Key of Question Bank MM

L. J. Institute of Management Studies MBA – I Semester – II Question Bank Key – Marketing Management (The questions in “OR’ has similar answer to the question above. It will help students to understand in how many ways one question can be asked.) Q. 1. Explain the nature and scope of marketing management. OR Explain the various marketing management tasks which signify the relevance of marketing to business. Answer: Marketing is about identifying and meeting human and social needs. Marketing management can be defined as the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value. Scope of marketing: Marketers market 10 main types of entities:1) GOODS: Physical goods constitute the bulk of most countries’ production and marketing efforts. E.g. Cello’s Fine grip pen, Lenovo’s Laptop 2) SERVICES: As economies advance, a growing proportion of their activities focuses on the production of services. E.g. It includes the work of airlines, hotels, barbers etc 3) EVENTS: Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to both companies and fans. 4) EXPERIENCES: By orchestrating several services and goods, a firm can create, stage, and market experiences. E.g. Theme based restaurant depicting the culture of Gujarat/Rajasthan 5) PERSONS: Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers. Some people have done a masterful job of marketing themselves. E.g. Shah rukh khan promoting Nerolac paints 6) PLACES: Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters. Place marketers include economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies. E.g. Kerala as a state 7) PROPERTIES: 1

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Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds). They are bought and sold, and these exchanges require marketing. 8) ORGANIZATIONS: Organizations work to build a strong, favorable, and unique image in the minds of their target publics. E.g. Tata as an organization is branded 9) INFORMATION : The production, packaging, and distribution of information are major industries. Information is essentially what books, schools, and universities produce, market, and distribute at a price to parents, students, and communities. E.g. Government of India promotes the information that free vaccinations are available on government centers. IDEAS: Every market offering includes a basic idea. Charles Revson of Revlon once observed: “In the factory we make cosmetics; in the drugstore we sell hope.” Products and services are platforms for delivering some idea or benefit. Social marketers are busy promoting such ideas as “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a Terrible Thing to Waste.” Q. 2. Explain the basic philosophies of marketing. OR Define the societal marketing concept. How have marketers adopted and implemented this concept? OR “The competing concepts under which organizations have conducted marketing activities include: the production concept, product concept, selling concept, marketing concept, and holistic marketing concept.”- Evaluate the advantages and disadvantages of each concept. Which concept do you believe is the most effective? Why? OR Trends and forces defining the 21st century indicate that Holistic Marketing will be the future of Marketing. List and explain the four broad components of Holistic Marketing with relevant examples OR Explain how Holistic Marketing concept is different form. Marketing concept by giving suitable example. Answer: Production Concept: The production concept holds that consumers prefer products that are widely available and inexpensive. Managers of production-oriented business Concentrate on achieving high production efficiency, low costs, and mass distribution. Product Concept: The product concept proposes that consumers favor products offering the most quality, performance, or innovative features. A new or improved product will not necessarily be successful unless it’s priced, distributed, advertised, and sold properly. 2

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Selling Concept: The selling concept holds that consumers and businesses, if left alone, won’t buy enough of organization’s products. It is practiced most aggressively with unsought goods—goods buyers don’t normally think of buying such as insurance and cemetery plots—and when firms with overcapacity aim to sell what they make, rather than make what the market wants. Marketing Concept: Marketing concepts he job is to find not the right customers for your products, but the right products for your customers The marketing concept holds that the key to achieving organizational goals is being more effective than competitors in creating, delivering, and communicating superior customer value to your target markets. Holistic Marketing Concept: The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize their breadth and interdependencies. Holistic marketing acknowledges that everything matters in marketing and that a broad, integrated perspective is often necessary. It carries 4 types of marketing:1) Relationship marketing. Relationship marketing aims to build mutually satisfying long-term relationships with key constituents in order to earn and retain their business. 2) Internal marketing. Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It ensures that everyone in the organization embraces appropriate marketing principles, especially senior management 3) Integrated marketing. Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that “the whole is greater than the sum of its parts.” Two key themes are that (1) Many different marketing activities can create, communicate, and deliver value and (2) Marketers should design and implement any one marketing activity with all other activities in mind. 4) Performance marketing. Performance marketing requires understanding the financial and nonfinancial returns to business and society from marketing activities and programs. 3

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Q. 3. Write a brief note on Managing Holistic Marketing Organization. Answer: One view of holistic marketing sees it as “integrating the value exploration, value creation, and value delivery activities with the purpose of building long-term, mutually satisfying relationships and co prosperity among key stakeholders.” Holistic marketers thus succeed by managing a superior value chain that delivers a high level of product quality, service, and speed. They achieve profitable growth by expanding customer share, building customer loyalty, and capturing customer lifetime value. Holistic marketers address three key management questions: 1. Value exploration—How a company identifies new value opportunities. 2. Value creation—how a company efficiently creates more promising new value offerings. 3. Value delivery—How a company uses its capabilities and infrastructure to deliver the new value offerings more efficiently. Q. 4. Being a Marketing Manager of a particular organization, how will you evaluate the Micro and Macro level factors affecting the Indian Marketing Environment? What will be its impact on strategic planning activities carried out at different levels of the organization? OR Discuss the various marketing environments. Answer: Macro Environment Successful companies recognize and respond profitably to unmet needs and trends. Needs and Trends Enterprising individuals and companies manage to create new solutions to unmet needs • A fad is “unpredictable, short-lived, and without social, economic, and political significance.” • A direction or sequence of events with momentum and durability, a trend is more predictable and durable than a fad; trends reveal the shape of the future and can provide strategic direction. EXAMPLE trend toward health and nutrition awareness has brought increased government regulation and negative publicity for firms seen as peddling unhealthy food. • A megatrend is a “large social, economic, political, and technological change is slow to form, and once in place, influences us for some time—between seven and ten years, or longer.” Macro environment consist of following dimensions : a) Demographic Environment Demographic developments often move at a fairly predictable pace. The main one marketers monitor is population, including the size and growth rate of population in cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and movements. The following sub parameters are included in it. 1)WORLDWIDE POPULATION GROWTH. 2)POPULATION AGE MIX. 3) Literacy levels of population b) Economic Environment 4

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The available purchasing power in an economy depends on current income, prices, savings, debt, and credit availability. As the recent economic downturn vividly demonstrated, trends affecting purchasing power can have a strong impact on business, especially for companies whose products are geared to highincome and price-sensitive consumers. The following sub parameters are included in it. 1)CONSUMER PSYCHOLOGY 2)INCOME DISTRIBUTION 3)INCOME, SAVINGS, DEBT, AND CREDIT c)Socio-cultural Environment From our socio-cultural environment we absorb, almost unconsciously, a world view that defines our relationships to ourselves, others, organizations, society, nature, and the universe. • Views of ourselves. • Views of others • Views of organizations. • Views of society • Views of nature • Views of the universe d)Natural Environment The Earth’s renewal of its natural resources such as forests, agricultural products, marine products, etc must be taken into account. There are also the natural non-renewable resources such as oil, coal, minerals, etc that may also impact the organisation’s production. e)Technological Environment It is the essence of market capitalism to be dynamic and tolerate the creative destructiveness of technology as the price of progress. Transistors hurt the vacuum-tube industry, and autos hurt the railroads. Television hurt the newspapers, and the Internet hurt them both. d)Political-Legal Environment The political and legal environment consists of laws, government agencies, and pressure groups that influence various organizations and individuals. Sometimes these laws create new business opportunities. Mandatory recycling laws have boosted the recycling industry and launched dozens of new companies making new products from recycled materials. Two major trends are the increase in business legislation and the growth of special-interest groups. Q. 5. How can a retailer of male apparels (premium segment) identify growth opportunities and overcome the strategic planning gaps? OR With the help of the Ansoff grid, suggest how a business school can chart out its growth strategies. OR 5

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Select a product of your choice. How will you, as a marketer use the Ansoff matrix as a tool for strategic marketing planning? Answer: Potential of a business based on growth opportunities from global expansion, repositioning or retargeting and strategic outsourcing. Assessing Growth Opportunities Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. The first option is to identify opportunities for growth within current businesses (intensive opportunities). The second is to identify opportunities to build or acquire businesses related to current businesses (integrative opportunities).The third is to identify opportunities to add attractive unrelated businesses (diversification opportunities). INTENSIVE GROWTH Ansoff's matrix enables businesses to decide growth strategy based on products and the markets that the products are aimed at. Under the matrix they have the option to stick with the markets and products they know (market penetration) or change one thing the market (market extension) or the product (product development). For those prepared to take accept big failure risks for potentially larger rewards there is diversification into new products and markets. The Ansoff grid is based on the following strategies: Market-penetration strategy (gain more market share) - This involves increasing sales of an existing product and penetrating the market further by promoting the product heavily or reducing prices to increase sales. This strategy has the lowest risk strategy as the firm knows the product and the market. Market penetration is often used by supermarkets and large retail chains. Market-development strategy (new markets for current products) – Under a market development strategy a firm sells existing products to new markets. For example a sandwich shop which is doing well in one area, expands and opens another sandwich shop in a different region. Through market development our sandwich shop has the potential to become a national chain. There are

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different ways to define new markets including different locations for sales to aiming products at different customer groups (age, background, interests, income). Product-development strategy (new products for current markets) - The business develops/introduces

new products into existing markets with the aim of selling the new product to existing customer groups. For example Microsoft with their Xbox2 game console introduced the Kinect, an add on that allows customers to play without the use of a controller, much like the Nintendo Wii. This is an example of a new product which simply needs to be added onto the existing model aimed at the existing market. Product Development is a medium risk strategy as the business is familiar with the market but not the new product. Diversification strategy (new products for new markets) - Diversification involves selling new

products to new markets. For example if a business which usually sells food to families, decides it would like to sell cars to single men it would be diversifying. Diversification is a high risk strategy as the business is unfamiliar with the product and the target market. However as it also has the potential to produce the highest rewards many businesses are prepared to take the risk. Corporate management’s first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive- growth opportunities is a “product-market expansion grid.” It considers the strategic growth opportunities for a firm in terms of current and new products and markets. The company first considers whether it could gain more market share with its current products in their current markets, using a market-penetration strategy. E.g. Use of Monaco biscuits at different occasions such as starters during dinner. Next it considers whether it can find or develop new markets for its current products, in a market-development strategy. E.g. Increasing the geographical scope of a company e.g. Starbucks opening new outlets. Then it considers whether it can develop new products of potential interest to its current markets with a product-development strategy. E.g. Hyundai launching new version of i20. Later the firm will also review opportunities to develop new products for new markets in a diversification strategy. E.g. Going for totally new product and market as Nirma went in to education sector from laundry products INTEGRATIVE GROWTH A business can increase sales and profits through backward, forward, or horizontal integration within its industry. Merck has gone beyond developing and selling prescription pharmaceuticals.

