uncertainty surrounding a new product's
failure is reduced when it is introduced at the appropriate moment. It is
important to pay attention to the market and release products when there is
a deman d for them.
8. Market Opportunity :
A business needs to be aware of its rivals, both present and prospective.
Only t he goods will be commercially successful in the current economic
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Developom ent Process
29 your position in the market unless your product is far better than your
competitors' offerings.
9. Technological Advancements:
Many may view the quickening pace of technological change as one of the
biggest obstacles to developing new products. A technology arms race
could create uncertainty for product developers. The upcoming
development may be unknown to product creators. Investors in a company
risk losing a substantial investment if it selects a path to functioning using
a technology that might become qu ickly outdated .
10. Price:
Another issue for the company is choosing the appropriate price for the
product before releasing it on the market. For a product to succeed in the
market, having the ideal price is crucial. It's important to set a product's
pricing at the appr opriate moment.
11. Resistance to Change:
Many consumers are innately conservative and reject change. Most
consumers, with the exception of the new early adopters, whose
excitement for new products knows no bounds, view innovation as
hazardou s and find ne w, unproven products less alluring than tried -and-
true alternatives. Therefore, unless it is viewed as safe by potential buyers,
any creative product, especially if it has a significant technological
component, will encounter opposition and se ll slowly.
12. Promotion:
Every marketer's task is to promote a new product in either a new or
existing market, as doing so is essential to ensuring the product's
continued success. Companies who don't actively market their products
are rarely recognized b y the market .
2.9 SUMMARY
It is clear that developing new products is a crucial part of any firm. A
business must take into account all the crucial elements influencing its
development in order to create a successful product. We must comprehend
the just ification for new product development and how it will assist the
company. Additionally, we were able to explain what a PARTS
framework and SWOT analysis were. We learned about the blunders made
and the difficulties encountered during the development of new products.
2.10 QUESTIONS
1. What is new product development?
2. What are the different steps in new product development process?
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30 4. What are the mistakes and challenges in new product development?
5. What is the m eaning of SWOT analysis and PARTS framework?
2.11 REFERENCES
 New Product Development, Annacchino , M., E lsevier
 Marketing Strategy, Walker , Mullins & Boyd , Tata McGraw -Hill
 Attractive Quality and Must -Be Quality . Journal of the Japanese
Society for Quality Con trol, N. Kano, S. Seraku & S.Tusj i
 Developing New Products and Services, Sanders, L., Saylor
 Marketing Management, Kotler, P. and Keller , K., Pearson



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31 3
MARKET INTELLIGENCE
Unit Structure
3.0 Objectives
3.1 Introduction
3.2 Marketing Metrics
3.3 Use of Market Share Metrics
3.4 Relative Market Share
3.5 Cannibalization
3.6 Supply Chain Metrics
3.7 Measures of Distribution
3.8 Awareness, Attitude s and Usage (AAU): Metrics of the Hierarchy
of Effects
3.9 Hierarchy of Effects Model
3.10 Summary
3.11 Questions
3.12 References
3.0 OBJECTIVES
 To understand the different types of information required by marketing
managers

 To understand the various marketing metrics

 To understand supply chain metrics

 To understand hierarchy of effects model and metrics of hierarchy of
effects
3.1 INTRODUCTION
A management information system called a marketing information system
(MIS) is created to assist with mark eting decisions. According to Jobber, it
is a "system in which marketing data is systematically collected, kept,
analyzed, and regularly given to managers in accordance with their
informational demands." It is defined more broadly by Kotler, et al. (2006)
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32 and communicate necessary, timely, and correct information to marketing
decision makers." No matter the size or level of managerial skill of an
organization, whether it is for pro fit or nonprofit, a formal MIS can be
very helpful.
MIS is now frequently integrated with computerized systems in many
firms. An organization's management information system (MIS) is a
crucial resource that must be carefully managed, just like any other
resource it may have, such as its human, productive, transportation, and
financial resources. A marketing information system (MIS) is a collection
of processes and tools created to produce, evaluate, distribute, and
preserve information about anticipated mar keting decisions. Several facets
of marketing can benefit from the operational, administrative, and
strategic use of a marketing information system. Some businesses use a
more systematic approach to acquiring marketing information and train
their sales people, after -sales staff, and district/area managers to be ahead
of competition.
One must look at what managers do and what information they require for
decision -making in order to identify the correct role of information
systems. Additionally, we must comp rehend the process of decision -
making and the types of decision issues that formal information systems
can assist. The value of information systems as tools and the best way to
develop them may then be determined.
We all understand that no marketing activi ty can be conducted in a
vacuum; when we say it does not work in a vacuum, we imply that a
number of forces, some of which may be external or internal, controllable,
or uncontrollable, are at play.
As a result, the marketer must collect the data using his or her own
resources in order to understand the forces at play and their effects. In
terms of marketing, we can say that the marketer is attempting to gather
market information or establish a marketing information system. This
information gathering is a co ntinual process that gathers data from many
sources, synthesizes it, and provides it to people in charge of satisfying the
needs of the market. A marketing intelligence network may or may not be
entirely automated, depending on the resources available to a company
and the complexity of its requirements. Consistency, thoroughness, and
organization are the essential components of a good MIS. Implementing
marketing strategies should be based on data from the intelligence
network.
Marketing managers require som e information which is obtained from
three sources:
1. Company Information: customer profiles, sales, orders, reports on
customer service, etc.
2. Marketing Intelligence : This is data obtained from a variety of
sources, such as vendors, clients, and distri butors. A corporation can
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33 about market trends, which is referred to as marketing intelligence. You
can purchase intelligence data from external vendors (such IDC, ORG,
and MARG) who have set up data collection systems to support
commercial intelligence goods that can be supplied to all market
participants.
3. Market Research: Management cannot always rely on information
coming from internal sources in fragments. Additionally, it is not always
possible to rely on sources of market intelligence to deliver accurate or up -
to-date information (particularly for smaller or niche market segments).
Businesses frequently need to conduct specific studies in these situations
to back up their ma rketing strategy; this is known as market research.
3.2 MARKETING METRICS
 Return on Marketing Investment is a metric used to assess the success
of a marketing effort. It aids in measuring results in relation to a certain
marketing goal. (Sales Growth - Marketing Cost) / Marketing Cost =
Marketing ROI is one of the simple formulae.
 Market share is essentially the portion of total revenues that the
company receives. For instance, if 100 soaps are sold and 40 of them
are LUX, then LUX has a 40% market sha re.
 Payback Period : This is the amount of time required to recoup
investment costs. Usually, it is expressed in years. For instance, if a
business invests Rs. 10 lakhs on a production unit that generates Rs. 1
lakh in positive cash flow annually, the payba ck period will be 10
years.
 Net Promoter Score (NPS): This measures the likelihood that customers
will recommend your goods to others. Asking your client to rate on a
scale of 1 to 10 will reveal this. Customers fall into one of the three categories:
 Detractors: They rate anything with a score of less than 6 out of 10.
 They award a score of 7 -8 for passi ves.
 Promoters receive a 9 -10 rating.
Customer satisfaction is a metric for gauging how content customers are.
Share of wallet refers to how much money a brand's regular customers
spend with it.
Average Unit Retail Price is the average selling price of an item. It is
calculated by dividing total sales in rupees by the number of items sold.
Purchase Intentions is the consumer's willingness to purchase a specific
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34 Brand Awareness / Preference reflects the level of customer recognition of
a product or brand. It is determined by dividing the total rupee sales by the
quantity of things sold.
All Commodity Volume is computed by dividing the sales revenue for all
stores by the total sales revenue for all stores.
Percentage Sales is a ratio of the total sales of one item to the total sales of
all items in the division.
Same Store Sales refers to the difference in revenue generated by existing
outlets (retail) over a particular period of time compared to identical
period in the past.
Cannibalization is a sales decline brought on by the replacement of one of
a company's older products by a new one.
Inventory Turns is essentially a ratio that shows how many times a
company has sold and replaced inventory during a given period.
3.3 USE OF MARKET SHARE
1. Avoid using market share as a primary goal or a stand -in for absolute
size.
2. Take into account the perspectives of competing companies. Will they
be more favorable toward your firm if your market share increases?
3. Take into account the consumer; if a busines s can not succinctly
describe how consumers will profit from industry consolidation,
increasing market share won't matter to consumers.
4. It will be interesting to watch if the increased market share increases
revenue.
Market share is the portion of the marke t that a certain business account
for.
• Unit Market Share (%) = Unit sales/ total Market Unit Sales
• Revenue Market Share (%) = Sales Revenue/ total Market Revenue
Purpose:
Changes in sales revenue are a key measure of market competitiveness
because they enab le managers to assess trends in consumer preference
among competitors as well as primary and secondary demand in their
industry.
Growing sales from main demand is less expensive & more profitable than
capturing market share from rivals .
When market sh are d eclines below a specific threshold, it indicates
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35 Market share for a specific product within a company's product line can
predict future opportunities or issues.
1. Market definition is alway s a crucial process :
 If a company defines its market too narrowly, it loses the chance.
 In general, it could diffuse its concentration.
 Managers are encouraged to define the market in terms of revenue or
unit sales for a precise list of rivals, goods, sales channels, geographic
areas, customers, and time periods in order to prevent this.
For instance, D -mart is the revenue and market share leader in grocery
stores.
2. Data parameters need to be defined carefully :
For instance, compare producer shipment s to customer purchases, or units
to rupees. Managers find it important to measure market share over a short
period of time when considering short term market dynamics, such as the
impact of promotions or recent pricing changes. The manager must
optimise t he pe rformance when deciding on the market and time frames
for the analysis.
3.4 RELATIVE MARKET SHARE
 Relative Market Share = Market Share of the Brand / Market Share of
the Biggest Competitor
Goal: To evaluate the position and success of a company or bra nd
 A co mpany with a 25% market share might be a dominant leader in
some markets but the number two player in others.
 It gives managers the ability to assess relative market position in
various product markets.
3.5 CANNIBALIZATION
The detrimental effect of a compa ny's new product on the sales
performance of its existing and connected items is known as market
cannibalization. It describes a circumstance in which a new product "eats"
up the demand and sales of a current product, potentially lowering overall
sales eve n as the new product's sales are rising.
 The new product shouldn't be associated too much with older ones.
 Rather, it ought to be directed at various market niches with new
attractions.
 When margins on new products are larger than those on old Prod ucts,
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36  It is frequently desirable to persuade target customers to upgrade to the
company's newest products in highly competitive industries.
3.6 SUPPLY CHAIN METRICS
 Out of Stock (%) = Outlet where Brand or Product is Listed bu t
Unavai lable / Total Outlet where Brand or Product is Listed
 Inventory Turns = Annual Product Revenue / Average Inventory
 Example: A garment retailer holds Rs.6,00,000 worth of stocks in
inventory on January 1, and Rs. 8,00,000 following on December 31.
Revenue gene rated by stock sales totaled Rs. 3.5 million during the
year
 Average Inventory = (Rs. 6,00,000 + Rs. 8,00,000) / 2 = Rs. 7,00,000
 Inventory Turns = Rs. 35,00,000 / 7,00,000 = 5
 Inventory Days = 365 / 5 = 73 Days’ worth of Inventory
3.7 MEASURES OF DISTRIBUTION
Managers c an make better decisions regarding their expansion and growth
initiatives by using distribution measures to better understand the retail
channel's sales dynamics.
Three distribution coverage metrics are examined in this overview:
 Numerical Dispersion
 Commo dity Volume for All (ACV)
 Product Category Volume (PCV), taking into account how out -of-stock
situations affect net PCV.
Definition :
A Stock Keeping Unit (SKU) is a special code that may be used to identify
any specific good or s ervice that is available fo r purchase.
Numeric Distribution: A percentage of retail establishments within a
certain market that carry a specific SKU or brand.
= (Number of retailers carrying a brand or SKU) / (total stores in relevant
market)
Definition :
All Commodity Volume (ACV) i s a metric that compares the total dollar
volume of retail sales at establishments that carry a certain SKU or brand
to the total dollar volume of sales across all product categories.
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37 ACV is a more accurate indicator of overall shop traffic than numeric
distribution of your product or brand. It says nothing specifically about
how those stores merchandise or compete in the relevant product area,
though.
Definition
Product C ategory Volume (PCV) is a measure of the percentage of
category sales made by retailers carrying your brand. The phrase "Product
Category Volume" should be noted as not being an industry standard.
PCV (%) = (category sales of sto res carrying a brand) / (to tal category
sales for all stores)
Percentage Sales on Deals
The purpose is to determine whether trade promotions lead to consumer
promotions.
The portion of manufacturer promotions' value that is reflected in trade
discounts giv en to customers by distribu tors and retailers.
 Calculate the proportion of company sales that include some type of
temporary trade discount.
 Take note that standard discounts, such as those for early payment or
co-operative advertising allowance, typically do not apply to this
(accru als) Percentage of Sales on deal (%) = Sales with the discount /
Total Sales
Net Profit and Return on Sales :
ROS is a metric that measures profitability and is frequently used to assess
the profitability of businesses and sector s of various sizes. It's imp ortant to
note that ROS does not take into account the capital (investment) used to
produce the profit.
Measurement of profitability levels and rates is the goal.
Net Profit = Sales Revenue - Total Costs
Return on Sales (ROS): N et profit as a percentage of s ales revenue.
Return on Sales (%) = Net Profit /Sales Revenue
Evaluating Multi -Period Investments :
Three measures are frequently used to analyse multi -period investments.
 Payback Periods: How long it will take to "pay back" or "return" the
initial investmen t.
 The discounted value of future cash flows less the initial investment is
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38  IRR (Internal Rate of Return): % The discount rate that yields a
negative net present value.
 Harry is considering buying a small chain of hairdr essing salons. He
estimates that the salons will produce a net income of Rs.15,000 a year
for at least five years.
 Harry’s payback on this investment is Rs. 50,000 / Rs. 15,000, or 3.33
years.
Share of Wallet
Share of Wallet (SOW) is the term used to descr ibe the percentage of a
customer's spending that goes toward your products in a certain product
category that your business deals in. Therefore, if a customer spends
$1,000 on various goods and $200 of that is spent on your p roducts, your
part of the walle t is 20%.
Index of Brand Development
 Brand Sales to Group / Household = Brand Development Index
 Total brand sales divided by all households
 Its goal is to comprehend the brand's relative performance inside a
given customer gr oup.
 It compares a brand's averag e sales per person or household in the
market as a whole to its sales per person or household within a given
demographic group or geographic area.
Market Penetration is a metric for gauging how well -liked a brand or
categor y is. It is calculated by dividin g the number of persons who make
at least one purchase of a certain brand or category of goods over a given
time period by the size of the relevant market population.
 Market Penetration (%) = Customers Who Have Purchased a Product in
the Category / Total Popu lation
 Brand Penetration (%) Customers = Who Have Purchased the Brand /
Total Population
Customer Satisfaction :
 Customer Satisfaction: the quantity of customers, or proportion of all
consumers, who are satisfied with a company, its goods, or its services
(rating) surpasses certain satisfaction benchmarks.
 Willingness to Recommend: The proportion of customers who say they
would suggest a brand to friends in a poll.
 A rating of customer satisfaction is typically based on s urvey data.
They emphasize to staff how crucial it is to meet client expectations
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39  Customer satisfaction predicts consumer purchase intentions, loyalty,
and desire to promote products and services.
When a business has devoted clients, it benefits from complimentary
word -of-mouth advertisin g, which is cost -free and very powerful.
Customer satisfaction serves as a leading predictor of consumer loyalty
and purchasing intentions.
 Despite the fact that several metrics examine brand loyalty, one is
known as the "acid test."
 Searching Propensity ( %) Percentage of Consumers Willing to
Postpone Purchases, Switch Stores, or Buy Less to Prevent Changing
Brands .
 This statistic can reveal a lot to a business about the views of its clients
and whether or not its mark et position is likely to be defendable a gainst
persistent pressure from a rival.
 Goal: To determine how loyal a company's or a brand's consumer base
is.
3.8 AWARENESS, ATTITUDES AND USAGE (AAU):
METRICS OF THE HIERARCHY OF EFFECTS
Marketers can quantify levels and trends in customer knowledge,
perceptions, beliefs, intentions, and actions through studies of Awareness,
Attitudes and Utilisation (AAU). The findings from these surveys are
referred to as "tracking" data in some businesses since they are used to
monitor long -term changes in consume r awareness, attitudes, and habits.
 AAU studies are most helpful when their findings are compared to an
obvious benchmark. This benchmark may include information from
earlier time periods, various markets, or rival co mpanies.
 Goal: To monitor changes in c onsumer views and behavior.
 Metrics for Awareness, Attitudes and Usage (AAU) are strongly related
to the notion of the Hierarchy of Effects, which is predicated on the
idea that consumers move in phases from lack of a wareness through
initial product purch ase to brand loyalty.
AAU measures are typically created to monitor these levels of
understanding, conviction, and behavior. AAU studies may also keep tabs
on "who" uses a brand or product, with customers characterized by media
use, region, category usage (heavy /light), demographics, and
psychographics.
 Knowledge about attitudes and opinions can shed light on why some
users favour or dislike particular companies. To collect these data,
marketers frequently interview siz able samples of homes or corporate
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40  Understanding and Information
Depending on whether the customer in a specific study is motivated by a
product's category, brand, advertising, or usage situation, marketers
evaluate different levels of awareness.
 Awareness: The proportion of prospecti ve buyers or consumers who
can name or recognise a specific brand. Marketers may do prompted or
assisted brand recognition research by asking people questions like,
"Have you heard of Mercedes?" As an alternative, they could ask
questions like, "What makes of cars spring to mind? " to gauge
"unaided" or "unprompted" awareness.
 Top of the Mind: The initial company that a client thinks of when
given an open -ended question about a certain category. A specific
brand's share of customers who think of it first ca n be calculated.
 Advertis ement Awareness: The proportion of target customers or
accounts that show awareness of a brand's advertising, either with or
without assistance. This measure may be media - or campaign - or all
advertising -specific.
 Brand/Product Knowledge: The proportion of respondents that
indicate having certain opinions or knowledge about a brand or product
Margin :
The difference between the selling price and the cost is the margin (on
sales).
In practically e very marketing choice, managers must have knowled ge of
margins. Pricing, return on marketing investment, earnings estimates, and
studies of customer profitability all depend heavily on margins.
Unit Margin ($) = Selling Price per Unit - Cost per Unit
Margi n (%) = Unit Margin / Selling Price per Unit
Margin (%) = (Total Sales Revenue - Total Cost / Total Sales Revenue)
Marketers can carry out a q uick check when working with percentage or
unit margins by making sure that the sum of the components equals the
total.
3.9 HIERARCHY OF EFFECTS MODEL
Robert J. Lav idge and Gary A. Steiner developed the Hierarchy of Effects
Model in 1961. According to this marketing communication model, there
are six phases between seeing a product advertisement (advert) and buying
the product.
The advertiser's task is to persuade th e consumer to follow the six stages
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41 Models
Stages AIDA
model Hierarchy of
effects model Innovation
adoption Information
Processing

