Evolving views of marketing
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Transcript of Evolving views of marketing
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Evolving views of marketing
• Attracting customers Todays customers are smarter, more price conscious,more demanding and approached by more players
• The challenge is not to produce satisfied customers but to produce delighted and loyal customers
• Companies seeking to expand their profits and sales have to spend time and resources leading to suspects,prospects and sales effort
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• Computing the cost of lost customers-First the company must define and measure its retention rate
• Second the company must distingush the causes of customer attrition and identify those can be managed better
• Third,the company needs to estimate how much profit it loses while losing customers,the lost profit is equal to the customers life time value
• Fourth, the company needs to figure out how much it would cost to reduce the defection rate, and finally nothing beats listening to customers
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• The need for customer retention-A company would be wise to measure customer satisfaction regularly as its the key toretention
• A highly satisfied customer stays loyal longer buys more as the company introduces new products,less bothered by competition,pricing
• Companies think they are getting a sense of customer satisfaction by tallying complaints
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• Measuring customer life time value- describes the present value of the stream of future profits expected over the customers lifetime
• The company must subtract from expected revenues the expected costs of attracting, selling and serving that customer
• Of course,a company needs,in addition to an average customer estimate,a way ofestimating CLV for each individual customer
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• Customer relationship management,the key- The aim of CRM is to produce high customer equity
• CRM is the process of managing detailed information about individual customers and care fully managing all customer touch points
• There are three drivers of customer equity; value equity,brand equity and relationship equity
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• Value equity is the customers objective assesment of the utility of an offering based on the perceptions of its benefits
• Brand equity is the customers subjective and intangible assesment of the brand,above its perceived value
• Relationship equity is the customers tendency to stick with the brand above and beyond all objective and subjective assesments
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• Customer relationship management- is perhaps the most important concept of modern marketing
• It involves managing detailed iformation of individual customers and carefully managing customer touch points to maximise loyalty
• More recently CRM is the overall process of building and maintaining profitable customer relationships by superior value and satisfaction
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• Customer value- Attracting and retaining customers can be a difficult task
• Customers have a big line of products and services to chose from
• A customer buys from the firm that offers highest perceived value
• The difference between all the benefits and cost of marketing offer compared to other offers eg: Federal express
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• Customer satisfaction- Depends on the products perceived performance relative to a buyers expectations
• If the product performance falls short of expectations the customer is disastisfied
• If performance matches expectations,the customer is satisfied and if the performance exceeds expectations there iscustomer delight
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• Oustanding marketing companies go out of their way to keep important customers satisfied
• Highly satisfied customers repeat purchases and also constitute to good word of mouth
• Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise
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Customer relationship levels and tools• At one extreme,a company with many low-margin
customers may seek to develop basic relationships with them
• P&G does not call and talk to all tide customer instead they do brand building,get to promotions,toll free no. and website
• At the other extreme in markets with few customers and high margins sellers want to create full partnership with key customers
• Eg:P&G work closely with walmart&boeing with airline service providers
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• Today most of the leading companies are offering customer loyalty and retention programs beyond consistent quality
• Marketers use specific marketing tools like frequency marketing programs to reward regular buyers like flierprograms,hotel upgrad
• Club marketing programmes and communities • Harley- davidsons Harley owners group(HOG)
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Types of buying decision behaviour
• Complex buying behaviour-undertake this behaviour ,they are highly involved inpurchase perceive significant difference among brands
• Consumers may be highly involved when the product is expensive,risky,purchased infrequently and highly self expressive
• Typically the consumer has to learn about the product category,for eg: a PC buyer may not know what attributes to consider
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• Dissonance –reducing buying behaviour -occurs customers are highly involved in infrequent purchase but see little difference among brands
• For eg:Customers buying carpeting may face a high involvement decision because carpeting is expensive and self expressive
• Yet buyers may consider most carpet brands in the given price range to be the same
• After purchase the customer might experience post purchase dissonance as they notice disadvantages in the purchased prod or adv.in the non-purchased
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• Habitual buying behaviour- occurs under conditions of consumers low involvement and a little significant brand difference
• For eg:Common salt,the consumers simply go to a store and search for a brand
• If they reach out the brand in future its out of habit rather than strong brand loyalty
• Because they are not committed to any brands marketers use price and sales promotions to stimulate product trial
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• Variety seeking buying behaviour- is undertaken by consumers in situations of low involvement but significant brand differences
• In such cases consumer often do a lot of brand switching
• For eg; When buying cookies consumer may hold some beliefs,choose a cookie without much evaluation,evaluate during consumption
• But next time the customer may pick another brand just for a variety not due to disatifaction
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The buyer decision process
• Need recognition- the first stage of buyer decision process in which the consumer recognises a problem or need eg:ad of a car
• Information search- The stage of buyer decision process in which the consumer is keen to search for more information
• Evaluation of alternatives-At this stage the consumer uses the information available to evaluate the alternate brands
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• Purchase decision- Generally the consumers purchase decision will go in favour of the most preferred brand
• Influence of others and unexpected situational factors can come in between the decision
• Post puchase behaviour – After purchasing the product,the consumer will be satisfied or dissatisfied and will engage in post purchase behaviour
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Business markets
• Business markets fetch more business and money than consumer markets
• Take an eg:of a tyre co (good year),various suppliers sell goodyearrubber,steel,equipment and other goods to produce tyres
• Good year sells this to retailers who inturn sells it to the conumers,they sell it to the OEMs,and sell to fleet owners for repalcement
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Charecteristics of business markets• Market structure and demand-the business
marketer deals with fewer buyers than consumer marketer
• For eg:the good year sells replacement tyres to final customers,its potential customers are lot of vehicle owners
• But the companys fate lies in an order from an auto maker&placing in key retailers
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• Business markets are geographically concentrated and business demand is derived demand
• B-to-B marketers sometimes promote the products to the final customer to increase business demand
• Many business have inelastic demand not directly related to price changes&business markets have fluctuating demand
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Participants in the buying process
• The decision making unit of an organisation is called the buying centre
• This group includes the actual users of the product or service,those who make the buying decision,who do the actual buying etc.