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DIVERSIFICATION GROWTH Diversification growth makes sense when good opportunities exist outside the present businesses—the industry is highly attractive and the company has the right mix of business strengths to succeed. From its origins as an animated film producer, The Walt Disney Company has moved into licensing characters for merchandised goods, publishing general interest fiction books under the Hyperion imprint, entering the broadcast industry with its own Disney Channel as well as ABC and ESPN. Q. 6. Explain various qualitative and quantitative methods of demand forecasting. Answer: The major concepts in demand measurement are market demand and company demand. Within each, we distinguish among a demand function, a sales forecast, and a potential. MARKET DEMAND The marketer’s first step in evaluating marketing opportunities is to estimate total market demand. Market demand for a product is the total volume that would be bought by a defined customer group in a defined geographical area in a defined time period in a defined marketing environment under a defined marketing program. MARKET FORECAST The market demand corresponding to this level is called the market forecast. MARKET POTENTIAL The market forecast shows expected market demand, not maximum market demand. For the latter, we need to visualize the level of market demand resulting from a very high level of industry marketing expenditure, where further increases in marketing effort would have little effect. Market potential is the limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment COMPANY DEMAND Company demand is the company’s estimated share of market demand at alternative levels of company marketing effort in a given time period. It depends on how the company’s products, services, prices, and communications are perceived relative to the competitors’. Other things equal, the company’s market share depends on the relative scale and effectiveness of its market expenditures. Marketing model builders have developed sales response functions to measure how a company’s sales are affected by its marketing expenditure level, marketing mix, and marketing effectiveness. COMPANY SALES FORECAST

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Once marketers have estimated company demand, their next task is to choose a level of marketing effort. The company sales forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. COMPANY SALES POTENTIAL Company sales potential is the sales limit approached by company demand as company marketing effort increases relative to that of competitors. The absolute limit of company demand is, of course, the market potential. The two would be equal if the company got 100 percent of the market. In most cases, company sales potential is less than the market potential, even when company marketing expenditures increase considerably. Different methods for demand estimating are as follows Marketing executives want to estimate total market potential, area market potential, and total industry sales and market shares. 1. Total Market Potential Total market potential is the maximum amount of sales that might be available to all the firms in an industry during a given period, under a given level of industry marketing effort and environmental conditions. 2. Area Market Potential Companies face the problem of selecting the best territories and allocating marketing budget optimally among these territories. Therefore, it needs to estimate the market potential of different cities, states, and nations. 3. Market-Buildup Method The market-buildup method calls for identifying all the potential buyers in each market and estimating their potential purchases. This method produces accurate results if we have a list of all potential buyers and a good estimate of what each will buy. 4. Multiple-Factor Index Method The method most commonly used in consumer markets is a straightforward index method. A single factor is rarely a complete indicator of sales opportunities thus it makes sense to develop a multiple-factor index, with each factor assigned a weight. Many companies compute other area indexes as a guide to allocating marketing resources. Industry Sales and Market Shares Besides estimating total potential and area potential, a company needs to know the actual industry sales taking place in its market. This means identifying competitors and estimating sales. Estimating Future Demand Very few products or services lend themselves to easy forecasting. In most markets, total demand and company demand are not stable. Good forecasting becomes a key factor in company success. The more unstable the demand, the more critical is forecast accuracy, and the more elaborate is forecasting procedure. 9

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Survey of Buyers’ Intentions Forecasting is the art of anticipating what buyers are likely to do under a given set of conditions. Because buyer behaviour is so important, buyers should be surveyed. Composite of Sales Force Opinions Each sales representative estimates how much each current and prospective customer will buy of each of the company‘s products. Expert Opinion Companies can obtain forecasts from experts, including dealers, distributors, suppliers, marketing consultants, and trade associations. Many companies buy economic and industry forecasts from well-known economic-forecasting firms. Occasionally, companies will invite a group of experts to prepare a forecast using any one of the following methods: 1) Group-discussion method. 2) Pooling of individual estimates. 3) Delphi method. Past Sales Analysis Sales forecasts can be developed on the basis of past sales. Time-series analysis consists of breaking down past time series into four components: Trend, Cycle, Seasonal. and Erratic and projecting these components into the future. Market Test Method When buyers do not plan their purchases carefully or experts are not available or reliable, a direct-market test is desirable. A direct-market test is especially desirable in forecasting new product sales or established product sales in a new distribution channel or territory. Q. 7. What do you mean by marketing research? Discuss the process of Marketing Research with a suitable example. OR Suppose you are the brand manager for Do-the-Wild-Thing, an unscented deodorant shampoo aimed at Generation-X members. Sales of your product have been declining. Exploratory research suggests your brand is not price competitive. Outline a research plan that would provide you with the information you need to decide what to do. Explain why you selected certain methods and not other ones. Answer: Marketing research as the systematic design, collection, analysis, and reporting of data and findings relevant to a specific marketing situation facing the company. Step 1: Define the Problem, the Decision Alternatives, and the Research Objectives Step 2: Develop the Research Plan Data sources There are two types of Data sources 10

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1) Primary – Primary data are data freshly gathered for a specific purpose or for a specific research project. Most marketing research projects involve some primary data collection. The different sources of primary (consumers, clients, retailers, wholesalers, competitors, employees, etc). 2) Secondary - Secondary data are data that were collected for another purpose and already exist. Researchers usually start out their investigation by examining secondary data.. Secondary data provides a starting point and offers the advantages of low cost and ready availability. Secondary data (company records, libraries, industrial associations, chambers of industry and commerce, government bodies, marketing research organizations, universities, etc). Research approaches 1) Observational research - Fresh data can be gathered by observing the relevant actors and settings. 2) Ethnographic research 3) focus group research - A focus group is a gathering of six to ten people who are carefully selected based on certain demographic, psychographic, or other considerations and brought together to discuss various topics of interest at length. 4) survey research - Companies undertake surveys to learn about people‘s knowledge, beliefs, preferences, and satisfaction, and to measure these magnitudes in the general population. 5) Behavioral data - Customers leave traces of their purchasing behaviour in store scanning data, catalogue purchases, and customer databases. Much can be learned by analysing these data. 6) Experimental research - The most scientifically valid research is experimental research. The purpose of experimental research is to capture cause-and-effect relationships by eliminating competing explanations of the observed findings. Research instruments 1) Questionnaires 2) Qualitative measures 3) Technological devices Sampling plan 1) Sampling unit: who should we survey? 2) Sample size: how many people should we survey? 3) Sampling procedure: how should we choose the respondents?

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Contact method 1) Mail questionnaire 2) Telephone interview 3) Personal interview 4) Online interview Step 3: Collect the Information- different automation techniques of data collection like computers or telecommunication are used for data collection. Step 4: Analyze the Information- Information can be analyzed in tabular or frequency distributions. Different statistical tools like mean, median etc can be used. Step 5: Present the Findings- The research findings needs to be presented in such a manner that is easy to understand, interpret and can be applied in solving the management problems. Step 6: Make the Decision –Depending on marketers confidence marketers can choose it’s the findings of the research. Q. 8. Briefly explain the term – Customer Perceived Value. Mention some companies and identify their practices through which they have consistently delivered high customer value. OR Why should marketers be obsessed with offering the correct ‘value proposition’ to consumers? Explain the concept of customer perceived value. Answer: Customers tend to be value-maximisers. Customers estimate which offer will deliver the most perceived value and act on it. 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. Total customer value is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers 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. Customer perceived value is based on the difference between what the customer gets and what he or she gives for different possible choices. Determinants of Customer perceived value. 1. 2. 3. 4. 5.

Total customer benefit Total customer cost Product benefit Monetary cost Services benefit

6. Time cost 7. personnel benefit 8. Energy cost 9. Image benefit 10. Psychological cost 12

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Here’s a company that is a master at delivering customer value. 1. Avis 2. Google 3. Samsung mobile phone 4. Yahoo! 5. Hyatt hotels Example: Kingfisher airline is India’s answer to virgin of United kingdom. Here passengers are addressed and treated as guests. . On seating, “guests” are welcomed through a video recorded message of the chairman’s CEO, Vijay Mallya, on individuals in flight entertainment system. The system offers a choice of video and audio channels. The airline embodies the chairman’s message, “enjoy the good time with king fisher airline”. Q. 9. Explain the concept of customer life time vales (CLV). Which parameters would you use calculating CLV. Answer: Marketing is the art of attracting and keeping profitable customers. The 80/20 rule states that the top 20 percent of the customers may generate as much as 80 percent of the company‘s profits. Customer profitability the ultimate test Ultimately, marketing is the art of attracting and retaining profitable customers. The well known 20-80 rule says that the top 20% of the customers may generate as much as 80% of the company’s profits. The largest customers who are yielding the most profit. The largest customers demand considerable service and receive the deepest discounts. The smallest customers pay full price and receive minimal service, but the costs of transacting with small customers reduce their profitability. The mid size customers receive good service and pay nearly full price and are often the most profitable. A company should not pursue and satisfy all customers. A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer. Customer Profitability A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company‘s cost stream of attracting, selling, and servicing that customer. Customer profitability can be assessed individually, by market segment, or by channel. Most companies fail to measure individual customer profitability. 13

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Competitive Advantage Competitive advantage is a company‘s ability to perform in one or more ways that competitors cannot or will not match. Michael Porter urged companies to build a sustainable competitive advantage. Few competitive advantages are sustainable, at best they may be leverage. A leverage advantage is one that a company can use as a springboard to new advantages. Any competitive advantage must be seen by customers as a customer advantage. Measuring Customer Lifetime Value Customer Lifetime Value (CLV) describes the net present value of the stream of future profits expected over the customer‘s lifetime purchases. CLV calculations provide a formal quantitative framework for planning customer investment and helps marketers to adopt a long-term perspective. Q. 10. In light of various consumer costs and values known to you, explain the contemporary ‘Value delivery network’ for the use of marketers for any product of your choice. OR Explain the concept of value chain and its relevance. Answer: Marketing and Customer Value Marketing involves satisfying consumers‘ needs and wants. The task of any business is to deliver customer value at a profit. The Value Delivery Process The traditional view of marketing is that the firm makes something and then sells it. Marketing will not work in economies where people face abundant choice. The new belief of marketing begins with the planning process. Value creation and delivery consists of three parts: Choosing the value (segment the market, define target market, develop ―offering‖) Providing the value (product features, prices, and distribution channels) Communicating the value (sales force, advertising, and promotional tools) 14