Cognitive Attention Awareness

Knowledge Awareness Presentation
Attention
Comprehension

Affective Interest

Desire Linking
Preference
Conviction Interest

Evaluation Yielding

Retention

Behavioral
Action
Purchase Trial

Adoption
Behavior

Fig. 3.1: Response Hierarchy Models
 Attitudes / Liking / Image: A score that consumer give to statements
like "This is a brand for people like me " or "This is a brand for young
people" when asked to r ate them on a scale of 1 -5 or 1 -7.
 Perceived Value for Money: A score that customer give to statements
like, "This brand often provides good value for the money," on a scale
of 1-5 or 1 -7.
 Perceived Qu ality / Esteem: A consumer's assessment, frequently on a
scale of 1 to 5 or 1 to 7, when compared to products in a similar market
or category.
 Relative Perceived Quality: A consumer evaluation of a brand
product in comparison to similar products in the mar ket or category
(typically on a scale of 1 -5 or 1 -7).
 Intentions: A measurement of a client's expressed readiness to act in a
particular way. Survey questions like "Would you be inclined to switch
brands if your favorite was not available" are used to acqu ire data on
this topic.
 Intention to Purchase: A precise metric or assessment of consumers'
expressed intentions to make a purchase.
Net Promoter Score
 Fred Reichheld's essay "The One Number You Need to Grow" from
the 2003 issue of the Harvard Business Rev iew is where NPS first
appeared. According to Reichheld, it's critical for a business to
understand how many of its clients are assets and how many are
liabilities.
 The metric can be used to properly direct a company's internal
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42 3.10 SUMMARY
We tried to understand the different types of information required by
marketing managers. Also, we tried to highlight the various marketing
metrics which help us to measure various asp ects of marketing. This was
followed by understanding of supply chain metrics, hierarchy of effects
model and metrics of hierarchy of effects.
3.11 QUESTIONS
 What are the different types of information required by marketing
managers?
 Explain the various ma rketing metrics
 Explain supply chain metrics
 Explain hier archy of effects model and metrics of hierarchy of effects
3.12 REFERENCES
 Marketing Strategy, Walker , Mullins & Boyd , Tata McGraw -Hill
 Marketing Strategy, Kotler, P. and Keller , K., Pearson
 Marketing Strategy, Stephen Schnaars, Free Press
 Hierarchy of Effe cts Models, Robert J Lavidge and Gary A Steine r
 Marketing Metrics, Reibstein , Farris , Bendle, Pfeifer, Pearson


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43 4
PRODUCT AND BRAND POLICY
Unit Structure :
4.0 Objectives
4.1 Introduction
4.2 Product Policy Decisions
4.3 Product and Service Strategies
4.4 Strategies for Product Life Cycle
4.5 Product Line Decisions
4.6 Product Mix Branding Strategies
4.7 Develop ing New Products: The Lead User Strategy
4.8 Criteria for choosing Brand Elements
4.9 Summary
4.10 Questions
4.11 References
4.0 OBJECTIVES
 To understand the meaning of product and brand policy

 To understand various product and service strategies

 To understand product life cycle and marketing strategies during
various stages of product life cycle

 To understand various product mix branding strategies
4.1 INTRODUCTION
Anything that may be supplied to a market and might satiate a need or
want is conside red a product in marketing. Products are referred to as
goods in retail. Products are purchased as raw materials for manufacture
and sold as finished commodities. The most common types of
commodities are basic materials like metals and agricultural goods, but
they can also include anything that is readily available on the open market.
In project management, products are the formally defined project
deliverables that include or assist in achieving the project's goals. In the
insurance industry, the contracts ' policies are viewed as products that the munotes.in

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44 insurance provider is selling. A product is a collection of material and
intangible qualities that satisfy customers.
Today's commoditization of goods, media fragmentation, cluttering of
advertising, and seemingly endless market options make branding more
crucial. A brand is the point where a customer's experience and
expectation meet. The buying choice is influenced by a strong brand. It
can command a premium price and sell the greatest possible number of
copies a t that premium. Without even being aware of the specifics of the
features of the products, it helps the buyers build trust and a set of
expectations about the goods. A corporation's plan to develop a strong
brand indicates that the company seeks to increas e client loyalty in
addition to product sales.
Trust and an emotional connection to a certain product or business are
created through branding. Customers find it easier to make purchases
thanks to branding. A strong branding strategy sends a clear, consis tent
message about the importance of the business. When a customer decides
to stick with a product made by the same business over one made by a
rival, they are demonstrating brand loyalty. Brand loyalty typically
pertains to a product rather than a busines s. Because brand loyalty boosts
sales volume, businesses with brand -loyal customers don't have to spend
as much on product promotion, which lowers production costs.
Branding is the use of a name, word, symbol, and/or unique design to
designate the products or services of a single seller or group of sellers. A
seller's products are set apart from those of rival sellers by their brand. A
product is branded through the management process of branding. It is a
comprehensive phrase that refers to a variety of tas ks, including giving a
product a brand name, creating a brand logo, and establishing and
popularizing it.
Decisions made in accordance with the Product and Brand Policy :
Mix and Line choices
Managing the entire product life cycle, including pre -launch, tr imming,
and market withdrawal
The function of lead users in product design
Aligning brand culture with organizational culture
Product Policy :
Product policies are broad directives created by the company's top
management with reference to product developmen t and planning.
The following are often covered by product policy:
 Planning and development of products
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Product and Brand Policy
45  Product labelling
 Product placement
 Branding a product
Goals of Product Policy :
1. Survival: For any business, maintaining a profitable pre sence in the
market is the primary goal.
2. Development: The company's strategies are set up to achieve good
market growth based on its long -term objectives.
3. Flexibility: The product policy must be adaptable to changing
consumer demands, governmental requirem ents, international trends,
and the economy.
4. Scalability: To make the most of their valuable resources, the
organization should utilize its resources wisely. To increase earnings,
the business must eventually establish economies of scale.
Keeping their pro duct range current and competitive is one of their
product development goals.
Adjust to shifting consumer demands and broaden the range of goods they
may offer to their current target market.
4.2 PRODUCT POLICY DECISIONS

Fig. 4.1: Product Mix Breadth an d Depth
Keeping their product range current and competitive is one of their
product development goals.
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46 Adjust to shifting consumer demands and broaden the range of goods they
may offer to their current target market.
4.3 PRODUCT AND SERVICE STRATEGIES
Individual Product Strategies
 Introduction Strategies
 Growth Strategies
 Maturity Strategies
 Declining Strategies
Product Line Strategies
 Upward Stretch Strategies
 Downward Stretch Strategies
 Two-way Stretch Strategies
 Line Filling Strategies
 Contraction Stra tegies
Product Mix Techniques
Branding Techniques
Add additional product lines
Delete current product lines
The Process of Diffusion
Consumers go through a procedure to decide whether to adopt a new
product when it is initially released t o the market. The adoption of an
innovation over time is described by the diffusion process.

