Marketing Management(Notes for BBA & Commerce)

Marketing Management Notes for BBA & Commerce

Compiled by: Seetal Daas Contact:[email protected]

BBA(Hons)-2k13

University of Sindh Laar Campus @ Badin

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CHAPTER 1

Introduction to Market and Marketing

What is MARKETS ?

Traditionally, a “market” was a physical place where buyers and sellers gathered

to buy and sell goods. Economists describe a market as a collection of buyers and

sellers who transact over a particular product or product class (such as the housing

market or the grain market).

Marketers use the term market to cover various groupings of customers. They

view sellers as constituting the industry and buyers as constituting the market.

They talk about need markets (the diet-seeking market), product markets (the

shoe market), demographic markets (the youth market), and geographic markets

(the Chinese market); or they extend the concept to cover voter markets, labor

markets, and donor markets, for instance.

Consider Following Four Markets:

1-Consumer Markets---Companies selling mass consumer goods and services

such as juices, cosmetics, athletic shoes, and air travel spend a great deal of time

establishing a strong brand image by developing a superior product and

packaging, ensuring its availability, and backing it with engaging

communications and reliable service.

2-Business Markets---Companies selling business goods and services often face

well-informed professional buyers skilled at evaluating competitive offerings.

Business buyers buy goods to make or resell a product to others at a profit.

Business marketers must demonstrate how their products will help achieve higher

revenue or lower costs. Advertising can play a role, but the sales force, the

price, and the company’s reputation may play a greater one.

3-Global Markets---Companies in the global marketplace must decide which

countries to enter; how to enter each (as an exporter, licenser, joint venture

partner, contract manufacturer, or solo manufacturer); how to adapt product and

service features to each country; how to price products in different countries; and

how to design communications for different cultures. They face different

requirements for buying and disposing of property; cultural, language, legal and

political differences; and currency fluctuations. Yet, the payoff can be huge.

4-Nonprofit and Governmental Markets---Companies selling to nonprofit

organizations with limited purchasing power such as churches, universities,

charitable organizations, and government agencies need to price carefully. Lower

selling prices affect the features and quality the seller can build into the offering.

Much government purchasing calls for bids, and buyers often focus on practical

solutions and favor the lowest bid in the absence of extenuating factors.



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Eight Different States Of Demand:

1. Negative demand---Consumers dislike the product and may even pay to avoid

it.

2. Nonexistent demand---Consumers may be unaware of or uninterested in the

product.

3. Latent demand---Consumers may share a strong need that cannot be satisfied

by an existing product.

4. Declining demand---Consumers begin to buy the product less frequently or

not at all.

5. Irregular demand---Consumer purchases vary on a seasonal, monthly,

weekly, daily, or even hourly basis.

6. Full demand---Consumers are adequately buying all products put into the

marketplace.

7. Overfull demand---More consumers would like to buy the product than can

be satisfied.

8. Unwholesome demand---Consumers may be attracted to products that have

undesirable social consequences.

Needs, Wants and Demand:

Needs describe basic human requirements. Example need for food, air, water,

education, entertainment etc. Needs become wants---when they are directed to

specific objects that might satisfy the need. Example need for food and want for

a Hamburger (KFC ZINGER), Demands--- are wants for specific products

backed by willingness and ability to pay. Marketers do not create needs. Needs

preexist marketers. Marketers along with other social influencers influence wants.

Product Or Offering And Brand:

Product--- A product is any offering that can satisfy a need or want. Major typed

of basic offerings: Goods, services, experiences, events, persons, places,

properties, organizations, information and ideas.

Brand--- A brand is an offering from a known source. Example: Apple, HP, etc.

Four Levels Of Competition:

1-Brand competition---Similar products or services to the same customers at

similar prices. Example: iPhone, Samsung, Nokia etc.

2-Industry competition---All companies making the same product or the class

of product. Example: Honda, Toyota and other medium price automobiles.

3-Form competition---All companies manufacturing the products that supply the

same service. Example: Automobiles + Motorcycles + Bicycles + Trucks.

4-Generic competition---All companies that compete for the same consumer

dollars. Example: Consumer durables + Foreign Vacations + New Homes.



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What Is Marketing?

Social Definition: Marketing is a societal process by which individuals and

groups obtain what they need and want through creating, offering and freely

exchanging products and services of value with others. (One marketer said that

marketing’s role is to deliver a high standard of living)

Managerial Definition: Often described as the art of selling. Marketing is not

just selling. Selling is only the tip of the iceberg!

Peter Drucker: The aim of marketing is to make selling superfluous. The aim of

marketing is to know and understand the customer so well that the product or

service fits him and sells itself.

American Management Association: Marketing (management) is the process

of planning and executing the conception, pricing, promotion, and distribution of

ideas, goods, services to create exchanges that satisfy individual and

organizational goals.

Kotler: We see marketing management as the art and science of choosing target

markets and getting, keeping and growing customers through creating, delivering

and communicating superior customer value.