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The Value Chain Porter suggested that activities within an organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive advantage. If they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organisation and transact freely and willingly. Michael Porter suggested that the organisation is split into ‘primary activities’ and ‘support activities’. Michael Porter‘s Value Chain (Figure) identifies nine strategically relevant activities that create value and costs (five primary and four support activities). A) Primary activities: 1) Inbound logistics (material procurement) - Refers to goods being obtained from the organisation's suppliers and to be used for producing the end product. 2) Operations (turn into final product) - Raw materials and goods are manufactured into the final product. Value is added to the product at this stage as it moves through the production line. 3) Outbound logistics (shipping and warehousing) - Once the products have been manufactured they are ready to be distributed to distribution centres, wholesalers, retailers or customers. Distribution of finished goods is known as outbound logistics. 4) Marketing (marketing and sales) - Marketing must make sure that the product is targeted towards the correct customer group. The marketing mix is used to establish an effective strategy, any competitive advantage is clearly communicated to the target group through the promotional mix. 5) Servicing (service after the sale) - After the product/service has been sold what support services does the organisation offer customers?. This may come in the form of after sales training, guarantees and warranties. B) Support activities: 1) Procurement - This department must source raw materials for the business and obtain the best price for doing so. The challenge for procurement is to obtain the best possible quality available (on the market) for their budget. 2) Technology development - The use of technology to obtain a competitive advantage is very important in today’s technological driven environment. Technology can be used in many ways including production to reduce cost thus add value, research and development to develop new products and the internet so customers have 24/7 access to the firm. 3) Human resource management - The organisation will have to recruit, train and develop the correct people for the organisation to be successful. Staff will have to be motivated and paid the ‘market rate’ if they are to stay with the organisation and add value. Within the service sector such as the airline industry, employees are the competitive advantage as customers are 15

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purchasing a service, which is provided by employees; there isn't a product for the customer to take away with them. 4) Firm infrastructure - Every organisations needs to ensure that their finances, legal structure and management structure work efficiently and helps drive the organisation forward. Inefficient infrastructures waste resources, could affect the firm's reputation and even leave it open to fines and sanctions. The firm‘s task is to examine its costs and performance in each value-creating activity and to look for ways to improve performance. It looks at how primary and support activities can work together to help the organisation create a superior competitive advantage. If an activity is performed well it is said to add value. Q. 11. Explain the various factors affecting the consumption behavior related to dining out (having a meal outside home). OR Discuss the various factors affecting consumer buying behavior. OR Explain the various factors affecting the consumer behavior related to any product of your choice. OR Which set of factors shall affect a consumer’s decision to purchase water – purifier? Answer: A consumer‘s buying behaviour is influenced by cultural, social, and personal factors. Cultural factors exert the broadest and deepest influence.

Cultural Factors Culture is the fundamental determinant of a persons‘ wants and behaviours. Each culture consists of smaller subcultures that provide more specific identification and socialization for their members. Subcultures include nationalities, religions, racial groups, and geographic regions. Multicultural marketing grew out of careful marketing research that revealed that different ethnic and demographic niches did not always respond favourably to mass-market advertising. One class depiction of social classes defines seven ascending levels: 1) Lower lowers 2) Upper lowers 3) Working class 4) Middle class 5) Upper middles 6) Lower uppers 7) Upper uppers 16

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Classes have several characteristics: Those within a class tend to behave more alike than persons from two different social classes. Persons are perceived as occupying inferior or superior positions according to social class. Social class is indicated by a cluster of variables (occupation, income, etc.) rather than by any single variable. Individuals can move up or down the social-class ladder. Social classes show distinct product and brand preferences in many areas. Social classes differ in media preferences. There are language differences among the social classes. Ex: McDonald’s is a brilliant example of adaptation to the specificities of each culture and each market. Well aware of the importance to have an offer with specific products to meet the needs and tastes of consumers from different cultures, the fast-food giant

Social Factors In addition to cultural factors, a consumer‘s behaviour is influenced by such social factors as reference groups, family, and social roles and statuses. A person‘s reference groups consist of all the groups that have a direct (face-to-face) or indirect influence on his/her attitudes or behaviour. Groups having a direct influence on a person are called membership groups. Some memberships groups are primary groups such as family, friends, neighbors, and co-workers with whom the person interacts fairly continuously and informally. Some membership groups are secondary groups such as religious or professional groups that tend to be more formal. People are significantly influenced by their reference groups in at least three ways: Reference groups expose an individual to new behaviours and lifestyles, influencing attitudes and self-concept. They create pressures for conformity that may affect actual product and brand choices People are also influenced by groups to which they do not belong: - Aspirational groups are those a person hopes to join. - Dissociative groups are those whose values or behaviour an individual rejects. Family The family is the most important consumer-buying organisation in society, and family members constitute the most influential primary reference group. Marketers are interested in the roles and relative influence of family members in the purchase of a large variety of products and services. Roles and Statuses A person participates in many groups and a person‘s position in each group can be defined in terms of role and status. Each role carries a status. Marketers must be aware of the status symbol potential of products and brands.

Personal Factors A buyer‘s decisions are also influenced by personal characteristics. These include the buyer‘s age and stage in the life cycle; occupation and economic circumstances; personality and selfconcept; and lifestyle and values. Age and Stage in the Life Cycle 17

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People buy different goods and services over a lifetime. Consumption is also shaped by the family life cycle. In addition, the psychological life cycle stage may matter. Critical life events or transitions give rise to new needs. Stages of family life cycle: 1. Bachelor stage: young, single not living at home. Few financial burdens, fashion opinion leader, recreation oriented. 2. Honeymooners/Newly married couple: Young no children. Highest purchase rate. 3. Parenthood: Youngest child under six 4. Post Parenthood: Grown up children, couple living with dependent children 5. Dissolution: older married couple, children not living with them. Occupation and Economic Circumstances Occupation influences consumption patterns and economic circumstances influence product. These comprise of: Spendable income (level, stability, and time pattern), Savings and assets Debts, Borrowing power, Attitudes toward spending and saving. Personality and Self-Concept Each person has personality characteristics that influence his or her buying behaviour. Personality is a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli. The idea is that brands have personalities and consumers are likely to choose brands whose personalities match their own. We define brand personality as the specific mix of human traits that may be attributed to a particular brand. Jennifer Aaker researched brand personalities and identified the following traits: 1. Sincerity (down-to-earth, honest, wholesome, and cheerful) 2. Excitement (daring, spirited, imaginative, and up-to-date) 3. Competence (reliable, intelligent, and successful) 4. Sophistication (upper-class and charming) 5. Ruggedness (outdoorsy and tough) Lifestyles and Value People from the same subculture, social class, and occupation may lead quite different lifestyles. A lifestyle is a person‘s pattern of living in the world as expressed in activities, interests, and opinions. Lifestyle portrays the ―whole person interacting with his or her environment. Marketers search for relationships between their products and lifestyle groups. Lifestyles are shaped partly by whether consumers are money-constrained or time-constrained. Q. 12. Stating adequate examples, explain the various consumer buying decisions. OR Discuss in detail various stages of the Consumer Buying Process? How can marketers learn about the stages in the buying process for their product? List and briefly characterize the methods. OR

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The information search in the buying decision process involves gathering information from a number of sources. Name the four different sources and provide examples of each that an individual would use when buying a microwave oven. OR Explain the stages of consumer buying decision process, giving suitable examples. Answer: These basic psychological processes play an important role in understanding how consumers actually make their buying decisions. Marketers must understand every facet of consumer behaviour. Figure depicts the Five-Stage Model of the Consumer Buying Process Five-Stage Model of the Consumer Buying Process Problem Recognition The buying process starts when the buyer recognises a problem or need. The need can be triggered by internal or external stimuli.. Marketers need to identify the circumstances that trigger a particular need so that they can develop marketing strategies that trigger consumer interest. Information Search The information sources fall into the following four groups: Personal (family, friends), Commercial (advertising, Websites, salespeople), Public (mass media, consumer organisations) and Experiential (handling, examining, using the product) Generally speaking the consumer receives the most information about a product from commercial sources. The most effective information often comes from personal sources or public sources that are independent authorities. The Internet has changed information search. Most consumers are hybrid consumers. The consumer will come to know only a subset of these brands (awareness set). Some brands will meet initial buying criteria (consideration set). Only a few will remain as strong contenders (choice set) and the consumer makes a final choice from this set. The company must also identify the other brands in the consumer‘s choice set so that it can plan the appropriate competitive appeals. Evaluation of Alternatives No single process is used by all consumers or by one consumer in all buying situations. The most current models see the process as cognitively orientated. First, the consumer is trying to satisfy a need. Second, the consumer is looking for certain benefits from the product solution. Third, the

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consumer sees each product as a bundle of attributes with varying abilities for delivering the benefits sought to satisfy this need. Beliefs and Attitudes Evaluations often reflect beliefs and attitudes. Through experience and learning, people acquire beliefs and attitudes. These in turn influence buying behaviour. A Belief is a descriptive thought that a person holds about something. An Attitude is a person‘s enduring favourable or unfavourable evaluation, emotional feeling, and action tendencies toward some object or idea. Expectancy-Value Model The expectancy-value model of attitude formation contends that consumers evaluate products and services by combining their brand beliefs - the positives and negatives - according to importance. Most consumers consider several attributes in their purchase decisions. Purchase Decisions In the evaluation stage, the consumer forms preferences among the brands in the choice set. The consumer may also form an intention to buy the most preferred brand. In executing a purchase intention, the consumer may make up to five sub-decisions: Brand, Dealer, Quantity, Timing and Payment-method Non-Compensatory Models of Consumer Choice Consumers may not always want to invest so much time and energy to evaluate brands. They often take ―mental shortcuts that involve various simplifying choice heuristics. With noncompensatory models of consumer choice, positive and negative attribute considerations do not necessarily net out. With the conjunctive heuristic method - the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first alternative that meets this minimum With the lexicographic heuristic method - the consumer chooses the best brand on the basis of its perceived most important attribute. With the elimination-by-aspects heuristic method - the consumer compares brands on an attribute selected and brands not meeting this attribute are eliminated Consumers do not adopt only one type of choice rule and may combine two or more decision rules. Intervening Factors Even if consumers form brand evaluations, two general factors can intervene between the purchase intention and the purchase decision. The first factor is the attitudes of others. The extent to which another person‘s attitude reduces the preference for an alternative depends on two things: The intensity of the other person‘s negative attitude toward the consumer‘s preferred alternative The consumer‘s motivation to comply with the other person‘s wishes 20