Fig. 4.2: Diffusion of Innovation
PLC Stages and Characteristics :
Marketers face a different situation at each stage of Product Life Cycle.
The diffusion process and competition b ring differences at each stage of
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47

Fig. 4.3: Product Life Cycle
Marketing Strategies during PLC :
Introduction Growth Maturity Decline
Marketing
Goals Encourage
trial,
establish
distribution Get triers to
repurchase,
attract new
users Seek new
user or users Reduce
marketing
expenses,
used to keep
loyal users
Product Establish
competitive
advantage Maintain
product
quality Modify
product Maintain
product
Distribution Establish
distribution
network Solidify
distribution
relationship s Provide
addition al
incentives to
ensure
support Eliminate
trade
allowances
Promotional Building
brand
awareness Provide
information Reposition
product Eliminate
most
advertising
& sales
promotions
Pricing Set
introductory
price Maintain
prices Reduce
prices to
meet
comp etition Maintain
prices

Fig. 4.4: Marketing Strategies during PLC
4.4 STRATEGIES FOR PRODUCT LIFE CYCLE
Introduction :
Characteristics :
 Low Sales, High distribution n promotion expenses, low or no profit,
focus on ready to buy customer, better quality
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48 Strategies :
 All competitors are focusing on building the distribution network &
Product awareness
1. High Price : Low Promotion Spending: it yields high Profit / unit and
marketing cost, Conditions are: Limited Market Size, Product
awareness a lready exists, will ing to pay high
2. Low Price: Heavy Promotion Spending: Bigger Market Share and
faster market penetration
3. Conditions are: Large market, Price sensitive buyers, product
unawareness, strong competition economic of scale
Growth Stage of PLC
 Be ready for sustain ed sales increases
 Rapid increase in profitability early in the growth stage that decreases
at the end of this stage
 Length depends on the nature of product and competitive reactions
Marketing Strategy Goals in this Stage:
 Leverage the p roduct’s perceived differential advantages
 Establish a clear product and brand identity
 Create unique positioning
 Maintain control over product quality
 Maximize availability of the product
 Maintain or enhance the product’s profitability to partners
 Find th e ideal balance bet ween price and demand
 Keep an eye focused on the competition
Growth Stage of PLC
Strategies:
1) Establish a strong, defensible marketing position
2) Achieve financial objectives
3) Improve or add features
4) Lowering of Price
5) Increase Promotion
6) Strengthening Distribut ion Channel
7) General Strategy prepares to face tradeoff between High Profit to High
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49 Maturity Stage of PLC
 Few new firms will enter the market
 An opportunity for new product features and variations
 The longest stage in the product life cycle
 Four general goals in this stage:
1. Generate Cash Flow
2. Hold Market Share
3. Steal Market Share
4. Increase Share of Customer
Options to achieve these Goals:
a. Product Modification: Quality, feature, Style
b. Market Modification : New users, New Market Segments, Increase
Usage
c. Marketing Mix: Value for money concepts, contests, prizes
Declining Stage of PLC
Strategies :
 Maintain: Modi Xerox drop the Fax machine but Panasonic is
continuing to sell in India
 Harvest: Reduce the cost, h ope the product sale will be profitable for
some time, Hindustan Motors continue to produce Ambassador
 Drop
Factors to be considered during this stage:
 Market segment potential
 The market position of the product
 The firm’s price and cost structure
 The rat e of market deterioration
4.5 PRODUCT LINE DE CISIONS
"In order to offer a product line, businesses typically create a core
platform and a set of modules that may be expanded to satisfy the needs of
various clients.
This modular strategy enables the busine ss to provide consumers with a
range of items .
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50 2. Choices about product line length
3. Choices about modernizing product lines
Decision on Product Line Length :
Using the sales and earnings of the pr oduct and market profile, decide
which assets to develop, maintain, or sell.
Stretching a line
Stretching Downward :
To attract new customers, luxury car manufacturers are releasing more
affordable vehicles.
A company releases products of poorer quality.
Blocking competitors, competing in the high -volume budget segment of
the market, and expanding the positioning of their brand .
Especially for a premium brand, risk is that
 They are stealing market share from their higher -margin goods.
 A general decline in t heir brand's reputation .
 The requirement to a ccommodate multiple products or positionings in
the market .
Stretching Upwards :
Superior to the offerings as a whole .
Reasons :
Increased unit margin
Increased brand recognition allows price premiums to be appli ed across
the entire product line.
Risk :
It's possible that the current brand equity and image won't translate to the
high-end of the market, necessitating the introduction of new brand names.
Competitors who are already on the more expensive end of the ma rket can
want to protect their position.
To s upport high -quality products, additional or extended distribution
channels may be needed.
Given that the turnover is often lower at this and the market, the level of
sales volume might not be adequate.
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51 The goal of the two -way stretch produ ct line strategy in emerging or new
markets is to aim to control or dominate the product category.
Line-filling can be done to increase revenues or make use of surplus
capacity. Snack corner and FMCG packaged fo ods offer a selection of
comparable items.
Having too many items to produce and sell poses a risk of product
cannibalization, as well as demands on the manufacturing and
transportation system and/or sales and service personnel.
Reducing the product line :
Service Line Contracting Companies should thin k about removing
products when:
They don't have any success.
They enter the PLC decline stage.
Marketing expenses for broad product lines are excessively costly.
Decision on Product Line Modernization :
The decis ion to modernise a product line is crucial si nce it allows
competitors to notice the changes and begin revamping their own lines. In
some cases, a product line's length is appropriate, but it has to be updated.
Customer Diversity & Specification of Require ments :
The segmentation or heterogeneity of t he client base and the stringency of
the productrequirements necessary to satisfy consumer need are the first
factors to be taken into account when determining the product line depth.
If the consumer specificati on is relatively homogenous those specificati on
of varied consumer can be met by shorter product line E.g. Coffee Mug
Ability to tailor an offering to a certain market segment :
Its ability to configure and position the product such that the intended
custom ers perceive it as being made for them hinges on its ability to target
the particular product even though the firm may have identified the target
segment. Example, Diet Coke
Competition Effect :
To gain a competitive edge with your product range,
1. Preempt a rival: Preemption occurs when a product fills a market niche
so effectively that no other firm can financially fill that niche.
For instance, Harley -Davidson ignores the US lower end market.
Suzuki and Honda provide the market and distribution system that
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52 2. Achieve a point of sustained differentiation through the growth of your
product line: You may do this by leveraging your company's expertise
to provide a product that stands out from the competition and of fers a
market segment exceptional value, like the Apple iPhone
3. By addressing market gaps, a broad product selection makes it
challenging for small businesses.
Legitimization :
Expansion of a leading company's product line into a particular product
category or market niche at a specific price point ca n legitimize its
position in the market, potentially to the detriment of rivals or potential
competitors.
Impact of Category Size
 Product line expansion if a new item increases demand for a product
category
 Appl e's low -cost addition to its iPhone range, th e iPhone 5C, not only
competes with Samsung but also boosts the market's desire for iPhones.
Impact on Companies' Own Margin as a Whole :
One of the following three sources may produce a unit sale for a new item :
1. Increasing the category
2. Taking away a sale that a rival would have otherwise made or
3. Taking away a sale from an item in a company's line that would have
otherwise been sold (Cannibalization)
Value of a brand :
Ability of brands to boost growth
Effect of brand extension on overall brand equi ty
Nike management acknowledges that expanding a brand into casual
sneakers was a mistake in its early years.
Variety Cost vs. Scale of Opportunity :
Problems include R&D costs, technical advancements, and invent ory
carrying costs brought on by supply cha in complexity. Extension boosts
unit sales of the line and the extra sales can bring down the cost across the
line.
Collaboration Response
Retailers' and distributors' reactions to the new product
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53 Mix of Products Breadth :
Even if there is minimal connectio n to the company's current operation,
there is economic opportunity and existing skill (ITC in Hotel)
The new products that are connected to existing products in some way
provide the greatest advantage.
Starting a company whose profit stream will negativel y affect the profit
stream of an already existing company, hence lowering the enterprise's
overall risk.
Coca -Cola is building a strong foothold in the mineral water industry to
offset the danger of soda sales dro pping if the market shifts.
Making use of t he company's main asset, which highlights its present line
of products ; Examples of complementary items that allow a company to
be a complete solution provider include P&G and HUL.
For instance, when P&G purchased the Gillette Firm and its Oral B
toothbrus h line, it became the market leader in oral care and the only
significant oral care company with a wide range of products in all
categories, including toothpaste, toothbrushes, whitening, etc.
It's crucial to evalu ate scarce resources carefully.
Product -Mix Strategies: A somewhat constrained product mix means
that the brand is frequently more of a niche player. It forces or restricts the
brand/firm to compete in different sections of the market.
The collection of al l commodities and products that a specific vendor
provides to customers is known as the product mix.
All product lines and individual goods that the company markets are
included in the product mix.
Product mix decisions include choosing breadth, length, de pth, and
uniformity
 Add new product categ ories
 Get rid of current product lines
 Branding Techniques




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54 4.6 PRODUCT MIX BRANDING STRATEGIES


Fig. 4.5: Product Mix Branding Strategies

Branding Decisions :

Fig. 4.6: Branding Decisions
4.7 DEVELOPING NE W PRODUCTS: THE LEAD USER
STRATEGY
An ea rly adopter of a new product or technology that is anticipated to
eventually be used by many people is referred to as a lead user.
When there is no commercial solution available, lead users invent one
(referred to a s "Jugaad" in India).
Lead User Curve: Th is curve shows how a market trend is shaped. Lead
users have requirements that are far in advance of the trend; as time
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55

Fig. 4.7: Lead User Curve
System for Lead User s:
A small cross -disciplinary team made u p of representatives from the
marketing and technical divisions forms to begin the lead user process.
The project is led by one individual. On average, team members work on a
project for 12 to 15 hours per week.
This degree of involvement encourages origin al thought and keeps the
project moving forward.
Four phases are involved in lead user initiatives.
Lead User Methodology :
Phase 1: Putting the groundwork
 Determine the target markets.
 Identify the types and degrees of innovations that the company's
stakeh olders want to see.
Phase 2: Identifying trends
 Seek the advice of specialists and those with a thorough understanding
of cutting -edge applications and developing technology in the field
being researched.
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56 Phase 3: Identifying lead users
 Start a networkin g strategy to find users who are at the cutting edge of
the target market and related markets and learn from them.
 Amass knowledge that aids in locating innovative concepts.
 Create draught product ideas based on the information gathered.
 Evaluate the conce pts' commercial viability and alignment with
corporate objectives.
Identifying Lead Users
 Networking: Teams start by outlining their issue to others with relevant
experience.
 They then request a recommendation for s omeone with even more in -
depth knowledge.
 As a result of continued networking, Lead Users emerge at the front of
the target market.
Phase 4: Developing the breakthrough
To start, conduct a workshop with a number of lead users, internal
technical and market ing staff, and the lead user team.
To cre ate final designs that are perfectly suited to the demands of the
organisation, participants first work in small groups and then collectively.
Following the workshop, the project group:
 hone the ideas even more
 assesses their suitability for the needs of t he target market's consumers.
 thereafter makes recommendations to upper managers.
Brand Strategies :
Product Category
Existing New

Brand
Name Existing Line
Extension Brand
Extension
New Multi
brands New brands

Fig. 4.8: B rand Strategies
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57 Importance of Packaging
Protection
Promote Importance of Packaging
Facilitate Storage, Use ,
and Convenience
Facilitate Recycling
BRAND CULTUR E
 Brand c ulture is a company culture in w hich employees "live" to brand
values, to solve problems and make decisions internally, and deliver a
branded customer experience externally.