Marketing is about identifying and meeting human and social needs. One of the

shortest good definitions of marketing is “meeting needs profitably.”

Marketing Management as the art and science of choosing target markets and

getting, keeping, and growing customers through creating, delivering, and

communicating superior customer value.

Managers sometimes think of marketing as “the art of selling products,” but many

people are surprised when they hear that selling is not the most important part of

marketing! Selling is only the tip of the marketing iceberg.

Four Key Dimensions Of Holistic Marketing are:

1. Internal marketing---ensuring everyone in the organization embraces

appropriate marketing principles, especially senior management.

2. Integrated marketing---ensuring that multiple means of creating, delivering,

and communicating value are employed and combined in the best way.

3. Relationship marketing---having rich, multifaceted relationships with

customers, channel members, and other marketing partners.

4. Performance marketing---understanding returns to the business from

marketing activities and programs, as well as addressing broader concerns and

their legal, ethical, social, and environmental effects.



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Three stages through which marketing practice might pass: 1) Entrepreneurial marketing: Most companies are started by individual who

live by their wits. They visualize an opportunity and knock on every door to get

attention. Example: A person sold beer door to door and such direct selling.

Slowly he became market leader in selling his products.

2) Formulated marketing: when small companies achieve success, they move

to formulated marketing i.e. already laid down advertising methods, like TV etc.

3) Entrepreneurial Marketing: some companies rely on formulated marketing,

without much success. They need to develop some creative out of the box ideas

to market their products.

Marketing Channels:

To reach a target market marketer uses three different kinds of marketing

channels.

1-Communication channel: The marketer uses communication channels to

deliver and receive messages from target buyers. These consist of dialogue

channels (e mail, toll free numbers).

2-Distribution channels: To display and deliver the physical product or service

to the buyer or user. They include warehouses, transportation vehicles and various

trade channels such as distributors, wholesalers, retailers etc.

3-Selling channels: They include not only the distributors and retailers but also

the banks and insurance companies that facilitate transactions.

Marketing Mix:

Marketing mix--- is the set of marketing tool that the firm uses to pursue its

marketing objectives in the target market.

Typically, the firm can change its price, sales force size, and advertising

expenditures in the short run. It can develop new products and modify its

distribution channels only in the long run. Thus the firm typically makes fewer

period-to-period marketing-mix changes in the short run than the number of

marketing-mix decision variables might suggest. Note that the four Ps represent

the seller’s view of the marketing tools available for influencing the buyer. From

a buyer’s point of view, each marketing tool is designed to deliver a customer

benefit. Robert Lauterborn suggested that the seller’s four P’s correspond to the

customer’s four Cs. Four Ps or Four Cs

Product Customer Solution

Price Customer Cost

Place Convenience

Promotion Communication



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Marketers And Prospects:

A marketer is someone who seeks a response---attention, a purchase, a vote, a

donation---from another party, called the prospect. If two parties are seeking to

sell something to each other, we call them both marketers.

Marketers are skilled at stimulating demand for their products, but that’s a limited

view of what they do. Just as production and logistics professionals are

responsible for supply management, marketers are responsible for demand

management. They seek to influence the level, timing, and composition of

demand to meet the organization’s objectives.

Marketplaces, Marketspaces, And Metamarkets:

The marketplace is physical, such as a store you shop in; the marketspace is

digital, as when you shop on the Internet. Northwestern University’s Mohan

Sawhney has proposed the concept of a metamarket to describe a cluster of

complementary products and services closely related in the minds of consumers,

but spread across a diverse set of industries. Metamarkets are the result of

marketers packaging a system that simplifies carrying out these related

product/service activities. The automobile metamarket consists of automobile

manufacturers, new and used car dealers, financing companies, insurance

companies, mechanics, spare parts dealers, service shops, auto magazines,

classified auto ads in newspapers, and auto sites on the Internet. A car buyer will

engage many parts of this metamarket, creating an opportunity for metamediaries

to assist him or her in moving seamlessly through them. Edmund’s

(www.edmunds.com) lets a car buyer find the stated features and prices of

different automobiles and easily click to other sites to search for the lowest-price

dealer for financing, accessories, and used cars. Metamediaries also serve other

metamarkets, such as home ownership, parenting and baby care, and weddings.

Supply Chain:

The supply chain is a longer channel stretching from raw materials to components

to finished products carried to final buyers. The supply chain for coffee may start

with Ethiopian farmers who plant, tend, and pick the coffee beans, selling their

harvest to wholesalers or perhaps a Fair Trade cooperative. If sold through the

cooperative, the coffee is washed, dried, and packaged for shipment by an

Alternative Trading Organization (ATO) that pays a minimum of $1.26 a pound.

The ATO transports the coffee to the developing world where it can sell it directly

or via retail channels. Each company captures only a certain percentage of the

total value generated by the supply chain’s value delivery system. When a

company acquires competitors or expands upstream or downstream, its aim is to

capture a higher percentage of supply chain value.