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The second factor is unanticipated situational factors that may erupt to change the purchase intention. A consumer‘s decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. There are many types of risks that consumers may perceive in buying and consuming a product. Some of the risks are as follows : Functional risk, Physical risk Financial risk, Social risk, Psychological risk and Time risk Marketers must understand the factors that provoke a feeling of risk in consumers and provide information and support to reduce perceived risk. Post-Purchase Behaviour After the purchase, the consumer might experience dissonance about their purchase and be alert to information that supports their decision. Marketing communications should supply beliefs and evaluations that reinforce the consumer‘s choice and help him or her feel good about the brand. Marketers must monitor post-purchase satisfaction, post-purchase actions, and post-purchase uses. Post-Purchase Satisfaction Satisfaction is a function of the closeness between expectations and the product‘s perceived performance. Post-Purchase Actions Satisfaction or dissatisfaction with the product will influence subsequent behaviour. A dissatisfied consumer may abandon or return the product. Post-Purchase Use and Disposal Marketers should also monitor how buyers use and dispose of the product. A key driver of sales frequency is product consumption rate. One potential opportunity to increase frequency of product use is when consumers‘ perceptions of their usage differ from reality. Marketers must also need to know how the consumer disposes of the product once it is used. Q. 13. Compare and contrast Consumer and Business Markets and Discuss the stages (buy phases) of the Industrial Buying Process. OR How is consumer market different from business market? Your college wants to technologically upgrade the teaching learning facilities available in your campus. They plan to buy latest LCD projectors for all the classrooms. Suggest suitable steps for the buying process. Answer: Business Market: Fewer, larger buyers - The business marketer normally deals with far fewer, much larger buyers than the consumer marketer does Close supplier-customer relationship - Because of the smaller customer base and the importance and power of the larger customers, suppliers are frequently expected to customize their offerings to individual business customer needs. Professional purchasing - Business goods are often purchasedı by trained purchasing agents, who must follow their organizations purchasing policies, constraints, and requirements. 21

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Several buying influences - More people typically influence business buying decisions. Buying committees consisting of technical experts and even senior management are common in the purchase of major goods. Geographically concentrated buyers - 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 buyers often buy directly from manufacturers rather than through intermediaries Consumer Market: Multiple sales call Derived demand - The demand for business goods is ultimately derived from the demand for consumer goods. For this reason, the business marketer must closely monitor the buying patterns of ultimate consumers. Inelastic demand - The total demand for many business goods and services is inelastic that is, not much affected by price changes. Fluctuation demand - The demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment necessary to produce the additional output. Q. 14. Your college wants to technologically upgrade the teaching learning facilities available in your campus. They plan to buy latest LCD projectors for all the classrooms. Suggest suitable steps for the buying process OR Discuss business buying process. Answer: The following eight stages: 

Problem recognition



General need description



Product specification



Supplier search

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Proposal solicitation

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Supplier selection

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Order-routine specification



Performance review

Problem Recognition The buying process begins when someone in the company recognises a problem or need. The recognition can be triggered by internal or external stimuli. General Need Description and Product Specification 22

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Next, the buyer determines the needed item‘s general characteristics and requirements. Supplier Search The buyer next tries to identify the most appropriate suppliers through trade directories, contacts with other companies, trade advertisements, and trade shows. Proposal Solicitation The buyer invites qualified suppliers to submit proposals. If the item is complex, the buyer will require a detailed written proposal from each qualified supplier. Business marketers must be skilled in researching, writing, and presenting proposals. Supplier Selection Before selecting a supplier, the buying centre will specify desired supplier attributes and indicate their relative importance. To rate and identify the most attractive suppliers, buying centres often use a supplier-evaluation model. Order-Routine Specifications After selecting suppliers, the buyer negotiates the final order, listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties, and so on. Performance Review The buyer periodically reviews the performance of the chosen supplier(s). Here are the commonly used methods: 

The buyer may contact the end users and ask for their evaluations



The buyer may rate the supplier on several criteria using a weighted score method



The buyer might aggregate the cost of poor performance to come up with adjusted costs of purchase, including price

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The performance review may lead to the buyer to continue, modify, or end a supplier relationship

Q. 15. What is the rationale behind market segmentation? What is target marketing? OR “Marketing success largely depends on the effective STP strategies adopted by the firm.”Discuss the above statement with two examples of your choice. Answer: A market segment consists of a group of customers who share a similar set of needs and wants. Rather than creating the segments, the marketer's task is to identify them and decide which one(s) to target. Segment marketing offers key benefits over mass marketing. The company can often better design, price, disclose, and deliver the product or service and also can fine-tune the marketing program and activities to better reflect competitors' marketing. One way is to identify preference segments. Homogeneous preferences exist when all consumers have roughly the same preferences; the market shows no natural segments. At the other extreme, consumers in diffused preferences vary greatly in their preferences. If several brands are in the market, they are likely to position themselves throughout the space and show 23

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real differences to match differences in consumer preference. Finally, clustered preferences result when natural market segments emerge from groups of consumers with shared preferences. Q. 16. Explain the bases for segmenting consumer markets, with relevant examples. OR Explain the various bases of segmentation available to a marketer of personal care & home care products, with examples. OR Explain the basis for segmenting the consumer market OR You are an MNC manufacturing washing machines and want to introduce one of your latest models in India with following specifications: • 5 kg slim size model for small space and small to medium clothing load, • 5-Star rated energy efficiency, wash performance and spin-performance, • Programs available for Cotton /Synthetic /Delicate /Wool /Hand wash • Programmable for Quick Rinse, Spin & Drain needs, • Additional selection of Pre wash/Rinse Hold/Super Rinse/Drain/Crease Care/Eco/Bio/No spin/Child-Lock functions, • The LCD display shows remaining time indication and error message indication, • A large transparent door with 180 degrees opening angle, • Free Installation Servicing for 6 months • Model is Priced at the Higher-End of the price range. What are the variables on the basis of which you will segment your market? Why? OR The Backpack (bags which are put on the backs) market in India is growing faster than most of the developed markets. Backpacks are mainly used for carrying laptops, some clothes, a water bottle and some extra space for other items. VIP and Samsonite are the major players in this segment. You have been appointed as a consultant for a new player which wants to enter this segment. What are the criteria for segmentation that you will use for evaluating this segment? What are the bases of segmentation you will use for identifying segments in this category? Answer: A market segment consists of a group of customers who share a similar set of needs and wants. Basis of segmentation are Geographic, demographics, and psycho-graphic while others look at behavioral considerations such as consumer responses to benefits, use occasions, or brands. Regardless of which type of segmentation scheme is employed, the key is that the marketing programme can be profitably adjusted to recognize customer differences. Geographic Segmentation Geographic segmentation calls for dividing the market into different geographical units. More and more, regional marketing means marketing right down to a specific postal code. Demographic Segmentation In demographic segmentation the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, 24

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generation, nationality, and social class. Consumer needs, wants, usage rates, and product and brand preferences are often associated with demographic variables. Demographic variables are easy to measure. Age and Life-Cycle Stage: Consumer wants and abilities change with age. Life Stage: Persons in the same part of the life cycle may differ in their life stage. Life stage defines a person‘s major concern. These life stages present opportunities for marketers who can help people cope with their major concerns. Gender: Men and women tend to have different attitudinal and behavioural orientations, based partly on genetic makeup and partly on socialization. Some traditionally more male-orientated markets, are beginning to recognise gender segmentation, changing how they design and sell their products. Income: Income segmentation is a long-standing practice in product and service categories. However, income does not always predict the best customers for a given product. Increasingly, companies are finding that their markets are ―hourglass-shaped as middle-market Americans migrate toward more premium products. Generation: Each generation is profoundly influenced by the times in which it grows up. They share similar outlooks and values. Marketers often advertise to a cohort group by using icons and images prominent in the experiences of such a cohort group. Social Class: Social class has a strong influence on preferences for consumers. Many companies design products and services for specific social classes. Psychographic Segmentation Psychographics is the science of using psychology and demographics to better understand consumers. In psychographic segmentation, buyers are divided into different groups on the basis of lifestyle or personality or values. One of the most popular commercially available classification systems is SRI Consulting Business Intelligence‘s VALS framework. The major tendencies of the four groups with high resources are innovators, thinkers, achievers and experiencers. The major tendencies of the four groups with lower resources are believers, strivers, makers and strugglers. Behavioural Segmentation In behavioural segmentation, buyers are divided into groups on the basis of their knowledge, attitude, toward, use of, or response to a product. Decision Roles: People play five roles in a buying decision. These are: Initiator, Influencer, Decider, Buyer and User Behavioural Variables: Many marketers believe that behavioural variables are the best starting points for constructing market segments. 25

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Occasions: Occasions can be defined in terms of the time of day, week, month, year or in terms of other well-defined temporal aspects of a consumer‘s life. Benefits: Buyers can be classified according to the benefits they seek. User Status: Markets can be segmented into non-users, ex-users, potential users, first-time users, and regular users of a product. Usage Rates: Markets can be segmented into light, medium, and heavy product users. Heavy users often account for a small percentage of the market but possess a high percentage of total consumption. Buyer-Readiness Stage: A market consists of people in different stages of readiness to buy a product. Some are unaware of the product, some are aware, some are informed, some are interested, some desire and some intend to buy. Loyalty Status Buyers can be divided into four groups according to brand loyalty status: Hard-core loyals, Split loyals, Shifting loyals and Switchers. A company can learn a great deal by analysing the degrees of brand loyalty. Attitude: Five attitude groups can be found in a market: Enthusiastic, Positive, Indifferent, Negative and Hostile.