Fig. 4.9: Brand Culture
Employees who "live" by a brand's values, solve problems and make
decisions on their own , and provide a branded customer experience
externally are said to have a brand culture.
If culture is "what your employees think of you," brand is "what your
consumers think of you." The two senses must coincide, w hich is b oth
desired and important. The b rand of an organization is the culmination of
consumer impressions and decisions that are informed by both rational and
emotional experiences with the brand.
The customer's interaction with the staff of an organizat ion, who serve as
brand ambassadors, is a crucial touch point.
Employees have the power to positively or negatively impact customers'
experiences with brands. In addition to marketing, employees' attitudes,
and behaviors as well as their capacity to provid e custome rs with pleasant
brand experienc es also contribute to the creation of brands.
The concept of the product life cycle is crucial to marketing. The various
stages of the product life cycle must be taken into account when planning
and defining the mar keting mi x strategies. Understanding the five stages
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58 develop appropriate marketing mix strategies, particularly promotion
tactics, if these stages are well analyzed.
4.8 CRITERIA FOR CH OOSING BR AND ELEMENTS
The following qual ities should be present in a good brand as feasible.
1. Simplicity:
The brand name ought to be short and simple to say. Simple names don't
have to be common place; they only need to be appropriate for the
product. For instance, Nirma or Lux.
2. Memorabili ty:
A strong brand should be able to stick in consumers' minds. The brand
should have a memorable name that appeals to more people in order to
stay in their minds. To promote brand memory, the brand's owne r may use
a significant amount of advertising.
3. Catchy:
The brand name needs to be catchy. For instance, the audience finds
certain brand names to be very enticing. It might be associated with a
location like Gwalior Suits. It could be somehow related t o the pro duct,
like Tips and Toes.
4. Capable of Fe ature Description:
The brand might be able to describe its qualities, features, etc. Action
Shoes, Thumps Up, Fair & Lovely, All Clear, Duracell, etc. are a few
examples.
5. Suitability:
The brand name, ma rk, desig n, or image used for the product must be
appropriate. For the soft drink, for instance, the Thumps Up symbol and
the brand name can work effectively. Ice creams can do well with the Go
Cool brand name.
6. Clarity:
There must be no ambiguity in th e brand i dentification. There shouldn't be
any overl ap with other brands. To prevent misunderstanding among
customers, brand names, colors, designs, trademarks, and other elements
must be easily recognizable.
7. Long -Term Use :
Brands ought to permit ongoin g use. Th e name, colors, designs, and other
elements should not need to be changed over time. As a result, the brands
must be described using proper names and marks.
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59 8. Profitability:
The brand must be created in a way that makes it simple to register it
under the Trade and Merchandise Act of 1958. If a bra nd's application for
registration is denied, others may easily copy it.
9. Differentiated:
The brand must stand out from those of rivals. The name, design, logo,
and other elements must be original. Peop le ought to exclaim, "Oh this is
amazing." Maybach, Omega Watch, Mount Blanc Pens, Rolls Royce,
Rolex and Raymond's are examples of premium brands.
10. Use in all contexts:
The brand should encourage widespread use. Other nations shouldn't raise
objection s to it. The brand should be easy for international c ustomers to
recognise and remember. The ubiquitous brands include things like Pepsi,
Colgate, and Coca -Cola.
11. Pronounced easily:
Such brands as Onida, Dettol, Thumps -up, Amul, Tata, LG, Samsung, etc.
should be simple to say, spell, and remember.
12. Ada ptable:
The brand should be able to adjust to any potential new offerings.
4.9 SUMMARY
First, we made an effort to comprehend what a product and brand policy
meant. We were able to comprehend various pro duct and service strategies
as a result. After that, the definition of the term "product life cycle" and
marketing tactics used at various stages of the cycle are examined. Next, it
was determined to research several product mix branding tactics.
4.10 QUES TIONS
1. Explain the meaning of product and brand policy
2. Explain various product and service strategies
3. Explain what do you mean by product life cycle and marketing
strategies during various stages of product life cycle
4. Explain various product mix branding st rategies


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60 4.11 REFERENCES
 Marketing Strategy, Steph en Schnaars, Free Press
 Strategic Marketing, Dr. Shahjahan , S.
 Marketing Management, Kotler, P. and Keller , K., Pearson
 https://blog.hubspot.com/marketing/ product -life-cycle
 https://hbr.org/2012/12/to -stay-ahead -of-disruptions -curve
 https:/ /www.elek en.co/ blog-posts/d ecline-stage -of-product -life-cycle -
overview -and-strategies
 https://brandingstrategyinsider.com/identifying -your-brand -culture/


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61 5
PRICING POLICY
Unit Structure
5.0 Objectives
5.1 Introduction
5.2 The Concept of Pricing
5.3 Pricing Strategy for New and Existing Products
5.4 Pricing Strategies
5.5 Determining Specific Prices and Policies
5.6 Pricing Strategies
5.7 Summary
5.8 Questions
5.9 References
5.0 OBJECTIVES
 To understand what is price and the concept of pricing
 To understand the pricing strategy for new and existing products
 To study the cost analysis for pricing decisions
 To understand various pricing strategies
5.1 INTRODUCTION
Companies that produce goods and services are required to determine the
cost of their offerings. One of the most crucial choices a management
must make is the price of the company's goods. The most important
component of marketing managemen t is pricing. As the source of income
for a businessperson but an expense for the consumer, pricing is a profit -
planning activity. While the consumer wants to pay as little as possible for
his purchase, the business owners want to earn the greatest price p ossible
for the good he sells. As a result, one of the most important and
challenging decisions a firm's managers must make is choosing the price.
One of the main factors in determining a product's pricing is cost.
It is one of the three main variables th at affect pricing. Customers and
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62 Pricing is a strategy used by a company to determine its selling price. It
typically depends on the company's regular prices as well as how much
the buyer thinks the product is wor th in relation to similar products. The
selection, estimation, and evaluation of costs, comparative analysis, and
market conditions are all factors that differ in importance depending on
the pricing approach.
For many businesses, pricing decisions are a ma jor challenge.
Examples are
 inexpensive carriers threatening large airlines.
 pharma companies are under pressure to lower their pricing.
 a fierce price war between grocery chains .
 aggressive price cuts by automakers to keep market share.
 counterfeit goods posing a threat to well -established companies.
What is Price?
One component of the marketing mix that generates income is price.
It is the amount paid for some goods and services.
Pricing is the process through which a company decides how much it will
charge for its goods and services.
5.2 THE PRICE CONCEPT
The cost of a good or service charged is known as the price. To put it
another way, it is the exchange of value in monetary terms between a
customer and the advantages or satisfaction of owning or utili zing a good
or service. Price is referred to as one of the components of the "marketing
mix" in the context of marketing, which also includes quality, design,
advertising, promotion, and distribution. But there is a significant
distinction between pricing and o ther factors.
The selection of a suitable price is crucial for a company's performance
since there is an important distinction between pricing and the other
components of the marketing mix: price generates income while the other
components result in c osts.
Pricing is the process of figuring out what a business will get in return for
its goods. Manufacturing costs, the marketplace, competition, the state of
the market, brand, and product quality are all factors that affect prices. In
the theory of micro econo mic price allocation, pricing is also a crucial
variable. Pricing is one of the four Ps of the marketing mix and a crucial
component of financial modelling. (The three additional factors are
product, promotion, and place .) The other three of the four Ps are cost
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63 Importance of Price
Profits are directly influenced by price (or losses)
Costs are indirectly impacted by price (through quantity sold)
The sort of consumer and level of competition a business will draw are
determined by price.
Price has an impact on a brand's reputation.
All other marketing mix actions could be rendered useless by a pricing
mistake.
Pricing Techniques :
Pricing for new goods
Lifetime pricing
Adapting the positioning approach
Combating threa ts from competitors
5.3 PRICING STRATEGY FOR NEW AND EXISTING
PRODUCTS
1. Choosing the Pricing Goal :
Setting a price is made simpler when a company's goals are clearer.
There are five main goals :
a. Survival
b. Current maximum profit
c. Largest market share
d. Exhaustive market scanning
e. Product -quality management
2. Examining the Price Environment :
It depends on four variables
a. Consumer price sensitivity
b. Moral and legal restrictions
c. Costs of the goods
d. Potential responses from rivals
Price Sensitivity of Customers
How big is the product market in terms of potential customers?
What are the market segments, and how should the market be targeted?
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64 How significant are non -price aspects like perfor mance and features?

Fig. 5.1 Perceived Value Pricing
Analyzing Costs to Make Pricing Decisions
 Find out what goes into the product's cost.
 Calculate the relationship between cost and sales volume.
 Analyze the product's cost competitive advantage.
 Conside r the impact of production experience on costs.
 Calculate the degree of cost control management has


Fig. 5.2: Fixed and Variable Cost
Competitor Research
Which businesses are most directly competing with each other?
Positioning of competitors based on r elative prices
Success of competitors' pricing tactics
Potential responses from rivals to different pricing schemes munotes.in

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65

Fig. 5.3: Types of Offers
Analyse Competitor’s Costs, Prices and Offers

Fig. 5.4: Competitor Costs, Prices and Offers
Legal and Et hical Price Analysis
Horizontal Price Fixing
Discrimination in prices
Misleading pricing
Pricing in the Distribution Channel
Data Regarding Prices
Choosing a price approach
It takes into account issues like:
a. How much is the flexibility?
b. Where should price be in relation to costs?
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66 Determinants of pricing flexibility

Fig. 5.5 Competition, Demand, and Costs
Calculating feasible price :
a. Demand in the target market: The price is influenced by the level of
demand among the target market.
b. Marketing and business tactics: The organization's entire business
and marketing strategy is a major determinant of a product's price.
Different products will be priced differently based on their features and
what makes them uniqu e from other products.
c. Pricing charged by competitors: The prices that we take into
consideration for our goods will be influenced by the prices that the
competitors charge.
d. Prices of alternatives: We must set our product's price in line with
those of the alternatives offered by other businesses.
e. Product costs: The cost of the product will determine the price that is
charged.
5.4 PRICING STRATEGIES
Strategies for New -Offering Pricing :
1. Skimming Pricing Strategy (Gillette Mach3): initial high price that
gradually declines
2. Nintendo's Penetration Pricing Strategy: The pricing is originally set
low to enter the market.
3. Intermediate Pricing Strategy: the most popular option between the two
extremes.
Pricing strategies for new goods :
Pricing for market penetr ation : Reasonably priced entry into a market .
Using premium prices or prestige pricing to attract early adopters and
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67 Penetration: Decreasing cost with time Reduce inventory and prolong
product life .
When to Us e Ski mming Pricing:
When Demand is likely to be Price Inelastic
Various price -market segments exist.
The product is distinctive enough to warrant patent, copyright, or trade
secret protection from rivalry.
Costs of production or marketing are not known.
There is a capacity limitation in the service or product production
A company wants to raise money rapidly.
The product or service has a realistic perceived worth.
Utilizing Penetration Pricing :
When Demand is anticipated to be elastic in terms of price
The product is not very novel or covered by any patents, copyrights, or
trade secrets.
Competitors are anticipated to swiftly enter the market.
Price -market segments are not distinct and independent.
If a high sales volume can be produced, there is a chance t hat s ignificant
production and marketing cost savings will occur.
Getting a sizable market share is the organization's main goal.
5.5 FINDING SPECIFIC PRICES AND POLICIES
Choosing Particular Prices
Regulations for Pricing Strategy
Issues with Special Prici ng
Basis for Calculating Particular Prices
1. Cost
2. Demand
3. Competition
Choosing a pricing strategy
3C's factored into price setting
Costs provide a price floor.
An anchoring point is provided by the prices of substitutes and
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68 The ceiling p ricing is determined by how distinctive features are perceived
by customers.
Price -Fixing Techniques:
Depending on the margin or markup chosen for the goods, markup pricing
Pricing based on perceived value: In this case, the customer's assessment
of value deter mines how much something costs.
Pricing is done here in accordance with the standards currently in effect
for the specific industry or region.
Creating a Pricing Structure and Policy :
Policy :
Refunds, discounts, allowances, and other operational polic ies
Pricing Framework :
Relationships between line pricing and product mix .
How the line's prices compare to one another for individual goods
Pricing Strategy Management :
1. You are better off if more customers and competitors know about
your pricing. Being op en an d honest about a company's costs and the
worth of its products is essential in the information era.
2. In markets with intense competition, attention should be paid to
market sectors that offer chances to establish a competitive edge. A
pricing strategy that is value -oriented results from such a focus.
3. Pricing choices ought to be determined in the context of a general
marketing strategy that is integrated into a corporate or business
strategy.
4. Profit is the primary consideration for setting prices, not sa les v olume
or market share.
5. Prices ought to be determined by how buyers judge the worth of an
item.
6. New product pricing should begin as soon as product development
does.
7. Incremental avoidable costs are the relevant costs for pricing.
8. When a pricing generat es in cremental revenues that outweigh
incremental costs, it may be lucrative.
9. The price function should be managed by a central organising unit. In
general, it is preferable to refrain from letting salespeople set prices,
especially when they lack access t o pro fitability data and specialised
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69 10. Instead of treating price setting as an annual event, pricing
management should be seen as a process.
Particular Pricing Conditions :
Price segmentation: In this instance, vari ous p rices are charged to various
client segments.
Value Chain (Distribution Channel) Pricing: In this case, the pricing is
based on the value chain stage where the product is located.
Price flexibility: In this case, the price can be altered to suit vario us
markets or clients.
Product Life Cycle Pricing: In this case, the price is determined by the
stage of the product's life cycle - that is, whether it is in the introduction,
growth, or maturity stages.
Market -Based pricing :
Pricing Existing Products/Servic es - 3 options
a. Pricing below market prices price wars
Eg.: airlines, store brand vs. manufacturer’s brand
b. Dumping
Pricing above prevailing market prices for similar products
Eg.: Sony: higher price = higher quality?
c. Pricing at or near mark et prices
Pricing and Interaction with Competitors :
A pricing war is when competitors reduce their prices repeatedly in an
effort to boost or keep their unit sales or market share. occurs when:
a. The price is lowered in order to increase market share, un it sales, and
profit
b. The lower price is matched by competitors
Loss of anticipated share, sales, and profit from initial price decrease
In order to prevent a price war, only consider price reduction when:
a. The business outperforms its rivals in terms of costs or technology.
b. If prices are decreased, a product class's primary demand will increase
c. The price reduction is limited to particular goods or clients rather than
being applied universally.
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70 5.6 PRICING STRATEGIES
Different pricing strategies can be used by organizations to set the
product's price. The following significant pricing techniques are covered:
1. Price based on Cost :
A profit component is added to the product's manufacturing cost to
determine price. Cost of the item serves as the p rimary criterion for setting
a price. In order to do this, the cost of producing or purchasing the good is
included as a defined sum or percentage when determining the price.
Despite its continued widespread use, this pricing technique is in some
ways rath er dated and somewhat denigrated. Customers are more
interested in the value the product offers them than they are in how much
it cost to manufacture it.
a. Cost Plus Pricing:
When a retailer needs to know with some confidence what the gross profit
margin of each transaction will be, they frequently utilise cost -plus (or
"mark -up") pricing. There are two variations of this: full cost pricing,
which accounts for both variable and fixed costs, and markup pricing,
which adds a percentage. The alternative is di rect cost pricing, which
combines variable expenses with a markup of some proportion. The latter
is only employed during times of intense competition because it frequently
results in long -term losses. This strategy has the benefit of letting the
company kn ow that its expenses are being met. The biggest drawback of
cost-plus pricing is that it could result in uncompetitive prices for goods.
b. Marginal -cost Pricing:
With this approach, the price of a product is set at the additional expense
of creating an ad ditional unit of output. This policy limits the producer's
ability to charge for each unit of a product sold to the addition to total cost
attributable to materials and direct labour. When sales are sluggish,
businesses frequently set prices that are near to their marginal costs.
c. Economy Pricing:
This is a straightforward low cost. A product is marketed and promoted
for the least amount of money possible. In supermarkets, you can
frequently find budget brands of soups, pasta, etc. In order to provide the
consumer a relatively lower price to fill an aircraft, budget airlines are
renowned for keeping their overhead costs as low as possible. The first
few seats on a flight are sold for a very low price (nearly a promotional
price), the middle portion is made up of economy tickets, and the final few
seats on a flight command the highest price (which would be a premium
pricing strategy). Sales increase during recessions because to economy
pricing.