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Marketing Environment:

The marketing environment consists of the task environment and the broad

environment. The task environment includes the actors engaged in producing,

distributing, and promoting the offering. These are the company, suppliers,

distributors, dealers, and target customers. In the supplier group are material

suppliers and service suppliers, such as marketing research agencies, advertising

agencies, banking and insurance companies, transportation companies, and

telecommunications companies. Distributors and dealers include agents, brokers,

manufacturer representatives, and others who facilitate finding and selling to

customers. The broad environment consists of six components: demographic

environment, economic environment, social-cultural environment, natural

environment, technological environment, and political- legal environment.

Marketers must pay close attention to the trends and developments in these and

adjust their marketing strategies as needed. New opportunities are constantly

emerging that await the right marketing savvy and ingenuity.



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CHAPTER 2

Creating Customer Value, Satisfaction and loyalty

(a) Traditional Organization Chart (b) Modern Customer Oriented-Organization Chart

Managers who believe the customer is the company’s only true “profit center”

consider the traditional organization chart in Figure(a)--a pyramid with the

president at the top, management in the middle, and frontline people and

customers at the bottom--obsolete. Successful marketing companies invert the

chart as in Figure (b). At the top are customers; next in importance are frontline

people who meet, serve, and satisfy customers; under them are the middle

managers, whose job is to support the frontline people so they can serve

customers well; and at the base is top management, whose job is to hire and

support good middle managers. We have added customers along the sides of

Figure (b) to indicate that managers at every level must be personally involved in

knowing, meeting, and serving customers. Some companies have been founded

with the customer-on-top business model, and customer advocacy has been their

strategy--and competitive advantage--all along. With the rise of digital

technologies such as the Internet, increasingly informed consumers today expect

companies to do more than connect with them, more than satisfy them, and even

more than delight them. They expect companies to listen and respond to them.

Customer Perceived Value:

Customer-perceived value (CPV) is the difference between the prospective

customer’s evaluation of all the benefits and all the costs of an offering and the

perceived alternatives. How then do customers ultimately make choices? They

tend to be value maximizers, within the bounds of search costs and limited

knowledge, mobility, and income. Customers estimate which offer they believe

(for whatever reason) will deliver the most perceived value and act on it. Whether

Top Management

Middle Management

Frontline Management

Customers

Customers

Frontline People

Middle Management

Top

Management



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the offer lives up to expectation affects customer satisfaction and the probability

that the customer will purchase the product again.

Total customer value—is the perceived monetary value of the bundle of

economic, functional, and psychological benefits customer expect from a given

market offering.

Total customer cost—is the bundle of costs customers expect to incur in

evaluating ,obtaining, using, and disposing of the given market offering,

including monetary, time, energy, and psychic costs.

Total Customer Satisfaction:

In general, satisfaction is a person’s feelings of pleasure or disappointment that

result from comparing a product’s perceived performance (or outcome) in

relation to his or her expectation. If the performance falls short of expectations,

the customer is dissatisfied. If it matches expectations, the customer is satisfied.

If it exceeds expectations, the customer is highly satisfied or delighted. Some of

today’s most successful companies are raising expectations and delivering

performances to match. Korean automaker Kia found success in the United States

by launching low-cost, high-quality cars with enough reliability to offer 10-year,

100,000 mile warranties.

Customer Expectation:

How to buyers form their expectations? From past buying experience, friends,

and associate’s advice, and marketers and competitors information and promises.

If the marketers raise expectations too high, the buyer is likely to be disappointed.

However, if the company sets expectation too low, it would not attract enough

buyers (although it will satisfy those who buy).

Measuring Satisfaction:

Many companies are systematically measuring how well they treat customers,

identifying the factors shaping satisfaction, and changing operations and

marketing as a result. Wise firms measure customer satisfaction regularly,

because it is one key to customer retention. A highly satisfied customer generally

stays loyal longer, buys more as the company introduces new and upgraded

products, talks favorably to others about the company and its products, pays less

attention to competing brands and is less sensitive to price, offers product or

service ideas to the company, and costs less to serve than new customers because

transactions can become routine. Greater customer satisfaction has also been

linked to higher returns and lower risk in the stock market.

Product and Service Quality:

Satisfaction will also depend on product and service quality. What exactly is

quality? Various experts have defined it as ‘fitness for use,’ ‘conformance to



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requirements,’ and ‘freedom from variation.’ We will use the American Society

for Quality’s definition: Quality is the totality of features and characteristics of a

product or service that bear on its ability to satisfy stated or implied needs. A

company that satisfies most of its customers’ needs most of the time is called a

quality company, but we need to distinguish between conformance quality and

performance quality (or grade). A Lexus provides higher performance quality

than a Hyundai: The Lexus rides smoother, goes faster, and lasts longer. Yet both

a Lexus and a Hyundai deliver the same conformance quality if all the units

deliver their respective promised quality.

Total Quality Management:

Total quality management (TQM) is an organizational-wide approach to

continuously improving the quality of all the organization’s processes, products,

and services.