Q. 17. Which are the different levels of market segmentation? How does a market leader defend its leadership position? Which strategies can be adopted by a marketer in the maturity stage? OR Markets can be segmented at four levels. Briefly describe each and explain the benefits associated with segmenting the market at each of the four levels. Answer: The starting point for discussing segmentation is mass marketing. In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one prod· uct for all buyers. Mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. However, many critics point to the increasing splintering of the market, and the proliferation of advertising media and distribution channels, which are making it difficult and increasingly expensive to reach a mass audience. Some claim that mass marketing is dying. Most companies are turning to micromarketing at one of four levels: segments, niches, local areas, and individuals. Segment Marketing Market segment consists of a group of customers who share a similar set of needs and wants. The marketer does not create the segments. The marketer‘s task is to identify the segments and decide which one(s) to target. Market segments can be defined in many different ways as follows: 

One way to carve up a market is to identify preference segments



Homogeneous preferences



Diffused preferences



Clustered preferences

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Niche Marketing A niche is a more narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub-segments. Niche marketers presumably understand their customers‘needs so well that the customers willingly pay a premium. Globalization has facilitated niche marketing. The low cost of setting up shop on the Internet has led to many small business start-ups aimed at niches. Local Marketing Target marketing is leading to marketing programmes tailored to the needs and wants of local customer groups. Local marketing reflects a growing trend called grassroots marketing. Marketing activities concentrate on getting as close and personally relevant to individual customers as possible. A large part of local, grassroots marketing is experiential marketing that promotes a product or service not just by communicating its features and benefits, but by also connecting it with unique and interesting experiences. Customerization The ultimate level of segmentation leads to ―segments of one, ―customized marketing, or ―one-to-one marketing. Today customers are taking more individual initiative in determining what and how to buy. Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice. Each business unit will have to decide whether it would gain more by designing its business system to create offering for segments or for individuals. Customization is certainly not for every company.

Q. 18. Explain the relevance of target marketing and positioning in marketing. Answers: All marketing strategy is built on STP - Segmentation, Targeting, and Positioning. A market segment consists of a group of customers who share a similar set of needs and wants. Once the firm has identified its market-segment opportunities, it has to decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups. This has led some market researchers to advocate a needs-based market segmentation approach. A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy in a superior way, and then positions its offering so that the target market recognises the company‘s distinctive offering and image. If a company does an excellent job of positioning, then it can work out the rest of its marketing planning and differentiation from its positioning strategy. We define positioning as follows: Positioning is the act of designing the company‘s offering and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the minds of consumers to maximise the potential benefit to the firm. A good brand positioning helps guide marketing strategy by clarifying the brand‘s essence, what goals it helps the consumer achieve, and how it does so in a unique way - customer-focused value proposition. 27

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Segmentation, Targeting and positioning Model of McDonalds: McDonalds has segmented their products according to bases of Demographic, Psychographic and Behavioral. They have segmented their products and positioned their products according to kids, students and family. But they haven’t segmented their products according to the Adult target group. Also they haven’t started segment related to breakfast in every outlet. Segmentation: McDonalds in India segmentation it has done is on three different bases: 1) Demographic Segmentation: Kids, Family and Students McDonalds offers different products like Happy Meal which includes a free toy for kids. For families it has made different outlets and meals which are suitable for takeaways and drive-thru. McDonalds has made its environment which is suitable for students of school to hang out with their friends and can get their lunch at McDonalds. 2) Psychographic segmentation: Convenience and lifestyle McDonalds has adopted itself according to the convenience and lifestyle of the Indian consumers, as India has a huge vegetarian population so McDonalds came up with a different and new product line which includes items like Mc Veggie burger and Mc Aloo tikki Burger. They also made McDonalds as a place to relax and even for entertainment. 3) Behavioral segmentation: Occasions, for e.g. Birthday Parties of kids McDonalds can get more customers by whom they can get most of the share of India Fast Food Industry but they should emphasis on their Targeting technique. In India positioning of McDonalds has been directed as a Family restaurant. Then they started positioning according to the kids as well by introducing new advertising of toys with their products such as “Happy Meal”. Q. 19. “The market leader must work hard to stay on top of its market. Various strategies are crafted by the organization to achieve this objective.”- Describe these strategies and any relevant sub strategies that are necessary for accomplishing the primary objective of the organization. Answers: The dominant firm normally gains the most when the total market expands. In general, the market leader should look for new customers or more usage from existing customers. New Customers Every product class has the potential of attracting buyers who are unaware of the product or who are resisting it because of price or lack of certain features. A company can search for new users among three groups: Those who might use it but do not (market-penetration strategy) Those who have never used it (new-market segment strategy) 28

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Those who live elsewhere (geographical-expansion strategy) More Usage Usage can be increased by increasing the level of quantity of consumption or increasing the frequency of consumption. Increasing the amount of consumption can sometimes be done through packaging or product design. Increasing frequency of use involves identifying additional opportunities to use the brand in the same basic way or identifying completely new and different ways to use the brand. To generate additional usage opportunities, a marketing programme can communicate the appropriateness and advantages of using the brand more frequently in new or existing situations and /or remind consumers to actually use the brand as close as possible to those situations. Another potential opportunity to increase frequency of use is when consumers‘perceptions of their usage differ from the reality of their usage. The second approach is to identify completely new and different applications. Product development can spur new uses. Defending Market Share While trying to expand total market size, the dominant firm must continuously defend its current business. What can the market leader do to defend its terrain? By continuous innovation—developing new product and customer services, distribution effectiveness, and cost cutting - it keeps its competitive strength and value to customers. In satisfying customer needs, a distinction can be drawn between responsive marketing, anticipative marketing, and creative marketing. A responsive marketer finds stated need and fills it. An anticipative marketer looks ahead into what needs customers may have in the near future. A creative marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond. Even when it does not launch offensives, the market leader must not leave any major flanks exposed. A dominant firm can use the six defence strategies: Position defence - Position defense means occupying the most desirable market space in consumers' minds, making the brand almost impregnable Flank defence - Although position defense is important, the market leader should also erect outposts to protect a weak front or possibly serve as an invasion base for counterattack. EX-Cadbury came up with five star to protect overall market share of Cadbury dairy milk Preemptive defence - A more aggressive maneuver is to attack before the enemy starts its offense. A company can launch a preemptive defense in several ways. It can wage guerrilla action across the market-hitting one competitor here, another there-and keep everyone off balance; or it can try to achieve a grand market envelopment. EX- Seiko has launched more than 2000 models Counteroffensive defence - When attacked, most market leaders will respond with a counterattack. In a counteroffensive, the leader can meet the attacker frontally or hit its flank or 29

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launch a pincer movement. An effective counterattack is to invade the attacker's main territory so that it will pull back to defend it. EX- Toyota launched lexus to responds to Mercedes attack Mobile defence - In mobile defense, the leader stretches its domain over new territories that can serve as future centers for defense and offense through market broadening and market diversification. Market broadening shifts focus from the current product to the underlying generic need. EX- Itc entered into fmcg products Contraction defence - Large companies sometimes must recognize that they can no longer defend all their territory. The best course of action then appears to be planned contraction (also called strategic withdrawal): giving up weaker territories and reassigning resources to stronger territories. EX- tata sold lakme to hul Q. 20. Discuss the following statement: “A company that is a market follower has no marketing strategy of its own.” Answer: Some years ago, Theodore levitt wrote an article entitle “innovative imitation,” in which he argued that strategy of product imitation might be as a profitable as a strategy of product innovation. Innovator bears the expense of developing the new product, getting it into distribution, and informing and educating the market. The reward for all this work and risk is normally market leadership. However, another firm can come along and copy or improve on the new product. Market follower: That’s not to say that market followers lack strategies. A market follower must know how to hold current customers and win a fair share of new ones. Each follower tries to bring distinctive advantages to its target market-location, services, financing. Because the follower is often a major target of attack by challengers. Types of marketing strategy of market follower: 1) Counterfeiter: The counterfeiter duplicates the leader’s product and packages and sells it on the black market or through disreputable dealers. Music firms, Apple, and Rolex have been plagued by the counterfeiter problem. 2)Cloner: The cloner emulates the leader’s products, name, and packaging, with slight variations. EX.-Parle-G=Prem-G, Puma=Pama 3)Imitator: The imitator copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing, or location. The leader doesn’t mind the imitators as long as the imitator doesn’t attack the leader aggressively. Fernandez Pujals grew up in Fort Lauderdale, Florida, and took Domino’s home delivery idea to Spain, where he borrowed $80,000 to open his first store in Madrid. 30

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EX.-Onida, Videocon 4)Adapter: The adapter takes the leader’s products and adapts or improves them. The adapter may choose to sell to different markets, but often it grows into the future challenger, as many Japanese firms have done after improving products developed elsewhere. EX.- Micromax Q. 21. Write a note on challenger strategies. OR Explain the strategies of market challenger. OR Explain the competitive strategies that can be adopted by challengers? OR Hindustan Unilever the market leader in the fast moving consumer goods category is facing a tough competition from Proctor and Gamble, ITC and other small players. What strategies do you suggest for Hindustan Unilever to defend its market share? OR Being the 2nd ranked brand in its category, what strategies would you propose to manage competition for your brand? Answer: Market challengers have gained ground or even overtake a leader. Toyota today produce more cars than general motors, Lowe’s is putting pressure on home depot. AMD has been chipping away at Intel’s market share. Challengers set high aspirations, leveraging their resource while market leader often runs the business as usual. Choosing a general attack strategy Frontal attack:In a pure frontal attack, the attacker matches its opponent’s product, advertising, price, and distribution. The principal of force says that the side with the greater resource will win. A modified frontal attack, such as cutting price, cam work if the market leader doesn’t retaliate, and if the competitor convinces the market that its product is equal to the leaders. Ex.-Amul Product Flank attack:An enemy’s weak spot are natural targets. A flank attack can be directed along two strategic dimensions geographic and segmental. In a geographic attack, the challenger spots areas where the opponent is underperforming. Ex. - Pepsi to co-cola Encirclement attack:Encirclement maneuver is an attempt to capture a wide a slice of the enemy’s territory through blitz. it means lunching a grand offensive on several front encirclement makes séance when the challenger commands superiors resource believes a swift encirclement will break the opponent’s will. Ex. - FMCG Product Bypass attack:The most indirect assault strategy is bypassing the enemy altogether and attacking easier market to broaden the firm’s resource base. This strategy of three line approach: diversifying into