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71 d. Product Life Cycle Pricing:
Every product has what is know n as a life cycle. A product moves through
the cycle's introduction, growth, maturity, and decline stages throughout
time. A small business would typically maintain higher prices when sales
are flourishing, and the organization is in the growth stage. Cust omers will
probably pay the higher price, for instance, if the company's product is
special or of higher quality than similar products. A business that charges
high prices for its goods while it is still growing can also have highly
sought -after new techno logy.
2. Customer based Pricing :
Where prices are set based on what a company anticipates that customers
would be willing to pay. The following are a few examples of popular
customer -based pricing techniques.
a. Penetration Pricing:
The goal of penetration p ricing is often to grow a product's market share,
giving the chance to raise the price once this goal has been accomplished.
Setting a relatively low initial entry price, typically lower than the
anticipated established price, in order to draw in new clien ts is known as
penetration pricing. Due to the cheaper pricing, the plan hopes to persuade
customers to switch to the new product. The most frequent association of
penetration pricing with a marketing goal is an increase in market share or
sales volume. Pe netration pricing is probably going to produce less profits
in the short run than it would if the price were set higher.
However, having a larger market share has certain important advantages
for long -term profitability, therefore the price strategy is fr equently
justifiable. A lower price than competing items is a competitive advantage
when a product enters a market with little to no significant product
difference and price elasticity. This strategy is frequently employed to
assist the launch of new produ cts.
b. Price Skimming:
Skimming is the practise of setting a high price before rival businesses
enter the market. This is frequently utilised for the introduction of new
products that, typically because of technological features, face little to no
compet ition. "Early adopters" who are willing to pay more for such things
frequently purchase them.
Skimming as a tactic won't work for very long because other companies
will soon release products that put pressure on the price. An innovative
new product may fac e difficulties with distribution (location). The
increased margins that can be achieved by price skimming may have to be
reduced in order to persuade retailers to stock the product. Another issue is
that a company may slow the volume increase of the demand for the
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72 substitute products in preparation for the period of time when the market's
(measured in volume) demand is the strongest.
Skimming is frequently utilised in electronic markets w hen a new range is
first released into the market at a premium price in order to cover the
expense of investment in the original research into the product. This tactic
is only used for a brief period of time to recoup the majority of the
expenditure requir ed to create the product. Other pricing strategies like
economy or penetration must be used by a supplier in order to increase
their market share. This approach could leave the product with a high
price compared to the competitors, which can have several d rawbacks.
c. Price Discrimination (Differential Pricing):
The act of charging a different price for the same product in various
market sectors is known as price discrimination. For instance, this might
be for several classes, such as age groups, or for var ious operating hours.
Whether to utilise a single price or numerous prices for the same product
is a crucial decision in pricing. Utilizing a single pricing has a number of
advantages, including the fact that it is straightforward, easier for both
employee s and customers to understand, and less likely to lead to a hostile
relationship between marketer and customer. A single pricing also
presents certain difficulties: if it is too expensive, some customers might
not be able to buy the goods. If the price is too low, clients who would
have spent more if it were more expensive cost the business money.
Differential pricing refers to setting different rates for various customers
while maintaining a consistent level of product quality and output. The
market must b e divided into various sectors with various price
sensitivities, and the pricing strategy must be used in a way that prevents
customers from becoming perplexed or enraged.
d. Temporary Discount Pricing:
Small businesses may also employ transient discounts t o boost sales.
Coupons, cent -off deals, seasonal price cuts, and even volume purchases
are examples of temporary discount pricing tactics. For instance, to
minimise product inventory after the holidays, a small garment company
might offer seasonal price di scounts. A buy -two-get-one-free deal could
be part of a volume discount.
3. Competitor -based Pricing:
The primary factor affecting price in this technique of pricing is
competition. Customers have a large selection of vendors to choose from
when there is f ierce rivalry in a market. They could choose to purchase
from the vendor who charges the lowest price or the one who provides the
finest customer service. However, clients will undoubtedly be aware of
what is a fair or typical pricing in the market. In a m arket where there is
competition, the majority of businesses lack the clout to raise prices above
those of their rivals. They frequently set prices that are in line with those
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73 In eff ect, such businesses are “price -takers” - they must accept the
going market price as determined by the forces of demand and supply. An
advantage of using competitive pricing is that selling prices should be line
with rivals, so price should not be a com petitive disadvantage. The main
problem is that the business needs some other way to attract customers. It
has to use non -price methods to compete - e.g., providing distinct
customer service or better availability.
4. Other Strategies:
a. Target Pricing:
It is a pricing strategy in which a product's selling price is determined to
generate a given rate of return on investment for a particular volume of
production. The target pricing strategy is most frequently employed by
public utilities, such as electric a nd gas companies, and businesses with
significant capital expenditures, such as automakers.
Target pricing is useless for businesses with low capital expenditures
since, using this equation, the selling price will be overstated. A
corporation may experienc e an overall budgetary loss on the product if the
entire volume is not sold because the target pricing strategy is also
unrelated to the product's demand.
b. Time -based Pricing:
It is a flexible pricing structure that has been made possible by information
technology advancements and is primarily used by internet -based
businesses. Dynamic pricing enables online businesses to adjust the prices
of identical goods to correspond to a customer's willingness to pay by
responding to market fluctuations or vast amou nts of data gathered from
customers - ranging from where they live to what they buy to how much
they have spent on previous purchases. The airline sector is frequently
used as an example of dynamic pricing success. In fact, it uses the strategy
so masterfu lly that the majority of passengers on any one airline have
purchased tickets at various price points for the same flight.
c. Value -based Pricing:
Pricing a product should be based on the value it provides to the client, not
on its production costs or any other aspect. When the value to the
consumer is significantly greater than the cost of delivering the good or
service, this pricing model is typically employed. For instance, the cost of
making a software CD is roughly the same regardless of the software o n it,
but the pricing varies depending on the projected perceived value from the
buyers. The customer's options will affect how much value they believe
they are receiving. Utilizing competing software, finding a manual
workaround, or refraining from doing an action are examples of
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74 You must understand your customer's business, his business expenses, and
his perceived alternatives in order to use value -based pricing. Other names
for it include perceived -value pricing.
d. Product -Line Pricing: Setting and modifying prices for various products
included in a product line is known as product -line pricing. Instead of
concentrating on the profitability of a single product, a marketer should
aim to optimise profits across the board.
1. Capt ive Pricing
Captive pricing includes setting a low price for the entry -level item in a
product range while setting a higher price for the necessary accessories or
enhancements.
2. Premium Pricing
When a product line includes various high - and low -quality variations of
the same item, premium pricing is frequently applied. It implies charging
more for goods with higher quality or greater versatility.
3. Bait Pricing
a) Bait pricing is when a marketer sets the price of one item in a product
line low with the g oal of selling another item in the line at a higher
price.
b) The marketer anticipates that the cheaper item will draw customers into
the store, where they will then hopefully buy the more expensive item.
4. Price Lining
a) Price lining entails a company sett ing a small range of pricing for
particular categories or product lines.
b) The fundamental premise of price lining is that demand for different
groupings or sets of products is inelastic. Customers will continue to
buy when prices are reasonable and will not react to little price
fluctuations.
5.7 SUMMARY
We made an effort to comprehend what a price is and how pricing works.
Additionally, we were aware of the price policies for both new and old
products. Understanding the cost analysis for pricing decision s and the
impact of cost on price. After carefully examining several pricing
schemes, we were able to determine when to use each one.
5.8 QUESTIONS
1. What is price and explain the concept of pricing
2. Briefly explain the pricing strategy for new and exis ting products
3. Explain how cost analysis is used for pricing decisions
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Pricing Policy
75 5.9 REFERENCES
 Marketing Strategy, Walker , Mullins & Boyd , Tata McGraw -Hill
 Marketin g Strategy and Plans, Luck & Ferrell, Prentic e Hall
 Mark eting Strategy, Stephen Schnaars, Free Press
 Strategic Marketing, Dr. Shahjahan , S.
 Competitive Pricing Analysis, Cheddar
 https://e conomictimes .indiatimes .com/p/perceived -value-
pricing/profileshow/51807284.cms
 https://corporatefinanceinstitute.com/resources/accounting/fixed -and-
variable -costs/
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76 6
MARKETING PLAN
Unit Structure
6.0 Objectives
6.1 Introduction
6.2 Features of Marketing Plan
6.3 Contents of Marketing Plan
6.4 Developing Marketing Strategies and Plan
6.5 Why do Marketing Plans fail and Factors affecting Profitability
6.6 Summa ry
6.7 Questions
6.8 References
6.0 OBJECTIVES
 To study and understand the meaning of marketing plan
 To study the features and contents of marketing plan
 To study the steps in developing marketing plan
 To study the 10 elements of marketing plan
 To study the reasons for failure of marketing plans
 To study the measures of marketing program effectiveness
6.1 INTRODUCTION
The Marketing Plan is the most crucial section of a business plan. This
plan must be tailored toward the objective of the company - its product
and service lines, its markets, its financial status, and its marketing and
sales strategies - in order to keep the business on track.
Meaning Of Marketing Plan :
A marketing strategy details the precise steps that will be taken to pique
the interest of potential customers and clients and convince them to
purchase the provided goods and services.
A marketing plan is a business document created to describe a company's
current position in the market and its marketing strategy for the time
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77 marketing plan should clearly outline the steps that will be done to
accomplish the company's marketing goals. Information like the target
market, competitors, marketing budget, and promotional mix are all
included in the marketing plan.
A marketing strategy is a document that describes the state of the market
and how a company plans to use its future marketing and advertising
budgets. It specifies who the target market is and how to sell a good or
service.
It outlines precise and doable marketing department tactics. The plan is
frequently utilized in conjunction with business or development plans in
order to help a company realize its potential for growth.
6.2 MARKETING PLAN FEATURES
Following is a discussion of the key elements of the marketing plan:
1. Marketing planning is a continuous process; it is not a one -time event.
It is a never -ending process. Finding marketing possibilities is the first
step, followed by developing an effective marketing plan. Once the
plan has been redeveloped, the next step is to find marketing
opportunities. An organization must regularly monitor these
developments because the marketing environment is constantly
changing.
2. Consumer -focused: The demands and requirements o f the customer
are the major focus of all marketing strategies. The marketing strategies
must be customer -focused with the goal of maximizing client
satisfaction. Only when marketing strategies are created with the
customer in mind will they be effective.
3. Textual Record: Marketing strategies are presented in writ ten form. It
should make the marketing goals crystal apparent. The marketing plan's
written version can be referred to in the future as you carry out your
marketing duties.
4. Two tiers: There are two degrees of operation for marketing plans:
long term and short term. Short -term level is referred to as tactical
level, while long -term level is known as strategic level. The target
market and value proposition are both included in the strategic
marketing s trategy. Product features, promotions, pricing, sales,
channels, and other factors are considered in tactical marketing
strategy.
5. Marketing Opportunities: Analysis of the marketing environment is a
component of marketing planning. The market opportunities that the
company can seize are identified by the SWOT analysis. Additionally,
it examines potential penalties that the company might encounter.