• The buying centre includes all members of the organisation who play 5 roles in the purchase decision process
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• Users- are members of the organisation who will use the product or service
• In many cases users initiate the buying proposal and help define product specifications
• Influencers- provide information for evaluating alternatives,technical personnel are particularly important influencers
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• Buyers- have formal authority to select the supplier and arrange terms of purchase
• Buyers may help shape product specifications,but major role is selecting vendors and negotiating
• In more complex puchases buyers may include high level officers participating in negotiations
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• Deciders- have formal or informal power to select or approve final suppliers
• In routine buying the buyers are often deciders or at least approvers
• Gate keepers- control the flow of information to others
• Examples are technical personnel or even personnel secretaries
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Market segmentation
• Market consists of buyers and buyers differ in one or more ways
• They may differ in their wants,resources, attitudes and buying practices
• Through market segmentation, the companies divide large heterogeneous markets in to smaller segments t reach more efficiently
• A marketer has to try different segmentation variables in consumer markets
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• Geographic segmentation- calls for dividing the market in to different geographical units like nation,state,district etc
• A company may operate in one area or few areas or operate in all possible areas but pay attention to geographical differences in needs
• Companies are going for untapped territories and mini stores in high density urban areas
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• Demographic segmentation- divides the market in to groups based on variables such as age,gender,family size,income,occupation,relig
• These are the most popular basis for segmenting customer groups
• A major reason is that the customer needs,wants,and usage rates vary with demographic variables
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• Psychographic segmentation- divides buyers in to different groups based on social class, lifesyle or personality charecteristics
• People in the same demographic group can have very different psychographic makeups
• Eg:the marketing for Honda appears to target the 20 plus guys but its actually aimed at a much broader personality group
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• Behavioral segmentation- divides buyers in to groups based on their knowledge,attitudes, users or responses to a product
• Marketers believe that behaviour variables are the best starting point for building market segments
• Ocassions- buyers can be grouped according to ocassions when they get the idea to buy actually make the purchase or use a purchased item
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• Benefits sought- a powerful form of segmentation is to group buyers according to the different benefits they seek from it
• User status- markets can be segmented in to groups of non-users,ex-users,potential users,first –time users ®ular users
• Usage rate- light,medium and heavy users• User status- non-users,ex-users,potential users,first
time users®ular users• Loyalty status- A market can also be segmented by
consumer loyalty
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Target marketing
• Once the segmentation is done,the firm has to evaluate the various segments and decide which segments it can serve best
• Evaluating the market segments- a firm must look at three facts; segment size and growth, segmentstructural attractiveness&coresources
• Selecting target market segments- a target market consists of a set of buyers who share common needs that the co needs to serve
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• Undifferentiated marketing- using a mass marketing strategy a firm ignores the segment differences and targets the whole market
• Differentiated marketing- here a firm decides to target several market segments and designs separate offers for each
• Concentrated marketing-isespecially appealing when company resources are limited,instead of going for a small share in a large market
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• Micromarketing- is the practice of tailoring products and marketing programs to meet the needs of various market segments and niches
• Choosing a target market strategy- best depends on the companys resources
• Socially responsible target marketing- biggest issues usually involve the targetting of vulnerable or disadvantaged consumers
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Positioning
• A products position is the way the product is defined by consumers on important attributes place the product occupies in consumers mind
• Positioning involves implanting the brands unique benefits and differentiation in customers minds
• Positioning maps- show consumer perception of brands vs competitors in important buying dimensions(price,orientation,performance)
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Choosing a positioning strategy • identifying possible competitive advantages- to
understand customer needs better than competitors and deliver more value
• Choosing right competitive advantages- if a company has multiple competitive advantages the best which will build its positioning strategy
• Selecting the overall positioning strategy- to position the brands on the key benefits that they offer relative to competing brands
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The product development processInvolves eight stages,they are1.Idea generation- starts with the search for ideas,the
management should decide the products and markets to emphasise
• The new product objective also should be stated whether cash flow or market domination
• 2.Idea screening-this stage is idea pruning or reducing by screening,the company must avoid drop-error,ie permitting a poor idea further or dropping a good one
• Idea rating is done by describing the product,the target market and the competition
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3.Concept development and testing- surviving ideas must be now developed into product concepts