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unrelated products, diversifying into new geographical market, and leapfrogging into new technologies to supplant existing product. Ex.-Pepsi Guerrilla attack:Guerrilla attack consists of waging small’s intermittent attack to hairballs and demoralizes the opponent and eventually secure permanent footholds. The guerrilla challengers’ use both conventional and unconventional means of attack. EX. - Micromax Q. 22. Service quality dimensions are important in marketing of services. How do these dimensions affect the marketing of DTH (Direct-to-home) services? OR What is services marketing? How is it different from the marketing of goods? Explain the Service quality Model with reference to hospital services in health-care sector. OR Define services and explain the characteristics of services. OR Explain generic difference between Product & Services. What challenges do these differences pose to a marketer? Respond by explaining through befitting example(s). OR How is the marketing of services unique? Identify strategies adopted by marketers for overcoming the challenges of marketing of services. OR Briefly explain the distinctive characteristics of services. Briefly explain any three major marketing decisions in Retailing OR “When the physical product cannot easily be differentiated, the key to competitive success may lie in adding valued services and improving quality.” Explain How? Answer: Introduction A service is the non material equivalent of a good .A service provision is an economic activity that does not result in ownership but implying an exchange of value between seller and buyer in the market place, and this differentiates it from providing physical goods. DEFINITION According to Philip kotler,”A service is an act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product” Characteristics of services Services possess four unique inherent characteristics not found in goods: 32

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1.Intangibility: Services are intangible unlike physical products, they can not seen, tasted felt, heard, or smelled before they are bought. The person getting a face lift cannot see the exact result before the purchase, and the patient in the psychiatrist’s office cannot know the exact outcome. 2.Inseparability: Inseparability is the next unique feature of services. Some experts refer to it by the term ‘immediacy’. In fact, services are marked by two kind of inseparability. In fact, services are marked by two kind of inseparability: i)Inseparability of production and consumption ii)Inseparability of the service from the person who possesses the skill and performs the service. 3.Variability: Service are also marked by variability/individuality/.This is so because of three reason. i) The inseparability of the service from the provider leads to some variability. ii) Service are highly people intensive and anything that is people intensive is bound to be marked by variability. iii) In service, the effect varies dependent on when and where the service is provided. 4. Perishability Services cannot be stored. Some doctors charge patients for missed appointments because the service value existed only at that point. The perish ability of services is not a problem when demand is steady. When demand is fluctuates, service firms have problems. The service quality of a firm is tested at each service encounter. Service Quality Model (If Asked) Customer Expectations Customers form service expectations from many sources. Some expectations stem from past experiences, word-of-mouth and advertising. In general, customers compare the perceived service with the expected service. If the perceived service falls below the expected service, customers are disappointed. If the perceived service meets or exceeds their expectations, they are apt to use the provider again. Successful companies add benefits to 33

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their offering that not only satisfy customers but also surprise and delight them. Delighting customers is a matter of exceeding expectations. A service-quality model that highlights the main requirements for delivering high service quality that identifies five gaps that cause unsuccessful delivery. The following five gaps that cause unsuccessful delivery: Gap between consumer expectations and management perception Gap between management perception and service-quality specification Gap between service-quality specifications and service delivery Gap between service delivery and external communications Gap between perceived service and expected service Based upon this service-quality model, these researchers identified the following five determinants of service quality, in order of importance: Reliability Responsiveness Assurance Empathy Tangibles Based on these five factors, the researchers developed the 21-item SERVQUAL scale: Reliability Empathy Providing service as promised Giving customers individual attention Dependability in handling customers‘ service Employees who deal with customers in a problems caring fashion Performing services right the first time Having the customer‘s best interests at heart Providing services at the promised time Employees who understand the needs of their Maintaining error-free records customers Convenient business hours Responsiveness Keeping customers informed as to when Tangibles services will be performed Modern equipment Prompt service to customers Visually appealing facilities Willingness to help customers Employees who have a neat, professional Readiness to respond to customers‘ requests appearance Visually appealing materials associated with the service Assurance Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions 34

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Q. 23. How has IT affected the distribution of goods and services? Which are the unique characteristics of advertising and personal selling? OR Which are the key characteristics of advertising and personal selling? Answer: Advertising and personal selling are two most important methods to create awareness and creating and increasing demand for goods and services. These are widely used throughout the world to introduce the products to the prospective buyers and pushing the sales. But the two are different from each other in many ways. The points of difference between the two are as follows: 1. Personal selling involves direct interaction of salesmen with individuals. Advertising is non-personal and is addressed to the customers in general. 2. Personal selling is confined to a particular area; advertisement is generally found to cover a larger number of people. 3. In personal selling there is a two way communication. The salesman explains his viewpoint to the potential buyer and knows about his/ her reaction. In advertisement there is one way communication; the targeted persons' reactions cannot be known immediately. 4. In Personal selling there is only one channel of transmission of messages i.e., personal talk of the salesman with the potential buyers; advertisement offers a wide choice of channels, visual, audio such as radio and audiovisual such as television. Q. 24. What is an Integrated Marketing Communication Program? Discuss the 5 M’s of Advertising Program? Answer: Marketing communications, are the means by which firms attempt to inform, persuade, and remind consumers - directly or indirectly - about the products and brands that they sell. Marketing communications represent the ―voice of the brand and are a means by which it can establish a dialogue and build relationships with consumers. Marketing communications performs many functions for consumers. As defined by the American Association of Advertising Agencies, integrated marketing communications (IMC) is a concept of marketing communications planning process designed to assure that all brand contacts received by a customer or prospect for a product, service, or organization are relevant to that person and consistent over time. Such a plan evaluates the strategic roles of a variety of communications disciplines such as general advertising, direct response, sales promotion, and public relations and combines these disciplines to provide clarity, consistency and impact. EX: Coca-Cola - Coca-Cola Life Recently, Coca-Cola launched a new product to its long standing line of soft drinks, called 'Coca-Cola Life' along with a month long campaign. Coca-Cola Life fits in the same kind of category as Coke Zero and Diet Coke - another one of Coca-Cola’s attempts to release a healthier option to its main heavily sugary product. The campaign is being rolled out across 7,000 outdoor locations nationwide with billboards, bus and digital screen ads; these are all being supported by print, digital, experiential and point of

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sale activity. Although television is not being used the buzz on social media since the drinks’ launch has been mainly positive. They then can make the five major decisions known as ―the 5Ms: Mission: What are the advertising objectives? Sales goals, Advertising objectives Money: How much to spend? Stage in PLC, market share, consumer base, competition, clutter, advertising frequency, product substitutability. Message: What message should be sent? Message generation, message evaluation and selection, message execution, social responsibility Media: What media should be used? Reach, frequency, impact, major types of media, specific type of media vehicle, media timings, and geographical media allocation Measurement: How should the results be evaluated? Communication impact, sales impact.

Q. 25. Explain various methods for determination of Advertising Budget. Critically compare them with respect to their pros and cons OR Discuss the various advertising budget methods OR Discuss some of the methods of establishing the total marketing communications budget with an example Answer: Deciding On the Advertising Budget How does a company know if it is spending the right amount? Although advertising is treated as a current expense, part of it really is an investment in building brand equity. The following are five specific factors to consider when setting the advertising budget: Stage in the product life cycle - New products typically merit large advertising budgets to build awareness and to gain consumer trial. Established brands usually are supported with lower advertising budgets, measured as a ratio to sales Market share and consumer base - High-market-share brands usually require less advertising expenditure as a percentage of sales to maintain share. To build share by increasing market size requires larger expenditures. Competition and clutter - In a market with a large number of competitors and high advertising spending, a brand must advertise more heavily to be heard. Even simple clutter from advertisements not directly competitive to the brand creates a need for heavier advertising. Advertising frequency - The number of repetitions needed to put across the brand's message to consumers has an obvious impact on the advertising budget. Product substitutability - Brands in less-well-differentiated or commodity-like product classes (beer, soft drinks, banks, and airlines) require heavy advertising to establish a differential image. Establish the Total Marketing Communications Budget 36

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One of the most difficult marketing decisions is determining how much to spend on promotion. Industries and companies vary considerably in how much they spend on promotion. Companies decide on the promotion budget in four common ways: the affordable method, percentage-ofsales method, competitive-parity method, and objective-and-task method. Affordable Method Many companies set the promotion budget at what they think the company can afford. This method completely ignores the role of promotion as an investment and the immediate impact on sales volume. It leads to an uncertain annual budget, and makes long-range planning difficult. Percentage-of-Sales Method Many companies set promotion expenditures at a specified percentage of sales (current or anticipated) or the sales price. Supporters of the percentage-of-sales method see a number of advantages. Promotion expenditures will vary with what the company can ―afford.‖ It encourages management to think of the relationship among promotion cost, selling price, and profit per unit. It encourages stability when competing firms spend approximately the same percentage of their sales on promotion. The percentage-of-sales method has little to justify it. It views sales as the determiner of promotion rather than as the result. It leads to a budget set by the availability of funds rather than by market opportunities. It discourages experimentation with countercyclical promotion or aggressive spending. Year-to-year sales fluctuations interfere with long-range planning. There is no logical basis for choosing the specific percentage. It does not encourage building the promotion budget by determining what each product and territory deserves. Ex: if profits in a period are low, it might not be the fault of sales or advertising. But if you stick with the same percentage figure, you'll automatically reduce your advertising allotment. There's no way around it: 2% of $10,000 is less than 2% of $15,000. Such a cut in the advertising budget, if profits are down for other reason, may very well lead to further losses in sales and profits. This in turn will lead to further reductions in advertising investment, and so on. Competitive-Parity Method Some companies set their promotion budget to achieve share-of-voice parity with competitors. Two arguments are made in support of the competitive-parity method. Competitors‘ expenditures represent the collective wisdom of the industry. Maintaining competitive parity prevents promotion wars. Neither argument is valid. Ex: Carry out a really comprehensive competitor review. Work out where, and how often, your main competitors are advertising. Are they primarily opting for print ads or have they plastered every billboard between here and the moon with their logo? From this, you should be able to work out (around about) what your competitors are spending. To remain competitive in the same market, you may need to make sure that your brand is as visible as your competitors. You may need to match their advertising budget. Objective-and-Task Method The objective-and-task method calls upon marketers to develop promotion budgets by defining specific objectives, determining the tasks that must be performed to achieve these objectives, and 37