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78 6. Time frame: Both long -term and short -term marketing programs are
possible. Short -term marketing strategies are those that last up to one
year, whilst long -term plans last from one year to five years.
7. Market circumstances: Marketing strategies are created by taking into
account the current marketing circumstances. The marketing strategy
will alter in accordance wit h how the situations change. The marketers
make every effort to incorporate the shifting market conditions into
their marketing strategy.
8. Teamwork: The support of each team member is essential to the
marketing plan's success. Any marketing strategy must in volve
collaboration in order to be successful. The creation and execution of
the marketing plan require the participation of every employee in the
organisation.
6.3 MARKETING PLAN CONTENTS
Every marketing strategy must take into account the conditions and
demands of the market. When creating the marketing plan, certain
common elements must be used. The following elements should always be
present in a marketing plan:
1. Situation Analysis:
A SWOT analysis of the market is the fundamental component of a
situation analysis. It examines the firm's assets and liabilities as well as
potential market risks and threats. Analyses of competitors are also
included. A market forecast, segmentation, customer data, and a market -
needs analysis will all be part of the mark et analysis. Performing a
scenario analysis also include gathering and examining data on the state of
the market, customer demographics, and changes that have an impact on
the environment for business and consumers.
2. Marketing Strategy:
At the very least , a strategy should have a mission statement, goals, and a
targeted approach that focuses on certain market segments and product
positioning. The firm's marketing operations should be clearly outlined in
the marketing plan.
3. Sales Forecast:
A detailed s ales forecast would allow for tracking sales on a month -by-
month basis and subsequent plan -vs-actual comparisons. A plan typically
includes more information, such as exact sales by product, location or
market segment, channel, manager responsibilities, and other factors. The
forecast is the absolute minimum.
4. Target Market:
It is essential to always keep in mind the customers we are trying to sell to
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79 strategy divides the population into s everal marketing segments that may
be reached with carefully crafted appeals. Despite this, it should also be
remembered that maintaining a distinct corporate identity depends on the
integration of information across the entire organization.
5. Unique Sell ing Proposition (USP):
Although the USP is an old idea, it is still relevant today. Determine how
the product is unique and how it stands out from the competition in order
to sell it in the enormous ocean of similar products. Only once the
corporation has identified this distinction and made the market aware of it
will its sales efforts be successful. Unfortunately, this is frequently
insufficient. Instead, the company may need to pin -point various USPs
that appeal to various market segments.
6. Marketing Budget:
Any marketing plan must include a budget. This section will assist you in
identifying your precise cash requirements for effective product marketing
and advertising. Implementing a marketing strategy is probably done in
stages. Therefore, it is im portant to be clear about the financial
requirements for each stage of marketing activity. In accordance with the
advertising medium, the firm should also provide a classification of
advertising costs. This should contain sufficient information to track
spending on a month -by-month basis and to do a plan -vs-actual analysis.
Typically, a plan will also include certain programs, management duties,
marketing strategies, and sales approaches. The expenditure budget is
quite restricted.
7. Marketing Goals and Ob jectives:
The firm's marketing goals and objectives should be stated in the
marketing plan. Setting goals is a necessary step in the creation of all
plans. Each company markets its goods and services with a certain set of
goals and objectives in mind. Whi le increasing sales is always the ultimate
goal of any marketing strategy, there may be other objectives as well. For
instance, a company would prefer that its target market sees its goods or
services in one particular light over another. The company might want
potential customers to view its products as necessities rather than luxury
goods. As a result, these goals will be the focus of marketing effort.
8. Marketing Methodology:
The marketing strategy must specify how the business will achieve its
marketi ng goals and objectives. What resources will be employed to
achieve these objectives? The process for carrying out marketing
operations is clearly laid out in marketing methodology.
9. Segmenting the Market:
A wide range of people make up the market audien ce. Engagement with
the audience depends on segmenting it and sending brand
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80 Each audience segment must have content that is specific to them.
Connecting with individuals will be challenging if not. Market
segment ation will assist the company in disseminating information,
building brand recognition, and increasing sales. The target market for the
firm should be stated clearly in the marketing plan. A thorough research
of every market segment, as well as consumer p rofiles from each of these
segments, should be accessible if the company intends to offer its products
in many market segments. What elements characterize the target market
for the company ? Why will the audience find the firm's products
appealing ? The ma rket analysis should provide answers to these two
crucial questions.
10. Product Specifications:
A strong marketing strategy should include the most thorough product
description feasible. Along with the characteristics and advantages of the
products the c ompany sells, a list of the drawbacks and solutions to these
drawbacks must also be included. The name of the product's manufacturer
and any safety precautions that must be observed when utilizing the
product should also be mentioned. This component of the marketing plan
also needs to include information on packaging, warranties and guarantees
that will be offered with the items, information on how to repair broken
goods, and information on customer assistance.
11. Pricing Information:
Without sufficient d etails on the costs associated with goods and services,
no marketing strategy is complete. Both the products' price strategy and
the reasoning behind it should be discussed. The company must make it
obvious why and how the cheap pricing would help them dra w in
customers. Information about any discounts and rebates your company
might give in conjunction with its goods and services can also be included
in this area. The marketing plan must include specific information about
any annual promotions or discounts the company intends to offer.
12. Integration:
The marketing plan's content must be completely connected with overall
business marketing initiatives. An integrated marketing strategy that uses
both online and offline content marketing as a catalyst for c onversations,
sharing, and effective word -of-mouth and brand loyalty may be the best
method to surround consumers with branded experiences.
6.4 DEVELOPING MARKETING STRATEGIES AND
PLAN
A well -thought -out marketing plan is the foundation of effective
marke ting. A sound marketing plan lays out the procedures necessary to
accomplish these objectives and aids in defining the company's vision,
mission, and business goals. Because the marketing strategy has an impact
on how the company operates, it should be est ablished and developed with
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81 outlines the company, its offerings, and its market. It describes the place
and function of goods and services in the market.
Customers and competitors ar e profiled, the marketing methods to be
employed are determined, and a marketing plan can be built and its
efficacy assessed.
A marketing plan, which specifies the precise steps that will be followed
to carry out the marketing strategy, differs from a mark eting strategy in
that it establishes the overarching direction and goals for the entire
marketing function. While the marketing plan typically outlines
techniques to be implemented in the current year, the marketing strategy
may be prepared for the follow ing few years. The process of marketing
planning entails both the creation of objectives and guidelines for how
they will be achieved.
The steps involved in creating marketing planning are as follows:
1. Internal marketing environment analysis :
Analyzing t he current marketing environment for the organization is the
first step in marketing planning. The company must now determine the
strengths and weaknesses of the company. The SW (strengths and
weaknesses) study uses techniques including market share analys is, cost -
volume -profit analysis, customer satisfaction index, brand equity index,
and others. A product's unique selling proposition (USP) is an example of
a strength, but a lack of innovation is an example of a weakness.
2. Analysis of the external market ing environment:
The external market environment is made up of environmental aspects that
are political, social, economic, technological, and legal. These variables
aid in identifying market -related opportunities and risks. Opportunities
and threats are e xternal factors that are out of the organization's direct
control. The holiday season can be an opportunity to generate the most
sales, however an increase in FDI in a country can pose a threat to
domestic players in that country. This OT (opportunities an d threats)
analysis may take into account political stability, shifting dietary habits,
lifestyle changes, liberalization, new legal measures, technological
advancements, etc. Demand forecasting, FDI influx, inflation, exchange
rate, economic policies, bud get, research studies, etc. are some of the
strategies used in this.
3. Marketing Assumptions:
A strong marketing strategy is built on a thorough understanding of the
target audience. However, as it is impossible to know every detail about
each consumer, many assumptions are made. As an illustration, consider
the following:
 Assumptions about the target buyers.
 Messaging / Offering Assumptions - Presumptions regarding what
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82 4. Establish ing business goals is necessary before developing the
marketing plan. such that defining a set of marketing objectives to support
them will be simple. Some possible business objectives are:
 Increasing awareness of the company's goods and services .
 increasi ng sales of a specific supplier's products & expanding into a
new market.
5. Specifying marketing goals and objectives:
Following the identification of the business objectives, the company must
specify a set of particular marketing goals based on the busi ness
objectives. These objectives will serve as the firm's and its team's road
map and success indicators. Increased market penetration (selling more
existing products to existing clients) and market development are two
examples of marketing objectives (se lling existing products to new target
markets). These marketing objectives may be long -term and may require
several years to successfully accomplish. They should, however, have
deadlines for completion, be precise and quantifiable.
The company must guaran tee that its overall strategies are both achievable
and quantifiable. When the strategies have been successful or your
marketing objectives have been reached, a strong marketing strategy will
be revised rather than altered every year. Additionally, you cou ld need to
adjust your strategy if the external market changes as a result of a new
competitor or new technology, or if your products undergo a significant
change.
6. Project the Expected Results:
Marketing managers must project the anticipated outcomes. They must
forecast the target market's future size, composition, and tendencies.
Without accurate forecasting, the marketing strategy may have
unattainable objectives or fail to deliver on its promises.
 Forecasting Customer Response: Marketing managers mus t predict
how the typical customer will react to marketing initiatives. Managers
cannot accurately design the promotions without some understanding
of how the marketing will be received.
 Forecasting Marketing Cost : Accurate forecasting of Marketing Cost
is necessary to strengthen the Marketing Plan.
 Market Forecasting : To correctly predict the market, marketing
managers must develop a thorough grasp of consumers, their
purchasing preferences, and behaviors.
Competition forecasting can be used to counteract compe titors' actions by
understanding how they market, how they market, and what incentives
they utilize.
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83 7. Do Market Research:
Designing a marketing plan requires conducting research. The business
must gather market data, including market size, growth, social trends, and
demography (population statistics such as age, gender and family type). In
order for the strategy to remain effective and focused, it is crucial for the
company to maintain an eye on the market and be aware of any changes
that may occur over time.
8. Identify your Customers:
Identify the needs of your target market and create a profile of your
potential clients using the information from your market research. Their
buying habits, including where, how, and what they purchase, will be
revealed by the profile. Once more, keep an eye on trends to ensure that
the company does not miss out on new chances or stop being relevant with
its marketing message. The business must ensure that its marketing plan
will enable it to maintain ties with its c urrent clients as well as attract new
ones.
9. Identify your Competitors:
Identify your competitors' products, supply chains, pricing, and marketing
strategies in order to create a profile of your competitors as part of your
marketing strategy. This will b e useful in determining the firm's
competitive edge, or what makes the company stand out from its rivals.
The company might also seek to assess the internal processes' strengths
and weaknesses in order to boost its performance relative to that of its
rivals.
10. Create strategies to support your marketing objectives:
The company should identify its target markets and create a set of tactics
to draw and keep them. Increasing young people's awareness of the
company's products is one such objective. Then, co mplementary methods
can include increasing the product's online social media presence through
regular updates on Twitter and Facebook, advertising in local periodicals
geared for young people, and providing student discounts.
11. Using the "5 Ps of Market ing":
The company must use the 5 Ps of marketing to determine the tactical
marketing mix. Its marketing strategy is more likely to be effective if it
can select the ideal blend of product, price, promotion, place, and people.
12. How the resources are orga nized:
An efficient marketing strategy requires the coordination of human,
financial, and technological resources. The resources required are outlined
in this area of the plan, and as a result, the marketing budget.