Product, service quality, customer satisfaction and company profitability are

connected. Higher levels of quality result in higher levels of customer

satisfaction, which support higher prices and lower costs. Studies have shown a

high correlation between relative product quality and company profitability.

Maximizing Customer Lifetime Value:

Ultimately, marketing is the art of attracting and keeping profitable customers.

Yet every company loses money on some of its customers. The well-known 80–

20 rule states that 80 percent or more of the company’s profits come from the top

20 percent of its customers. Some cases may be more extreme--the most

profitable 20 percent of customers (on a per capita basis) may contribute as much

as 150 percent to 300 percent of profitability. The least profitable 10 percent to

20 percent, on the other hand, can actually reduce profits between 50 percent to

200 percent per account, with the middle 60 percent to 70 percent breaking

even.41 The implication is that a company could improve its profits by “firing”

its worst customers.

Customer Profitability:

A profitable customer is a person, household, or company that over time yields a

revenue stream exceeding by an acceptable amount the company’s cost stream

for attracting, selling, and serving that customer. Note the emphasis is on the

lifetime stream of revenue and cost, not the profit from a particular transaction.42

Marketers can assess customer profitability individually, by market segment, or

by channel.

Customer Profitability Analysis:

Customer profitability analysis (CPA) is best conducted with the tools of an

accounting technique called activity-based costing (ABC). ABC accounting tries

to identify the real costs associated with serving each customer--the costs of



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products and services based on the resources they consume. The company

estimates all revenue coming from the customer, less all costs. With ABC, the

costs should include the cost not only of making and distributing the products

and services, but also of taking phone calls from the customer, traveling to visit

the customer, paying for entertainment and gifts--all the company’s resources that

go into serving that customer. ABC also allocates indirect costs like clerical costs,

office expenses, supplies, and so on, to the activities that use them, rather than in

some. proportion to direct costs. Both variable and overhead costs are tagged back

to each customer.

Competitive advantage: is a company’s ability to perform in one or more ways

that competitors cannot or will not match. Any Competitive advantage must be

seen by customers as a customer advantage. For example, if a company delivers

faster than its competitors , this will not be a customer advantage if customer do

not value speed. A leverageable (the ability to influence what people do)

advantage is one that a company can use as a springboard to new advantages,

much as Microsoft has leveraged its operating system to Microsoft Office and

then to networking application.

Measuring Customer Lifetime Value:

The case for maximizing long-term customer profitability is captured in the

concept of customer lifetime value.46 Customer lifetime value (CLV) describes

the net present value of the stream of future profits expected over the customer’s

lifetime purchases.

The company must subtract from its expected revenues the expected costs of

attracting, selling, and servicing the account of that customer, applying the

appropriate discount rate (say, between 10 percent and 20 percent, depending on

cost of capital and risk attitudes). Lifetime value calculations for a product or

service can add up to tens of thousands of dollars or even into six figures.

Customer Equity: Customer Equity—is the total of the discounted lifetime values of all of the

firm’s customers. The aim of customer relationship management (CRM) is to

produce high equity.

Value Equity(VE): is the customer’s objective assessment of the utility of an

offering based on perceptions of its benefits. Relative to its costs. Sub-drivers of

VE are quality, price and convenience. Value equity specially drives customer

equity in business market.

Brand Equity(BE): is the customer’s subjective and intangible assessment of the

brand, above and beyond its objectively perceived value. Sub-drivers of BE are

customer brand awareness, attitude toward the brand, and customer perception of



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brand ethics. Brand equity is more important than the other drivers of customer

equity.

Relationship Equity(RE): is the customer’s tendency to sick with the brand,

above and beyond objective and subjective assessments of its worth. Sub-drivers

of RE include loyalty programs, special recognition and treatment programs,

community-building programs, and knowledge-building programs.

Cultivating Customer Relationships:

Companies are using information about customers to enact precision marketing

designed to build strong long-term relationships. Information is easy to

differentiate, customize, personalize, and dispatch over networks at incredible

speed. But information cuts both ways. For instance, customers now have a quick

and easy means of doing comparison shopping through sites such as Bizrate.com,

Shopping.com, and PriceGrabber.com. The Internet also facilitates

communication between customers. Web sites such as Epinions.com and

Yelp.com enable customers to share information about their experiences with

various products and services. Customer empowerment has become a way of life

for many companies that have had to adjust to a shift in the power with their

customer relationships.

Mass customization: providing all features in product that customer needs.

Customer Relationship Management:

Customer relationship management (CRM) is the process of carefully managing

detailed information about individual customers and all customer ‘touch points’

to maximize loyalty. A customer touch point is any occasion on which a customer

encounters the brand and product--from actual experience to personal or mass

communications to casual observation. For a hotel, the touch points include

reservations, check-in and checkout, frequent-stay programs, room service,

business services, exercise facilities, laundry service, restaurants, and bars.