• A product idea is an idea of a possible product the company can see offering to the market
4.Marketing strategy development-consists of 3stages first describing the size,strucuture and behaviour
• The second part outlines the products planned pricing and distribution strategy and the third part says about the long-run and profit goals
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5.Business analysis- the management must review the sales,cost and profit projections to determine whether they satisfy the objectives
• If they do, the product concept can move to the product development stage
6.Product development- if the product concept passes the business test,it moves to the R&D and the engineering department for developing
• This stage will answer whether the product idea can be translated in to a technically and commercially feasible product
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7.Test marketing- once the management is satisfied with the products functional performance,the product is ready with a brand name
• The purpose of test marketing is to learn how consumers and dealers react to handling,using and repurchasing the actual product
8.Commercialisation- test marketing gives management enough information to make a final decision regarding the decision regarding launch
• In launching a product,the company should decide when,were to whom and how
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The product life cycle
• The PLC is the course of a products sales history and profits over its life- time
• It involves 5 distinct stages- product development,introduction,growth,maturity and decline
1. Product development- product development begins when the company finds and develops a new product idea
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• 2.introduction stage- starts when the product is launched commercially and made available for purchase
• High level of promotion is needed to 1,inform the potential customers2, induce trial and 3, secure distribution in retail outlets
• Marketing strategies- considering the price and promotion the marketing dept can pursue multiple strategies
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• Rapid skimming strategy-launching new product at a high price and high promotion level
• Slow skimming strategy- launching the new product at a high price and low promotion
• Rapid penetration strategy- launching the new product at a low price and spending heavily on promotion
• Slow penetration strategy- consists of launching the new products at a low price and low level of promotion
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• 3,Growth stage- the growth stage is marked by a rapid climb in sales
• New competitors enter the market,attracted by the opportunities for large scale production and profit
• They introduce new product features and this further expands the market
• The increased number of competitors leads to an increase in the number of outlets and production
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• Marketing strategies- the strategies will try to sustain the market as long as possible
• a, the firm improves product quality and adds new product features and models
• b,it enters new market segments• c,it enters new distribution channels• d,it shifts some advertising from building product
awareness to bringing about product conviction • e,it lowers prices at the right time to attract the
price-sensitive buyers
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• 4,Maturity stage- a products rate of growth will slow down and the product will enter a stage of relative maturity
• The stage lasts longer than previous stages and pose formidable challenges to the marketing department
• Most products are in the maturity stage of the life cycle and most marketers deal with mature markets
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• The maturity stage is divided in to 3 phases• The first phase of growth maturity the sales growth
rate starts to decline because of distribution saturation
• The second phase,stable maturity,sales become level on a percapita basis because of market saturation
• In the third phase ,decaying maturity the absolute level of sales starts to decline and customers move towards other products and substitutes
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• Marketing strategies- • a,market modification- the company should seek to
expand the market for its brand by working with the twofactors-no. of users& usage rate per user
• b,product modification- in a way that will attract the new users and more usage from current users
• c,Market mix modification- stimulate sales through modifying one or more marketing mix elements like price,distribution,advertising,sales promotion etc
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• 5.Decline stage- the sales of most firms and brands eventually decline,the decline may be slow or rapid
• Sales may plunge to zero or they may be at a lower level and continue for so many years
• Sales decline for a number of reasons like technological advances,consumer shift in tastes and increased domestic and foregin cmpetition
• As sales and profits decline some products are withdrawn from the market and remaining reduce the no.of offerings and even promotion and prices
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• Marketing strategies- A company faces number of tasks and decisions to handle its ageing products
• They must decide whether to maintain product without change,harvest the product or drop the products
• If the product is to continue special marketing strategies have to be evolved
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Types of distribution channels• 1.Intensive distribution- stocking products in as
many outlets as possible,producers of convenience goods like toothpastes,soaps etc use this strategy
• 2.Exclusive distribution- only limited number of dealers are granted exclusive rights of distribution in a territory
• Selective distribution- appointing more than one, but less than all the dealers willing to carry a product eg; TV,fridge,washing machine
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Selection of a channel• In the process of designing channels, companies
have to study and compromise between the ideal and practicable
• The different steps involved in the channel design process are
• 1.Determining the channel objectives- effective channel planning starts with the determination of what is to be achieved using it