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84 13. Implementation and Evaluation:
At this point, the marketing team is prepared to begin executing its
strategies. This could entail making financial investments in marketing,
introducing new goods, communicating with potential customers, opening
up additional retail locations, etc.
14. Eval uate the Performance:
The controls that will be used to track progress are outlined in the plan's
last section.
Examine the results for each period, perhaps each month or quarter, and
decide if the plan was successful in achieving its goals. It can be impr oved
upon if necessary to increase effectiveness.
5 C's of a Marketing Plan
 Who are you serving as a Customer ?
 Why do you do what you do as a Company ?
 Who stands in your way as a Competitor ?
 With whom are you Collaborating ?
 What are the economic and market Context in which you operate?
PESTEL analysis for societal change forecasting :
• Political
• Economic
• Socio -cultural
• Technological
• Ethical
• Legal
6.5 FACTORS AFFECTING PROFITABILITY AND THE
REASONS WHY MARKETING PLANS FAIL
a. Marketing plans fail due to:
1. Inadequate data analysis and planning
2. Poor aims communication
3. Ineffective performance monitoring
4. Insufficient allocation of resources
5. Lack of training
6. Modifications in client requirements
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85 b. The crucial elements influencing the company's profitabili ty:
1. Growth in sales or share
2. Effectiveness of new services
3. Customer satisfaction
4. Effectiveness
Performance Dimensions - Profitability
ROA = Profits/Assets
Cash Flow/Assets = CFROA
Return on Sales (ROS) = Profits/Sales
Meeting Margin or Contri bution Goals
6.6 SUMMARY
First, we made an effort to comprehend what a marketing plan is. Next, we
looked at the components and elements of a marketing plan. The steps in
creating a marketing plan were highlighted. Then, we looked at t he 10
components of a marketing strategy. The causes of marketing strategy
failures were taken into account. The effectiveness of marketing
programmes was then measured in many ways.
6.7 QUESTIONS
1. Explain the meaning of marketing plan
2. What are the co ntents of a marketing plan?
3. What are the steps in developing a marketing plan?
4. Enumerate the 10 elements of a marketing plan
5. What are the different measures of marketing program effectiveness?
6.8 REFERENCES
 Marketing Strategy, Walker , Mullins & Boyd, Tata McGraw -Hill
 Marketing Strategy and Plans , Luck & Ferrell, Prentice Hall
 Marketing Management, Kotler, P. and Keller , K., Pearso n
 Strategic Marketing, Dr. Shahjahan , S.
 Marketing Strategy, Stephen Schnaars, Free Press

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86 7
CHANNEL POLICY
Unit Structure
7.0 Objectives
7.1 Introduction
7.2 Marketing Channels
7.3 Length of Channel
7.4 The Nature and Importance of Marketing Channels
7.5 Channel Dynamics
7.6 Channel Conflict
7.7 Marketing Logistics and Supply Chain Mana gement
7.8 Market Logistics Decisions
7.9 Summary
7.10 Questions
7.11 References
7.0 OBJECTIVES
 To understand Channel Policy
 Designing the length, breadth, and modifying the dimensions of the
channel
 Need for control and availability of resources and role in Channel
Design
 Channel selection strategy -direct, corporate, contractual systems omni -
channels
 Channel conflicts and resolution
7.1 INTRODUCTION
Channel Policy :
The number of intermediaries between the manufacturer and the consumer
is known as the "channel length." The distribution channel is determined
by the size and financial stability of the company.
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87  Channel Width: The number of middlemen at a specific distribution
channel step
Things to take into account when choosing a channel:
1. Market Co nsideration
(a) The nature of the market is a crucial aspect of the market. It is taken
into consideration whether a product is intended for a consumer or an
industrial buyer. If a product is intended for both the consumer and
the industrial markets, a long c hannel will need to be used.
(b) The number of possible clients: If there are many potential clients,
there is a need for several intermediaries’ services. Direct selling is
suggested when there are few potential clients.
(c) Geographic concentration of the market : Direct selling works best
when its clients are largely based in a small number of locations. If
they are dispersed throughout the entire nation, a sizable workforce of
middlemen will be required.
(d) Order size: Direct selling is appropriate if sales volume is high.
Industrial distributors offer operating supplies for industry.
(e) Customer purchasing patterns : This has a significant impact on
channel policy. Indirect selling is appropriate when consumer buying
behaviour and patterns are regular and modest in sc ale.
2. Product Consideration :
a. Unit selling value of the product: Direct marketing is more effective
when a product's unit value is high. On the other hand, the direct
channel is less effective when the unit value is low. If the product is
inexpensive, bi gger and less expensive channels are preferable. The
products may be employed in quick and expensive channels if they
have great value.
b. Weight and Bulk: To reduce the freight, heavy or bulky items might
be shipped by truck or train.
c. Perishable Nature: Perishable goods like milk, dairy products, bread,
meat, etc. are conveyed via shorter or direct channels, whereas non -
perishable goods are sent via long channels.
d. Technicality: As the product is technological, services are needed , so
that sales and service per sonnel are required to instruct consumers on
how to use the product. Direct channel is preferable for goods like
computers, office equipment, and so on.
e. Seasonal: Product sales, such as those of woollen clothing, are subject
to seasonal change. There fore, the necessity for intermediaries to
market these seasonal goods. Direct selling does not work.
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88 3. Company Consideration
a. Financial soundness: Businesses that are financially stable are in a
better position to choose and create their distribution chan nel. D irect
route is therefore used. Conversely, financially precarious businesses
must use an indirect channel because they rely on middlemen.
b. Reputation: It has been believed that word -of-mouth spreads more
quickly . Many businesses enjoy a posit ive reputation as a result of
clients' preference for their products. Numerous intermediaries are
ready to connect with these businesses.
c. Market control: Direct channels are recommended when a company
wants to exert control over the price, the manner clien ts are served, etc.
4. Consideration of middlemen :
The middleman who can provide a good storage facility may be taken into
consideration. The sales channel that facilitates the most sales should be
chosen. Each attractive channel's price can be evaluated ba sed on unit
sales. The best channel type with the lowest marketing unit cost may be
taken into consideration.
5. Consideration of the client :
The selection of the channel is influenced by the characteristics of the
purchasers, such as their numbers, locatio ns, purchasin g patterns,
quantities purchased, etc. Geographically dispersed customers may benefit
from a long channel. Customers might like to have the product in a handy
location; for instance, they might prefer to have everyday necessities like
milk, pa per, bread, e tc. near the front door. The distribution channel used
must make it possible for the manufactured goods to reach consumers on
time.
Channel Structure :
Channel structures come in two types:
 Industrial channel structure
 Channel structures for co nsumers
Desig ning a distribution system involves the following general steps:
defining the distribution objective, defining customer requirements, and
evaluating competitor strategies.
Types of Channels :
1. M anufacturer - Consumer
This is the direct chann el. Consumers receive products directly from
manufacturers. The shortest and most straightforward channel. The makers
of perishable items and trendy products who wish to sell their wares
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89 When new product s are released into the market, they are placed close to
the clients to encourage aggressive sales, etc.
The producers' chosen techniques for direct selling include installing a
sales counter at the manufacturing facility, door -to-door sales, sales by
mail order, sales by opening their own stores, and sales through
mechanical devices.
2. M anufacturer - Retailer - Consumer
An intermediary retailer is present in the channel. Through these retailers,
a manufacturer offers products for sale to customers. Betwee n
manufacturer s and consumers, there is a chasm. When there are many
buyers and the product needs to be sent quickly, this strategy is used. In
this channel, manufacturers perform a wholesaler's duties while
wholesalers are disregarded.
In general, retaile rs are directl y offered vehicle appliances, apparel, and
shoes. This channel is used by Bata India Limited.
3. Producer - Wholesaler - Retailer - Consumer
The two different categories of intermediaries in this route are wholesalers
and retailers. Through these middlemen , a producer distributes his goods
to customers. These intermediaries expand the gulf between the producers
and the buyers.
4. M anufacturer - Agent Middlemen - Wholesaler - Retailer - Customer
The three different categories of intermediaries in this route are
wholesalers, retailers, and agent middlemen. There is a very wide distance
between the producer and the customer. For the purpose of distribution,
the manufacturer through this channel employs agent intermediaries. The
agent supplies the products to wholes alers, who then sell them to retailers,
who then supply the products to customers.
Channel Conflict :
Channel Conflicts fall under three categories:
a. Vertical level conflicts: When a member of one level disagrees with a
member of a higher or lower level
b. Conf licts at the same level, or on a horizontal level
c. Conflicts at multiple levels, including those brought on by middlemen,
at all of the aforementioned levels.
Channel Conflict Management :
Setting overarching goals, Dealer Committees, Communication ,
Arbitrat ion, and Mediation Motivating channel users through financial and
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90 7.2 MARKETING CHANNELS
These are sets of independent organizations participating in the process of
making a product or service available for use or consum ption

Fig. 7.1: Marketing Channels
Value Delivery Network and Supply Chains :
The "make and sell" perspective of the supply chain takes into account the
company's resources, inputs, and manufacturing capabilities.
According to the "sense and respond" dema nd chain t heory, planning
should begin with the demands of the target customer, and the company
should then respond by setting up a chain of resources and activities with
the aim of adding value for the client.
Marketing channels create the market rather t han merely serving it.
Push Strategy:
 Uses promotion tools, sales force to sell.
 Used when there is little brand loyalty .
Pull Strategy:
 Utilizes advertising and other methods to generate demand.
 Used when there is a strong brand loyalty .
Channel Integration
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91 The value delivery network is made up of the company's suppliers,
distributors, and finally customers who collaborate to raise system
performance.
Value Net works :
A firm creates a value network as a system of alliances and partnerships to
source, augment, and deliver its offerings.
Indirect channels are use when market is widely dispersed, Low
transaction amount, bulk purchase in one transaction
The marketin g channel has three dimensions:

Fig. 7.2: Dimensions of Marketing Channel
7.3 LENGTH OF CHANNEL
Increase your chances of reaching more of your target market by
maximizing distribution.
For instance, Toyota would only be able to sell its automobiles from its
manu facturing facilities absent dealerships. This would significantly
reduce their ability to reach the customer.
Cost minimization : You can reduce costs more by shortening the channel.
Mainta ining control : You have less control over your product th e longer
your marketing channel .
For instance, Subway would have little influence over how their product
was presented if they created sandwiches and sold them to a wholesaler
who then sold them to a store. Instead, they prepare it freshly in front of
the customer, g iving them total control over the experience.
When you take the length of your distribution route into account, there is a
trade -off between increasing distribution, reducing expenses, and
maintaining control.
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92 Channel Design Dimensions

Fig. 7 .3: Channel Design Dimensions
Key Functions performed in Marketing Channels
1. Marketing Communications :
Using P -O-P Displays to Promote the Product Supplying a sales force that
serves as a resource for customers
2. Inventory Control :
Ordering the right se lection of goods
Keeping enough stock on hand to satisfy client demand
Keeping goods in a facility that's suitable
3. Physical Distribution :
Delivering goods
Co-ordinating delivery times to satisfy customer demands
Co-ordinating the return of damaged goods
4. Market Feedback :
Serving on advisory boards for manufacturers
Letting other channel participants know about competing activity
Taking part in evaluations of test markets
5. Taking care of monetary risk :
Minimizing the risk of product loss or degradation
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93 How Channel Members Add Value