CRM enables companies to provide excellent real-time customer service through

the effective use of individual account information. Based on what they know

about each valued customer, companies can customize market offerings, services,

programs, messages, and media. CRM is important because a major driver of

company profitability is the aggregate value of the company’s customer base.

One to One Market: marketers will treat good with their regular customer, that

is why marketer sees the importance by customer to customer.

Mass distribution/ Production: distribution of product in quantity should be

equal to all type of customers.



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Don Peppers and Martha Rogers outline a four-step framework for one-to-

one marketing that can be adapted to CRM marketing as follows:

1. Identify your prospects and customers. Don’t go after everyone. Build,

maintain, and mine a rich customer database with information from all the

channels and customer touch points.

2. Differentiate customers in terms of (1) their needs and (2) their value to

your company. Spend proportionately more effort on the most valuable

customers (MVCs).Apply activity-based costing and calculate customer lifetime

value. Estimate net present value of all future profits from purchases, margin

levels, and referrals, less customer-specific servicing costs.

3. Interact with individual customers to improve your knowledge about their

individual needs and to build stronger relationships. Formulate customized

offerings you can communicate in a personalized way.

4. Customize products, services, and messages to each customer. Facilitate

customer interaction through the company contact center and Web site.

Company losses in response to losing potential customer:

Losing potential customer and attracting new customer cost 5 times

increase.

Average companies loses 10% of its customer year.

5% reduction in customer defection rate can profit 25% to 85%.

Retention of customer in permanent sources of increasing profit.

Market Characterize on the basis of Long-term buying Profits:

Permanent capture Market: a market where customer purchase the products on

the daily basis--once a customer always a customer.

Example: Medical care products—juices, Fat Lessing products etc.

Simple Retention Market: a market where customer permanently loss by period.

Example: Wire and Telecom.

Customer Migration Market: a market where customer can leave and come

again to buy product. Example: Consumer Products, Airline Services.

Customer Churn: Many companies suffer from high customer defection so it is

called customer churn.



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Building Loyalty:

Basic Marketing: It is a limited where seller sells the products but additional

services are not provided.

Reactive Marketing: In this marketing, seller sells the product whether customer

has the problem about the product shares with the company notes his/her

complaints and cooperate with customer.

Accountable Marketing: In this marketing, after selling product seller call the

customer asking about that their expectation has achieved or not, satisfied with

their quality etc.

Proactive Marketing: In this type of marketing, company remains in touch of

customer, contacts weekly, monthly for knowing opinion about the performance

and improvement of product.

Partnership Marketing: In this kind of marketing, company treat with customer

as partner and even adapt the policies recommended by customer for their

products/brand.

Forming Strong Customer Bond:

1-Adding Financial Benefits: to build a strong relation marketers provide

additional services to customer for Example, Hotel provides facility of pick and

drop, security, and internet services.

2-Adding Social Benefits: for building close relation with customer marketers

invites their customer in their award winning/ distribution ceremony and

anniversary etc.

3-Adding Structural Ties: marketers provides some accessories by which they

remains in contact with customer. For Example, Purchasing laptop EVO gifted.

Customer Database And Database Marketing:

Customer database—a complete information about customer profile, location,

age and how much time customer purchases and in which quantity or amount.

Customer mailing list: is simply set of names, addresses, and telephone

numbers.



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Business database: contain business customers past purchases; past volumes,

prices and profits.

Benefits

Lead generation: when a customer buys the product more times than other

consequently company will able to know about reward will be rewarded.

Lead qualification: on the basis of buying products regularly, company

will be able to select potential customer and customer will be more

beneficial easy to give reward.

For Sale of products/services: special treatment should be done to those

who buy enough being having customer are the assets of organization.

For building customer relationship: database is one of the major source

for building good relationship.

Database marketing—is the process of building, maintaining, and using

customer databases and other databases(products, suppliers, resellers) for the

purpose of contacting, transacting, and building customer relationship. For

Example, Nokia through assessing past record do something innovate in their

upcoming product.

Order place: to fulfill the given order of delivery/product on time and place.

Benefits

First to identify prospectus: many companies generate sales leads by

advertising their product or service. The ads generally contain a response

feature, such as business cad toll-free number. The compnay sorts though

the database to identify the best prospects, then contact them by mail,

phone, or personal call in an attempt to convert them into customer.

To decide which customer should receive a particular offer: companies

are interested in selling, up-selling and cross-selling their products and

services.

to deepen customer loyalty: companies can build interest by remembering

customer preferences; by sending appropriate gifts, discounts, and

interesting reading material.



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To reactivate customer purchases: company can install automatic

mailing programs that send out birthday or anniversary cards, Christmas

shopping reminders. the database can help the company make attractive or

timely offers.

To avoid serious customer mistakes: a major bank confessed a number

of mistakes that it had made by not using its customer database well. in one

case, the bank charged a customer a penalty for late payment on his

mortgage, failing to note that he headed a company that was a major

depositor in this bank.



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CHAPTER 3

Analyzing Consumer Market

Consumer market: a market where final consumer buys the products.