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estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget. The objective-and-task method has the advantage of requiring management to spell out its assumptions about the relationship among rands spent, exposure levels, trial rates, and regular usage. A major question is how much weight marketing communications should receive in relation to alternatives such as product improvement, lower prices, or better service. The answers depend on where the company‘s products are in their life cycles - Whether they are commodities or highly differentiable products or whether they are routinely needed or have to be ―sold. Ex: You should set specific objectives: not just "Increase sales," but, for example, "Sell 25% more of product X or service Y by attracting the business of teenagers." Then determine what media best reaches your target market and estimate how much it will cost to run the number and types of advertisement you think it'll take to get that sales increase. You repeat this process for each of your objectives. When you total these costs, you have your projected budget. Q. 26. Which are the various ways in which a marketer can communicate with its customers personally? Personal Communication Channels Personal communication channels involve two or more persons communicating directly face-toface, person to audience, over the telephone, or through e-mail. Personal communication channels derive their effectiveness through individualized presentation and feedback. Advocate channels consist of company salespeople contacting buyers in the target market. Expert channels consist of independent experts making statements to target buyers. Social channels consist of neighbors, friends, family members, and associates talking to target buyers. Personal influence carries especially great weight in two situations: With products that are expensive, risky, or purchased infrequently and Where the product suggests something about the user‘s status or taste. Communication researchers are moving toward a social-structure view of interpersonal communication. They see society as consisting of cliques, small groups whose members interact frequently. A liaison is a person who connects two or more cliques without belonging to either. A bridge is a person who belongs to one clique and is linked to a person in another clique. Many companies are becoming acutely aware of the power of word of mouth or ―buzz. In some cases, positive word of mouth happens in a natural way. ―Buzz is managed. Companies can take the following steps to stimulate personal influence channels to work on their behalf: Identify influential individuals and companies and devote extra effort to them Create opinion leaders by supplying certain people with the product on attractive terms Work through community influentials such as presidents of social, religious, and other organisations Use influential or believable people in testimonial advertising Develop advertising that has high ―conversation value 38

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Develop word-of-mouth referral channels to build business Establish an electronic forum Use viral marketing Viral marketing involves passing on company-developed products, services, or information from user to user. Marketers must be careful in reaching out to consumers. Consumers can resent personal communications if unsolicited.

Q. 27. Advertising can perform a number of functions in business markets. Name and explain six of those functions. Answer: The advertising objectives must flow from prior decisions on target market, brand positioning, and the marketing programme. An advertising goal (or objective) is a specific communication task and achievement level to be accomplished with a specific audience in a specific period of time. To Increase Among 30 Million Homemakers Who Own Automatic Washers The Number Who Identify Brand X As A Low-Sudsing Detergent ,And Who Are Persuaded That It Gets Clothes Cleaner, From 10% To 40% In One Year. Advertising objectives can be classified according to whether their aim is to inform, persuade, remind and reinforce. Information - aims to create brand awareness and knowledge of new products or new features of existing products. One Of The Most Memorable Ads Ever Starred Australian Rugby Player Jacko For Energizer Batteries. Jacko Was Dressed As Battrie And Brust Into A Subway Car, Repeatedly Shouting Out The Brand Name Helpless Early-Morning Commuters. Unfortuneatly , Although People Remembred The Brand Name –They Hated The Ad !Brand Awreness Cannot Come At The Expense Of Brand Attitudues. Persuasive - aims to create liking, preference, conviction, and purchase of a product or service. Example:- Ujala Fabric Whitener , A Brand In India , Shot To Prominence By Introdusing It Self Through Comparitive Ads Reminder - aims to stimulate repeat purchase of products and services. Expensive , Four Colour Cocacola Ads In Mazagine Are Intended To Remind People To Purchase Cocacola. Reinforcement - aims to convince purchasers that they made the right choice. The advertising objective should emerge from a thorough analysis of the current marketing situation. To create brand preference To create differentiation of company’s offerings from competitors. Q. 28. Explain in depth, the concepts of creative strategy and appeals, supported with relevant examples. Creative Strategy 39

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Communication effectiveness depends on how a message is being expressed as well as the content of the message itself. Ineffective communication may mean that the wrong message was used or the right message was expressed poorly. Creative strategies are how marketers translate their messages into specific communication. Creative strategies can be broadly classified as either ―informational or ―transformational‖ appeals. Informational Appeals An informational appeal elaborates on product or service attributes or benefits. Examples are: Problem solving ads - Moov-dard mitaye chutki me, ENO-Kam suru sirf 6 second me Product demonstration ads - Oral-B tooth brush with tongue cleaner Product comparison ads - Smartphones ads( camera, processor, supporting system etc.) Testimonials Informational appeals assume very rational processing of the communication on the part of the consumer - logic and reason ―rule. There are three types of informational appeals: Conclusion drawing One-versus-two-sided arguments - one-sided presentations that praise a product would be more effective than two-sided arguments that also mention shortcomings. Order of argument presentations Each of these appeals has their supporters and distracters and depends heavily upon the target audience for the message. Transformational Appeals A transformational appeal elaborates on a non-product-related benefit or image. It might depict: What kind of person uses a brand What kind of experience results from using the brand Transformational appeals often attempt to stir up emotions that will motivate purchase Communicators use negative appeals such as: Fear - Cyber crime ads (government of india,cuber crime department), Tax payment deadline ads etc. Guilt Shame - boroplus-sukha chahera,chipchipa chahera (brush their teeth, have an annual health checkup) or stop doing things (smoking, alcohol abuse, overeating). Messages are most persuasive when they are moderately discrepant with what the audience believes. Communicators also use positive emotional appeals such as: 40

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Humour - Fevicol Love – Surf Excel Daag Ache Hai, Cadbury. Pride - Sar uthake jio-HDFC life insurance Joy - Pappu pass ho gya Motivational or ―borrowed interest devices are often employed to attract consumer attention and raise their involvement with an ad. Borrowed interest techniques are thought to be necessary in the tough new media environment characterised by low involvement consumer processing and while competing with ad and programmeming clutter. These borrowed interest approaches can attract attention and create more liking and belief in the sponsor, but they may also: Detract from comprehension Wear out their welcome fast Overshadow the product Attention getting tactics are often too effective and distract from brand or product claims. One challenge in arriving at the best creative strategy is figuring out how to ―break through the clutter to attract the attention of the consumer - but still be able to deliver the intended message. The magic of advertising is to bring concepts to life in the minds of the consumer target. Q. 29. What are the different steps involved in personnel selling? Explain. OR Provide the steps in the selling process. What would be the two most difficult steps for most salespeople and why? The Six Steps Step 1: Prospecting and Qualifying The first step in selling is to identify and qualify prospects. More companies are taking responsibility for finding and qualifying leads. Leads can be categorized, with ―hot prospects turned over to the field sales force. Step 2: Pre-approach The salesperson needs to learn as much as possible about the prospect company. The salesperson should set call objectives. Step 3: Presentation and Demonstration The salesperson now tells the product ―story‖ to the buyer, following the AIDA formula: Gaining attention. Holding interest. Arousing desire. Obtaining action

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Step 4: Overcoming Objections Customers typically pose objections during the presentation or when asked for the order. To handle these objections, the salesperson maintains a positive approach, asks the buyer to clarify the objection, questions the buyer in a way that the buyer has to answer his or her own objection, denies the validity of the objections and turns the objection into a reason for buying. One potential problem is for salespeople to give in too often when customers demand a discount. ―Sell the price rather than ―sell through price. Step 5: Closing Salespeople need to know how to recognise closing signs from the buyer. Step 6: Follow-Up and Maintenance Follow-up and maintenance are necessary if the salesperson wants to ensure customer satisfaction and repeat business. Immediately after the closing, the salesperson should cement any details on delivery time, purchase terms, and other matters important to the customer. Q. 30. Explain various choices amongst major media alternatives available to marketer of a FMCG company and compare the same with their relative merits & demerits. OR List and explain some of the alternative advertising options that are available to marketers Alternative Advertising Options Many marketers are looking for alternative advertising media such as the following : Place Advertising Place advertising, also called out-of-home advertising, is a broadly defined category that captures many different alternative advertising forms. Marketers are using creative and unexpected ad placement to grab consumer‘s attention. The rationale is that marketers are better off reaching people in other environments, such as where they work, play or shop. Some of the options available include: Billboards, Public places, Product placement and Point-of-purchase. Billboards Billboards now use colourful, digitally produced graphics, backlighting, sounds, movement, and even three-dimensional images. Billboards do not have to be fixed. Marketers can buy space on billboard-laden trucks. Public Spaces Advertisers are placing traditional TV and print ads in unconventional places such as movies, airlines, lounges, classrooms, sports arenas, hotel elevators and other public places. Advertisers can buy space in stadiums, on garbage cans, bicycle racks and other places. Product Placement Product placement has expanded from movies to all types of TV shows. Product placements can be combined with special promotions to publicize entertainment tie-ins. Some firms get product placement at no cost by supplying their product to the movie company. Marketers are finding other inventive ways to advertise during actual television broadcasts. Virtual logos networks add digitally to the playing field. Ads also appear in best-selling paperback books and movie 42

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videotapes. Advertorials are print ads that offer editorial content that reflects favourably on the brand and is difficult to distinguish from newspaper or magazine content. Point-of-Purchase

There are many ways to communicate with consumers at the point-of-purchase (POP). In-store advertising includes ads on shopping carts, cart straps, aisles and shelves. The appeal of point-ofpurchasing advertising lies in the fact that numerous studies show that in many product categories, consumers make the bulk of their final brand decisions in the store. One study suggested that 70 percent of all buying decisions are made in the store. In-store advertising is designed to increase the number of spontaneous buying decisions. Other alternative media are aerial advertising, transit advertising, etc. Evaluating Alternative Media The main advantage of non-traditional media is that a very precise and captive audience often can be reached in a cost-effective manner. The challenge with non-traditional media is demonstrating its reach and effectiveness through credible, independent research. These new marketing strategies must be judged on how they contribute, directly or indirectly, to brand equity. There has been some consumer backlash when people see ads in traditionally ad-free spaces. Perhaps because of the sheer pervasiveness of advertising, consumers seem to be less bothered by non-traditional media now than in the past. Q. 31. What is direct marketing? Which channels are used by direct marketers in their direct marketing efforts? DIRECT MARKETING  Meaning of Direct Marketing  Direct marketing, is the use of consumer-direct (CD) channels to reach and deliver goods and services to customers without using marketing intermediary (middlemen).  Direct marketers seek a measurable response, typically a customer order. This is sometimes called direct-order marketing.  Today, many direct marketers use direct marketing to build a long-term relationship with the customer.  Direct marketing is one of the fastest growing avenues for serving customers. More and more businesses have turned to direct mail and telemarketing in response to the high and increasing costs of reaching business markets through a sales force.  Channels of direct marketing  This channels include: Direct mail, Catalogues, Telemarketing, Interactive TV, Kiosks, Websites and Mobile devices. I.