Fig. 7.4: How Channel Members Add Value
7.4 THE NATURE AND IMPORTANCE OF
MARKETING CHANNELS
Members of the channel have the following duties:
1. Analyzing Customer Needs
Lot size, w aiting and delivery times, spatial convenience, product variety,
and service backup are only a few examples.
2. Define Goals and Limitations
1. Product accessibility
2. Fulfilling Customer Service Needs
3. Support for Promotional Activities
4. Ma rket Da ta
5. Cost -Effectiveness
6. Adaptability
Channel goals change depending on the features of the product.
Environmental aspects including the channels of competitors, the state of
the economy, and judicial and other restraints and regulations also ha ve an
impact on channel design.
In addition to the target market, the following factors affect the company's
channel objectives:
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94 Due to the nature of its goods, such as perishable goods, more direct
marketing is necessary to prevent delays and excessive h andling .
Which functions, how many channels, and modes of transportation a
corporation can utilise depend on its features, such as its size and financial
standing.
The capacities of intermediaries to handle marketing, client contact,
storage, and credit va ry; for instance, the company's own sales team is
more aggressive in selling.
Competitors' channels: Some businesses may prefer to compete in or close
to the same outlets that sell their rivals' products, while others may not, as
in the case of Burger King wantin g to be close to McDonald's.
Environmental factors, the state of the economy, and legal restrictions also
have an impact on channel design decisions. For example, in a struggling
economy, producers may choose to use shorter channels to distribute th eir
products.
3. Identify and Evaluate Major Channel Alternatives :
Economic Criteria:
Finding out which will generate more sales - a business sales force or a
sales agency - is the first step.
The cost estimates for selling various volumes through each channe l come
next.
Comparison of sales and costs is the last step.
Sales and prices will vary depending on the channel.
Control Criteria:
The agents can be preoccupied with the products of other clients or they
might be unqualified to handle our merchandise.
Adaptive Criteria:
The channel participants are required to commit to one another in some
way for a predetermined amount of time.
Channel Management Decisions :
a. Selecting Channel Members :
Identify characteristics that distinguish the best channel members
b. Training Channel Members
c. Motivating Channel Members :
Coercive power: If intermediaries don't collaborate, the manufacturer
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95 Reward power: Manufacturers give intermediaries additional rewards in
exchange for carrying out particular tasks.
Legitimate power: It exists when the manufacturer makes a request that
the contract supports.
Expert power: The manufacturer possesses unique knowledge that the
middlemen value.
Referent power: The manufacturers are proud to be associated with the
intermediaries.
Producers may employ: Powers of coercion, persuasion, legitimacy,
knowledge, and referral
7.5 CHANNEL DYNAMICS
Vertical Marketing Systems (VMS)
Conventional Marketing Channel
Corporate VMS: It unites many p roduction and distribution stages under
a single ownership.
Administered VMS: Using the size and influence of one member,
administered VMS coordinates the many production and distribution
stages.
Contractual VMS: A contractual VMS consists of independent
businesses integrating their programs on a contractual basis to achieve
more economies of scale or sales impact than they could do on their own.
1. Voluntary chains sponsored by wholesalers bring together teams of
independent merchants to more effectively comp ete with big chains
through uniform selling techniques and purchasing economies.
2. Stores that decide to create a new company to continue wholesaling and
potentially some production give rise to retailer cooperatives. Retail
cooperative members focus their p urchases through the cooperative,
collaborate on advertising plans, and split revenues according to their
purchases.
3. Organizations that are franchised when a franchisor connects multiple
subsequent production -distribution stages.
Manufacturer -sponsored ret ailer franchise E.g. Honda and its dealers
Manufacturer -sponsored wholesaler franchise E.g. Coca -Cola and its
bottlers
Service -firm-sponsored retailer franchise E.g. Ramada Inn and its motel
franchisees
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96 The New Competition in Retailing
Horizontal Marketi ng Sy stems :
To take advantage of a new marketing opportunity, two or more
unconnected organizations may pool their resources or implement joint
initiatives.
Multi -channel Marketing Systems:
To reach one or more consumer categories, a single company may emp loy
two or more marketing channels. Companies can profit from improved
market coverage, decreased channel costs, and more individualized selling
by implementing more channels.
7.6 CHANNEL CONFLICT
Types of Conflict and Competition :
Vertical channel conflic t: General Motors came into conflict with its
dealers in trying to enforce policies on service, pricing, and advertising.
Horizontal channel conflict
Multi -channel conflict
Causes of Channel Conflict :
Goal incompatibility
Unclear roles and rights
Differenc es in perception
Managing Channel Conflict :
1. Adoption of super -ordinate objectives, with channel participants
agreeing on the core objective they share, such as survival, market
share, excellent quality, or customer pleasure. When the channel is
threatened f rom outside forces like a more effective rival channel,
unfavorable legislation, or a change in customer preferences, members
typically reach an agreement.
2. Incorporating leaders from rival organizations into advisory councils,
boards of directors, and othe r similar structures is referred to as co -
optation. Co -optation can lessen conflict as long as the originating
organization takes the leaders and their ideas seriously.
3. The disagreement is resolved through diplomacy when each party sends
a representative t o meet with the other side.
4. Using mediation, the interests of the two sides are reconciled by a
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97 5. When the parties agree to submit their arguments to an arbitrator and
accept the arbitrator's verdict, arbitration takes p lace.
7.7 MARKETING LOGISTICS AND SUPPLY CHAIN
MANAGEMENT
Why logistics is receiving more attention:
Gives businesses a competitive edge
It may result in cost reductions
An increase in product variety necessitates better logistics
Thanks to information te chnology, distribution efficiency could be
increased.
The Logistics System's objectives :
No system can optimize customer service while reducing expenses.
The advantages of better service must be weighed against the costs by
businesses initially.
Set object ives for a specific level of customer service at lowest cost
Marketing Logis tics: Definition and Importance:
Supply chain management is the process of controlling the upstream and
downstream value -added movements of raw materials, finished items, and
related information among suppliers, the company, resellers, and end
users.
Important Logistics Activities :
Warehousing
Inventory control
Logistics Information management
Transportation
Transportation has an impact on product cost, delivery efficiency, and th e
state of the items upon arrival.
Logistics information Management is the management of the flow of
information, such as client orders, billing, inventory levels, and customer
data, is known as information management.
EDI (electronic data interchange) VMI (vendor -managed inventory)
Integrated logistics management is the recognition that providing customer
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98 Third -Party Logistics is the outsourcing of logistics functions to Third-
Party Logistics providers (3PLs)
Types of Retailers
1. Department Store:
This sort of retailer can appear as a collection of smaller retail stores run
by one company, but it is frequently the most complex and offers a large
selection of products. The department store merchants provide goods at
various price points. This kind of retailer enhances customer service by
facilitating the purchase of a wide range of products from a single shop.
2. Supermarkets:
Typically, this cate gory of business focuses on providing a selection of
food and drink items. However, many now supply goods from the markets
for home, fashion, and electrical goods as well. Due of their large
purchasing power, supermarkets frequently sell products at inexpe nsive
costs.
3. Warehouse Re tailers:
This category of retailer is typically found in commercial or retail parks,
where space rents are less expensive. This makes it possible for this kind
of shop to stock, present, and sell a wide range of goods at extrem ely
affordable costs.
4. Spe cialty Retailers:
By focusing on particular markets or goods, these merchants may provide
their clients with in -depth information and top -notch support. By
providing accessories and extra relevant products at the same location,
they also provide value. A t ypical specialty store concentrates on a single
category and offers high -quality customer service.
5. E-tailer:
This category of retailer enables clients to order things online and have
them delivered. This kind of store can p rovide a larger geographic
consumer base and is very practical. E -tailers frequently have reduced rent
and overhead costs, allowing them to provide very competitive rates.
6. Convenience Shop:
Typically found in residential areas, this sort of retailer of fers a
constrained selection o f goods at higher rates due to the convenience
factor. They are primarily seen in populated areas. They offer a small
selection of items at higher than usual costs, along with quick checkout.
Given that it frequently operates with extended hours and stocks every
day, this store is excellent for last -minute and emergency purchases.
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99 7. Discount Shop:
This category of retailer provides a range of products at reduced prices. By
reselling end of line and returned goods at reduced costs, they provide
inexpensiv e pricing on less trendy brand products from a variety of
providers. These shops typically provide a wide range of goods and
services, but they mostly compete on pricing by providing a vast selection
of goods at reasonable and low costs. Retailers typicall y carry fewer
trendy brands.
8. Boutiques or concept stores:
These establishments resemble specialty shops. Concept stores are
typically quite small and carry just one brand. The company that owns
them manages them.
9. Hyperm arkets:
They offer a wide sel ection and tonnes of special goods with slim profit
margins. Operating expenses are relatively low.
10. Malls:
They have a variety of retail stores in a single location. Under one roof,
they provide goods, food, and entertain ment.
11. Vending Machines:
This is a piece of automated equipment that clients use to insert money
and purchase goods.
12. Street Stalls:
These are businesses with very little space because they are typically built
on any open ground along a busy street ; they are typically long -term
structures. They are owned by small partnership companies or independent
retailers.
13. Stalls in Markets or Bazaars:
These are tiny stores located in markets that have been especially built,
such the Crawford Market in Mumbai or the New Market in Kolkata.
There is hardly much room. The fact that potential customers are always
walking by is a significant benefit of such a stall. These stalls can be
transient, as with weekly markets in rural areas, or they might be
permanent. These companies typically contr olled by partnerships or
individual proprietors.
14. Second -hand Dealers:
These often deal in the sale of books, clothing, furniture, automobiles, and
other items. They are quite successful because they meet the demands of
the majority of consumers who ca nnot afford to purchase brand -new
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100 15. Hawkers and Peddlers:
They travel from one locality to another with a relatively small inventory
that they purchas e from wholesalers or neighborhoo d shops. Usually, you
can find them on busy street corners. They typically offer products that are
of lower quality and at alluring prices.
16. Co -operative Retail Stores:
Just as chain stores and department stores were esta blished in order to
reduce the m iddleman's profit, people have opened their own stores in an
effort to do the same. In order to provide goods and services to its
members at a reasonable cost through its store, a co -operative organization
is created in whic h members spend their cash.
17. Mail -Order Business:
These are companies that operate through the mail, expanding the scope of
their activities by operating in a larger region. The biggest issue with mail
order businesses in India is the variety of langua ges spoken throughout the
nation , which makes it challenging for these businesses to expand beyond
a small local area. They could therefore need to focus on the major cities
while operating in English because doing business in various languages in
various locations might be costly.
In or der to fulfil certain needs, such as those of customers or businesses,
logistics is the management of the movement of resources between the
point of origin and the site of consumption.
Physical resources like food, materials , equipment, liquids, and person nel
can be managed alongside abstract resources like time, information,
particles, and energy in logistics. The integration of information flow,
material handling, production, packaging, inventory, shipping,
warehousing, and frequently security is typicall y required for the logistics
of physical goods. Dedicated simulation software can model, evaluate,
visualize, and optimize the complexity of logistics. In logistics for import
and export, minimizing the utilization of resour ces is a typical driving
force.
The science of planning, executing, and maintaining force mobility and
maintenance is known as logistics. In the broadest sense, those
components of operations that deal with: a) the design and development,
acquisit ion, storage, movement, distribution, mai ntenance, evacuation, and
disposition of materiel; b) the movement, evacuation, and hospitalization
of personnel; c) the acquisition or construction, maintenance, operation,
and disposal of facilities; and d) the ac quisition or provision of services.


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101 7.8 MARKET LOGISTICS DECISIONS
In order to meet consumer needs and still turn a profit, marketing logistics
entails organizing, delivering, and controlling the flow of tangible
products, promotional materials, and inf ormation from a manufacturer to a
market. Understanding and putting into practice a successful marketing
logistics plan about product, pricing, site, and promotion are necessary to
maintain an organization's competitive edge. These four marketing
logistics tasks assist the company in reaching its target market and
providing the goods or services it is selling to these clients. The following
are significant logistics decisions to be made:
1. Order Processing :
The majority of businesses aim to reduce the tim e that passes between
receiving, deliveri ng, and paying for an order. The longer this cycle lasts,
the less satisfied the customers are, and the less money the company
makes. An order processing system gathers order information from
customer service repres entatives or directly from customers, mai ntains the
information in a central database, and, if necessary, distributes order
details to the accounting and shipping departments.
2. Warehousing :
Since the cycles of production and consumption are rarely synch ronised,
every business must keep produce d goods until they are sold. Goods can
be delivered to clients more rapidly with more stocking sites, but
warehousing and inventory costs increase. The business may consolidate
inventory and use quick shipping to me et orders to cut down on these
costs. Fro m the beginning of the Industrial Revolution through the 19th
century and into the 20th century, warehouses were a significant
component of the urban landscape; the structures persisted even after their
primary purp ose had changed.
3. Inventory :
Salespeop le want their businesses to have enough inventory on hand to
immediately meet all customer orders. This, however, is not economical.
As the customer service level gets closer to 100%, the cost of inventory
rises qui ckly. Before making a choice, management must ascertain how
much sales and earnings would rise as a result of maintaining larger stocks
and guaranteeing quicker order fulfilment times. The process of
effectively managing the continuous flow of items into a nd out of an
existing inventory is known as inventory management.
4. Transportation :
The mode of transportation chosen has an impact on the cost of the
product, the performance of on -time deliveries, and the state of the items
upon arrival, all of which h ave an impact on customer satisfaction. T hanks
to containerization, shippers are increasingly combining two or more
modes of transportation and putting goods in boxes or trailers that are
simple to switch between them.
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102 7.9 SUMMARY
First, we tried to compr ehend the numerous facets of channel poli cy. After
that, we tried to comprehend designing the channel's length, breadth, and
dimensions of the channel. Additionally, it is demonstrated how to
evaluate the necessity of control, resource availability, and ro le in channel
design. Next, we looked at a channel selection approach that included
direct, corporate, and contractual systems as well as Omni -channels.
Finally, we made an effort to comprehend Channel conflicts and their
resolution.
7.10 QUESTIONS
1. What do you mean by Channel Policy?
2. Explain the meaning of length and breadth of channel.
3. What factors affect Channel selection strategy?
4. What do you mean by Channel conflicts and resolution of these
conflicts?
7.11 REFERENCES
 Marketing Channel Strategy, Palmatier, Sivadas, Stern & Ansary,
Routledge
 Marketing Management, Kotler, P. and Keller, K., Pearso n
 Marketing Stra tegy, Walker , Mullins & Boyd , Tata McGraw -Hill
 Principles of Ma rketing, Kotler, P. and Armstrong, G., Pearson
 Marketing Strategy, Stephen Schnaars, Free Press

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