What Influences Consumer Behavior?

Three factors may influence consumer behavior;

1-Culture factors: some general features in all people, for example, American

has freedom of speech in everywhere anytime and anywhere in America.

Subculture: some features about religion, region, narrow concept, living style,

sect and language.

2-Social factors: social interaction that what and how you discuss with people

and marketers with consumer.

Reference group: a person's reference groups consist of all the groups that have

direct or indirect influence on his/her attitudes or behavior.

Primary group: it is sort of reference group includes family, friends, peers, and

neighbors. marketers by this come to know who is opinion leader or from whom

consumer get information or permission before purchasing product. Example,

whenever children want to buy any sort of product they ask parents before.

Secondary groups: such as religious, professional, and trade-union groups; if

consumer want to buy product he/she shares the products name with its expert or

who have good knowledge in that product, after getting fruitful information

consumer make final decision.

Aspirational groups: are those persons who hopes to join; for example, NGO

starts campaign about the usage of expired products public willingly join them in

this subject to support the NGO.

Dissociative groups: are those persons who dislike to join. Example when

marketers sells the products which consumer does not want to buy after seeing

own benefits consumer dislike it.



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3-Personal factors: a buy's decision are also influenced by personal

characteristics. these includes the buyer's age and stage in the life cycle;

occupation and economic circumstances; personality and self-concept; and life

style and value.

People buy different goods and services over a lifetime. taste in food, clothes,

furniture is often age related. consumption is also shaped by the family life cycle

and the number, age, and gender of people in the household at any point in time.

marketers should also consider critical life events or transitions--marriage,

childbirth, illness, relocation, divorce, career change, widowhood-- as giving rise

to new need.

Occupation and economic circumstances: occupation also influence

consumption patterns. a blue/white collar worker/employee will buy work

clothes/dresses, shoes and lunchboxes. marketers try to identify the occupational

groups that have above-average interest in their products and services.

Personality and self-concept: personality means showing your outlook to others.

personality is often described in terms of such as self-confidence, dominance,

autonomy, deference, sociability, defensiveness, and adaptability. personality can

be useful variable in analyzing consumer brand choices. Whenever a brand is

worn people realize themselves as upper class person. Self-concept is how one

views oneself.

Key Psychological Processes:

A set of psychological processes combine with certain consumer decision

processes and purchase processes. The marketers task is to understand what

happens in the mind of consumer according to that marketers works to fulfill the

needs and want of consumer.

Motivation: Freud, Maslow, Herzberg

A person has many needs at any given time. Some needs are biogenic; they arise

from physiological states of tension such as hunger, thirst, or discomfort. Other

needs are psychogenic; they are arise form psychological states of tension such

as need for recognition, esteem, or belonging.

Freud’s Theory: assumed that the psychological forces shaping people’s

behavior are largely unconscious, and that a person cannot fully understand



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his/her own motivation. When a person examines specific brands, he/she will

react not only to their stated capabilities, but also to other, less conscious.

Marlow’s Theory: Abraham Marlow sought to explain why people are driven

by particular needs at particular times. Human needs are arranged in a hierarchy

such as physiological needs, safety needs, social needs, esteem needs and self-

actualization needs.

Marlow’s Theory helps marketers understand how various products fit into the

plans, goals, and lives of consumer.

Herzberg Theory: Frederick Herzberg developed a two-factor theory is that

hygiene factors(factors that cause of dissatisfaction ) and motivator factors

(factors that cause of satisfaction).

By this theory marketers came to know two implication 1)sellers should do their

best to avoid dissatisfiers (e.g. poor service policy) 2)the seller should identify

the major satisfier or motivator of purchase in the market and then supply them.

Perceptional Processes:

a-Selective attention: estimated that the average person may be exposed to over

1,500 ads or brand communication a day. Because a person cannot possibly attend

to all of these, most will be screened out—a process called selective attention

means that marketers have to work hard to attract consumers notice/attention.

b-Selection distortion: consumer at this distort the information; selective

distortion is the tendency or ability to interpret information in a way that will fit

our preconception. Therefore marketers have to do more work on this to fulfill

consumer needs, wants, satisfaction and expectation. For Example, providing

more features in a camera which consumer never anticipated about that.

c-Selective Retention: marketers likely, we are likely to remember good points

about the product we like and forget good points about competing products.

selective retention again works to the advantage of strong brands, so marketers

continuously pay attention on reminding about their product and diverting the

attention of consumer toward their products, because when consumer want to

similar product his/her attention should not be diversified to another product.



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Psychological Factors:

Learning: involves changes in an individual’s behavior arising from experience.

Learning theorist believe that learning is produced through the interplay of drives,

stimuli, cues, response and reinforcement.

Drive: is a positive focus on to take an action. E.g. consumer want to buy a laptop

before purchasing the features of laptop offering companies.

Stimuli: material or information on your mind.

Cues: are minor stimuli that determine when, where, and how a person responds.

E.g. you buy Dell laptop, if your past experience is rewarding, your response to

Dell laptop positively.