• The objectives include effective coverage of the target market,efficient and cost effective distribution,making products available near etc
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• 2.Identifying functions- Out of the various functions like providing information,promotion,contact, breaking bulk etc
• Out of all of these the function expected of the channel has to be decided
• 3.Matching channel design to product attributes- Products differ from each other and hence require different channel systems
• The channel system that is suitable for that particular product should be selected
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• 4. Evaluating legal aspects and distribution – the distribution environment in the country or territtory has to be considered while deciding on the channel
• The proposed channel should be compatible with features of the distribution environment
• 5. Assessing competitors channel design- the channel partners of competitors should be evaluated before deciding on channel design
• The strength and weaknesses of competitors channels have to be assessed in order to get an edge over them
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• 6. Assessing company resources and matching channel design to it-
• Company with limited resources may opt for conventional channels and those with larger resources will opt for wider distribution channels
• 7.Final selection of best design- after the various alternatives are evaluated,the company choses the best among them
• Each alternative needs are to be evaluated against economic,control and adaptive criteria
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Channel management decisions• After a company has chosen a channel
alternative,individual intermediaries must be selected,trained ,motivated and evaluated
• Channel arrangements must be modified over time• 1.Selecting channel members-Companies need to
select their channel members carefully• To customers the channels are the company and
any unpleasant and inefficient behaviour from the channel will get a negative impression of the company
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• Producers vary in their ability to attract qualified intermediaries eg:Epson corporation
• Whether producers find it easy or difficult to find intermediaries, they should distingush the charecters of best intermediaries
• They should evaluate the number of years in business,other lines carried,growth and profit record,financial strength and co-operation
• The size and quality of the sales force is also taken in to account
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• 2.Training channel members- Companies need to plan and implement careful training programs for intermediaries
• This is because they will be viewed as the company by end users
• Microsoft requires third party service engineers to take complete a set of courses
• The passing out people are formally recognised as MCP and they can use this desgnation to promote business
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• 3.Motivating channel members- A company needs to view its intermediaries in the same way it views it end users
• The co. should provide training programs, market research programs and other capabiity building programs to improve the performance
• The company must constantly communiacte that the intermediaries are partners in a joint effort to satisfy end users of the product
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• 4.Evaluating channel members- producers must periodically evaluate intermediaries performance against standards such as sales targets,delivery time
• The producer will ocassionally discover that its paying too much to certain intermediaries for what they are actually doing
• Under performers must be counselled,remotivated or else terminated
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• 5.Modifying channel arrangements- A producer must periodically modify its channel arrangements
• When the distribution channel is not working as planned consumer patterns change,market expands and new competition arise
• Also innovative distribution channels emerge and the product moves in to the later stages in the life cycle
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Channel conflicts
• Diasgreement among channel members on goals and roles leads to channel conflicts
• The ideal condition is to work smoothly understanding their roles and goals
• Horizontal conflict can happen with dealers in the same level of the channel
• For eg; some fertilizer dealers may complain that others are selling at a discount or they are selling outside their territory
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• Vertical conflict is conflicts between different levels of the same channel
• Dealer of Hyundai may complain if the company gets in to a direct outlet
• Multichannel conflict exists when the manuafctuer has established two or more channels to sell to the same market
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Causes of channel conflict
• One major cause is goal incompatibility,for eg; a manufacturer wants a low pricing penetrating strategy whereas the dealer looks for more margins
• Conflict can also stem from diffrences in perception, for eg; a manuafcturer wants to have a higher level of inventory but the dealer is pessimistic about it
• Conflict can also occur by the channel partners over dependence on the manuafacturer
• The product and pricing decisions for eg create conflicts in auto dealers
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Managing channel conflict• There are several mechanisms for effective conflict
management• 1.Adoption of superordinate goals- channel
members come to an agreement on the fundamental goal they are jointly seeking
• It could be survival,market share,high quality or customer satisfaction
• 2.Another useful step is to exchange persons between two or more channel levels
• In this case the company executives may work some time in dealerships too
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• 3. Co-optation is effort by one organisation to win the support of the leaders of another organisation
• This is possible by including them in advisory councils,boards of directors etc
• 4.Much can be accomplished by encouraging joint membership in and between trade associations
• This could be grocery marketing association,food marketing institute etc
• 5.When conflict is chronic or acute, the parties have to resort to diplomacy,mediation or arbitration