Memory: is a kind of stuff in consumer’s mind. E.g. Used product consumer buys

again by recalling his memory. It is divided into two categorizes expressed below.

1-Short-term memory(STM): information which is temporary available in

mind. E.g. Fast Moving Consumer Goods (FMCG), this kind of products remains

very short time in mind.

2-Long-term memory(LTM): information which is permanent available in

mind. By using this memory consumer collects the information from their past

experience and makes a good decision in purchasing.

Memory Processes—it is a process in which consumer losses the information

about eh product after watching the ads/publicity consumer recall the product

information. Market study focused on where consumer losses his memory ,should

be revised or reminded again. E.g. Nissan Sunny was popular brand in 1990s but

now no one knows about it due to not having any kind of ads etc.

Buying Decision Process:

1-Problem recognition: first identify your problem, for example what to

purchase and what is your need?

2-Information Search: in this stage consumer searches the information about the

product, it may be searched by numerous ways such as;

2.1-Personal ways of information search includes family, friends and neighbor

etc.

2.2-Commercial ways of information search includes advertisement—websites,

TV, Radio—dealers, Salespersons etc.



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2.3-Public ways of information includes Mass-Media—magazines, newspapers.

2.4-Experiential ways of information means those have already used same

product so each way or source influence buying decision.

3-Evaluation of Alternatives: some basic concept will help us understand

consumer evaluation processes; First, the consumer trying to satisfy a need.

Second, the consumer is looking for certain benefits from the product solution.

Third, the consumer sees each product as a bundle of attributes with varying

abilities for delivering the benefits sought to satisfy this need.

4-Purchase decision: in this stage, on the basis of criteria consumer prefer the

product or take final decision in purchasing.

5- Postpurchase Behavior: in this stage behavior of consumer changes or not

after using the product, his/her expectation and satisfaction about the product

fulfilled or not. Means consumer monitors his decision that it was right or wrong.

Decision Heuristics And Biases:

Heuristics: are rules of thumb or mental shortcuts in the decision process.

1-The availability heuristics: consumer base their prediction on the quickness

and ease regarding particular like that product comes in mind. Simply what is in

consumer mind he/she buy or choose product on that base.

2-Representative heuristics: seeing another product which matches the product

which consumer used in past on that base he/she buys.

3-Anchoring and Adjustment heuristics: consumer finally purchases the

product thereafter he/she make amendment according to his/her choices.



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CHAPTER 4

Analyzing Business Market

What is Organizational Buying?

Organizational buying is a process of purchasing by-product or semi-product for

making it to finished goods.

Business Market V/S The Consumer Market:

The business market consists of all the organizations that acquire goods and

services used in the production of other products or services that are sold, rented,

or supplied to others. The major industry making up the business market are

agriculture, forestry, and fisheries, mining, manufacturing, construction,

transportation. Communication , public utilities, banking, finance, and insurance,

distribution and services. More dollars and items are involved in sales to business

buyers than to consumers.

Fewer, Larger Buyers: in this buying incurred in large volume but

purchaser are very few.

Close Supplier-Customer Relationship: power of larger customers,

suppliers are frequently expected to customize their offerings to individual

business customer needs. Business buyer often select supplier who also

buy form them. Example. A paper manufacturer that buys chemicals form

a chemical company that buys a considerable amount of tis paper.

Professional Purchasing: business goods are often purchased by trained

purchasing agents, who must follow their organization’s purchasing

policies, constraints, and requirements. Example, request for quotations,

proposals, and purchase contracts, are not typically found in consumer

buying. Professional buyers spend their life how to buy better.

Several Buying Influences: buying committees consisting of technical

experts and even senior management are common in the purchase of major

goods. Business marketers send well-trained sales representatives and

sales teams to deal with the well-trained buyers.



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Multiple Sales Calls: more people are involved in selling process, it takes

multiple sales calls to win most business orders.

Derived Demand: the demand for business goods is derived form the

demand for consumer goods. For this reason, business marketer must

closely monitor the buying pattern of consumer. Example, the Big Three

automakers inn Detroit have been driving the boom in demand for steel-

bar product.

Inelastic Demand: in business market; small change in price, great change

in demand is called elastic demand and small change in demand but great

change in price is called inelastic, business marketer mostly focus on

inelastic demand.

Fluctuating Demand: business market depends on the demands of

consumer market. Demand for business goods and services tends to be

more volatile than the demand for consumer goods and services.

Geographically Concentrated Buyers: more than half of U.S. business

buyers are concentrated in major states such as New York, California,

Ohio, New Jersey etc., The geographical concentration of producers helps

to reduce selling costs. At the same time, business marketers need to

monitor regional shifts of certain industries.

Direct Purchasing: business market focus on direct purchasing not

intermediary means business marketer make direct contact to supplier; but

consumer market focus on intermediary, such as retailer, wholesaler.

Buying Situations:

Situation in which customer set their buying decision.

Straight Rebuy: the purchasing department reorders on a routine basis.

For Example, office supplies, bulk chemicals and chooses form suppliers

on an approved list. The supplier make an effort to maintain product and

service quality and often propose automatic reordering system to save time.



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Modified Rebuy: the buyer wants to modify product specifications, prices,

delivery requirements, or other terms. The in-suppliers become nervous

and have to protect the account.

New Task: a purchaser buys a product or service for the first time. For

Example, office building, and new security system.

System Buying and Selling:

Many business buyers prefer to buy a total solution to a problem form one seller.

Called buying, this practice originated with government purchases of major

weapons and communication. The government solicit from prime contractors,

who assembled the package or system. The prime contractor would provide a

solution so-called because the buyer simply had to turn one key to get the job

done.

Participants in the Business Buying Process:

Who buys the trillions of dollars’ worth of goods and services needed by business

organization? Purchasing agents are influential in straight-rebuy and modified-

rebuy situations, whereas other department personnel are more influential in new-

buy situations. Engineering personnel usually have a major influence in selecting

product components, and purchasing agents dominate in selecting suppliers.

The Buying Center

1. Initiators: those who request that something be purchased. They may be

users or others in the organization.

2. Users: those who will use the product or service. In many cases, the users

initiate the buying proposal and help define the product requirements.

3. Influencers: people who influence the buying decision such as

technicians, savvy in that area of purchasing . They often help define

specifications and also provide information for alternatives.

4. Deciders: people who decide on product requirements or on suppliers.

5. Approvers: people who authorize the proposed actions of deciders or

buyers such as CEO,CFO etc.

6. Buyers: people who have formal authority to select supplier and arrange

the purchase terms. The buyer may include high-level managers. Buyers

may help shape product specification, their major role in selecting

vendors(dealers, sellers) and negotiating.



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7. Gatekeepers: they maintain inflow and outflow of company; people who

have the power to prevent sellers or information from reaching members

of the buying center. For Example; purchasing agents, receptionists, and

telephone operators.

Types of Business Customers:

i. Price Oriented Customers: these sort of customers are very much

conscious about price whenever they buy. Center part is price of decision.

For Example, Sugar Mill’s buyers; remain very much conscious about

price, do not care of quality.

ii. Solution Oriented Customers: (consultative selling)—these types of

customer buys products or material by negotiation and arguments for lower

cost total cost or more dependable supply or services.

iii. Gold-standard customers: (quality selling)—these sort of customer more

focus on quality of material/product before purchasing. They testing the

quality of material they send the material to laboratory; after the

recommendation of lab. They purchase the material. Such as ISO certified

material.

iv. Strategic-Value Customers:(enterprise selling)—they want a fairly

permanent in terms of supplier relationship with the company.

Types Of Products Involved:

1. Routine Products: these products have low value and cost to the customer

and involve little risk (e.g. Office supplies). customer will seek the lowest

price and emphasize routine ordering.

2. Leverage Products: these products have high value and cost to the

customer but involve little risk of supply (e.g. Engine pistons, for control

room company buys software for controlling)because many companies

make them. the supplier knows that the customer will compare market

offerings and costs, and it needs to show that its offering minimizes the

customer's total cost.

3. Strategic Products: these products have high value and cost to the

customer and involve high risk these are very expensive (e.g. Mainframe



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computers). the customer will want a well-known and trusted supplier and

be willing to pay more than the average price.

4. Bottleneck Products: these products have low value and cost to the

customer but they involve some risk (e.g. spare parts). the customer will

want a supplier who can guarantee a supply reliable products.

Stages In The Buying Decision Process:

a. Problem Recognition: what kind of material do you need, why do you

need and in which quantity to purchase.

b. General Need Description And Product Specification: required

quantity for standard items, this is simple engineers, users—define

characteristics like reliability, durability, or price.

c. Supplier Search: the buyers start search an appropriate supplier who can

provide reliable materials, those may be national and international.

d. Proposal Solicitation: the buyer invites qualified suppliers to submit

proposals. if the item is complex or expensive, the buyer will require a

detailed written proposal form each qualified supplier. after evaluating the

proposals, the buyer will invite a few supplier to make formal presentation.

business marketers must be skilled in researching, writing, and presenting

proposals.

e. Supplier Selection: the buying center will specify desired supplier and

indicate their relative importance. to rate and identify the most attractive

suppliers, buying centers often use a supplier-evaluation model. business

marketers need to do a better job of understanding how business buyers

arrive their valuation.

f. Order Routine Specification: after selecting suppliers, the buyers

negotiates the final order , listing the technical specification, the quantity

needed, the expected time delivery, return policies, warranties. many

industrial buyers lease heavy equipment like machinery and truck.

g. Performance Review: the buyer periodically reviews the performance of

the chosen supplier(s).the performance review may lead the buyer to

continue, modify, or end a supplier relationship.



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Marketing Management(Notes for BBA & Commerce)

Education

Transcript of Marketing Management(Notes for BBA & Commerce)