Direct Mail  Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a person.  Examples include postcards with an offer, catalogs that display goods, coupons, solicitation letters from nonprofits or free samples sent by businesses. 43

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 

For example, Pantaloons sends mail informing new style, new launch, offers etc. Direct marketing is a popular medium because it: Permits target market selectivity, Can be personalized, Is flexible, Allows for early testing and response measurement, In constructing an effective direct mail campaign marketer decides on their, Objective, Target market, Offer elements, Testing elements and Lifetime of value. II. Catalog Marketing  In catalog marketing company send full line merchandise catalog, specialty consumer catalog and business catalog usually prints form but also sometime as CDs, videos, or online.  Through their catalogs Avon sells cosmetics, IKEA sells furniture and Saks Fifth Avenue sells specialty clothing.  Examples of general merchandise catalogs are: Amway, Oriflame and Avon. III. Telemarketing  Telemarketing is the use of the telephone and calls centers to attract prospects, sell to existing customers and provide service by taking orders and answering questions.  Telemarketing helps companies increase revenues, reduce selling costs and improve customer’s satisfaction.  Companies use call center for inbound telemarketing and outbound telemarketing.  Inbound telemarketing means receiving calls from customers and outbound means initiating calls to prospects and customers.  For example In India Wipro BPO solution and Daksh by IBM are two major players in this sector.  The telecommunications industry, for example, has used telemarketing extensively to attempt to increase their market share.  This includes: AT&T, MCI WorldCom and Sprint IV. Kiosk Marketing  Customer order machines, versus vending machines that actually provide products, are another form of direct marketing. Examples are:  Your bank’s automatic teller machines (ATMs) placed in convenient and high traffic areas are another example of kiosk marketing. A combination of these direct marketing techniques may offer the optimal revenue generating solution. V. Other Media for Direct Response Marketing   

Direct marketer uses all major media. Newspaper and magazines carry abundant print ads offering books, articles of clothing, appliances, vacations and other goods and services. Radio ads present offers 24 hours a day. Some companies prepare 30 and 60 minute infomercials to combine the sell od television commercial with the draw of information and entertainment.

Q. 32. Under Interactive marketing discuss some of the options available for placing advertisements and promotion Online Answer: INTERACTIVE MARKETING The newest channels for direct marketers are electronic. The Internet provides marketers and consumers with opportunities for much greater interaction and individualization. Today companies can send individualized content and consumers themselves can further individualize the content. Companies can interact and dialogue with much larger groups than in the past. The exchange process has become increasingly customer-initiated and customer-controlled where 44

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customers: Define the rules of engagement, Define what information they need, Indicate what offering they are interested in, Indicate what price they are willing to pay Designing An Attractive Web Site Clearly all companies need to consider and evaluate e-marketing and e-purchasing opportunities. A key challenge is designing a site that is attractive on first viewing and interesting enough to encourage repeat visits. Amazon and Flipkart have proposed that effective Websites feature seven design elements that they call the 7Cs: Context, Content, Community, Customization, Communication, Connection, Commerce. To encourage repeat visit, companies need to pay special attention to context and content factors and embrace another ―C - constant change. Visitors will judge a site‘s performance on its ease of use and its physical attractiveness. Ease of use breaks down into three attributes: The Website downloads quickly, The first page is easy to understand, The visitor finds it easy to navigate to other pages that open quickly. Physical attractiveness is determined by the following factors: The individual pages are clean looking anad not overly crammed with content, The typefaces and font sizes are very readable and The site makes good use of colour (and sound) Placing Ads and Promotion Online A company has to decide which forms of Internet advertising will be most cost-effective in achieving advertising objectives. Banner ads are small rectangular boxes containing text and perhaps a picture. Companies pay to place banner ads on relevant Websites. Sponsorships are best placed in well-targeted sites where they can offer relevant information or service. A microsite is a limited area on the Web, managed and paid for by an external advertiser/company. Interstitials are advertisements that pop up between changes on a Web site. There are search ads and display ads in interactive advertising. The hottest growth area has been search-related ads. A newer trend, content-target advertising links ads not keywords to the content of Web pages. Companies can set up alliances and affiliate programmes (when one Internet company works with another one, they end up advertising each other). Web advertising is showing double-digit growth. E-Marketing Guidelines If a company does an e-mail campaign right, not only can it build customer relationships, but also reap additional profits. The following are some guidelines followed by pioneering e-mail marketers: Give the customer a reason to respond, Personalize the content of your e-mails, Offer something the customer could not get via direct mail, Make it easy for customers to ―unsubscribe. Direct marketing must be integrated with other communications

Q. 33. Define public relation and explain its tools. Answer: Not only must the company relate constructively to customers, suppliers, and dealers, it must also relate to a large number of interested publics. A public is any group that has an actual or potential interest in or impact on a company‘s ability to achieve its objectives. Public relations (PR) involves a variety of programmes designed to promote or protect a company‘s image to its individual products. The wise company takes concrete steps to manage successful relations with its key publics. Most companies have a

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public-relations department that monitors the attitudes of the organisations‘publics and distributes information and communications to build goodwill. PR departments perform the following five functions: 1. Press relations 2. Product publicity 3. Corporate communications 4. Lobbying 5. Counseling Marketing Public Relations Many companies are turning to marketing public relations (MPR) to support corporate or product promotion and image making. The old name for MPR was publicity that was seen as the task of securing editorial space to promote or ―hype a product, service, idea, etc. MPR goes beyond simple publicity and plays an important role in the following tasks: 1. Assisting in the launch of new products 2. Assisting in repositioning a mature product 3. Building interest in a product category 4. Influencing specific target groups 5. Defending products that have encountered public problems 6. Building the corporate image in a way that reflects favourably on its products As the power of mass advertising weakens, marketing managers are turning to MPR to build awareness and brand knowledge for both new and established products. MPR is also effective in blanketing local communities and reaching specific groups. MPR must be planned jointly with advertising. Creative public relations can affect public awareness at a fraction of the cost of advertising. Some experts say that consumers are five times more likely to be influenced by editorial copy than by advertising. Major Decisions in Marketing PR In considering when and how to use MPR, management must establish the marketing objectives, choose the PR messages and vehicles, implement the plan carefully, and evaluate the results. Establishing Objectives MPR can: Build awareness by placing stores in the media to bring attention to a product, service, person, organisation, or idea It can build credibility by communicating the message in an editorial context 46

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It can help boost sales-force and dealer enthusiasm with stores about a new product before it is launched It can hold down promotion costs because MPR costs less than direct mail and media advertising Choosing Message and Vehicles The MPR manager must identify or develop interesting stories about the product. Each event is an opportunity to develop a multitude of stories directed at different audiences. The best MPR practitioners are able to find or create stories even for mundane or out-of-fashion products. Implementing the Plan and Evaluating Results MPRs contribution to the bottom line is difficult to measure, because it is used along with other promotional tools. The three most commonly used measures of MPR effectiveness are: Number of exposures, Awareness, comprehension, or attitude change and Contribution to sales and profits. Q. 34. Define sales promotion. Explain the different sales promotion tools OR Write a detailed note on Sales promotion, with examples. OR Explain various strategies for consumer sales promotion for marketing of “Cellular Telecom Service” aimed towards a cross section of consumer segments with elaboration. OR Explain the relevance and applicability of each promotional tool vis-à-vis various products and services. Answer: Sales promotion, a key ingredient in marketing campaigns, consists of a collection of incentive tools, mostly short term, designed to stimulate quicker or greater purchase of particular products or services by consumers or the trade. Where advertising offers a reason to buy, sales promotion offers an incentive to buy. Sales promotions includes tools for: Consumer promotion Trade promotion Business and sales-force promotion Objectives Sales promotions tools vary in their specific objectives: Sellers use incentive-type promotions to: Attract new users, Reward loyal customers, Increase the repurchase rates of occasional users. Sales promotions are often used to attract brand switchers. Sales promotions used in markets of high brand similarity can produce a high sales response in the short run. In markets of high brand dissimilarity, sales promotions may be able to alter market shares permanently. In addition to brand switching, consumers may engage in stockpiling during sales promotions. A number of sales-promotion benefits flow to manufacturers and 47

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consumers. Sales promotions enable manufacturers to adjust short-term variations in supply and demand. Selecting Consumer-Promotion Tools The promotion planner should take into account the type of market, sales-promotion objectives, competitive conditions, and each tool‘s cost-effectiveness. We can distinguish between manufacturers‘ promotions and retailer promotions. Manufacturers promotions are illustrated by uses of rebates and gifts. Retailer promotions include price cuts, feature advertising, coupons, contests, or premiums. We can also distinguish between sales-promotion tools that are consumerfranchise building and reinforce the consumer‘s brand preference and those that do not. Consumer franchise-building promotions offer the best of both worlds - they build brand equity while moving product. Sales promotion is usually most effective when used together with advertising. Samples: Offer of a free amount of a product or service delivered door-to-door, sent in the mail, picked up in a store, attached to another product, or featured in an advertising offer. Coupons: Certificates entitling the bearer to a stated saving on the purchase of a specific product: mailed, enclosed in other products or attached to them, or inserted in magazine and newspaper ads. Cash Refund Offers (rebates): Provide a price reduction after purchase rather than at the retail shop: Consumer sends a specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by mail. Price Packs (cents-off deals): Offers to consumers of savings off the regular price of a product, flagged on the label or package. A reduced-price pack is a single package sold at a reduced price (such as two for the price of one). A banded pack is two related products banded together (such as a toothbrush and toothpaste). Premiums (gifts): Merchandise offered at a relatively low cost or free as an incentive to purchase a particular product. A with-pack premium accompanies the product inside or on the package. A free in-the-mail premium is mailed to consumers who send in a proof of purchase, such as a box top. A self-liquidating premium is sold below its normal retail price to consumers who request it. Frequency Programs: Programs providing rewards related to the consumer’s frequency and intensity in purchasing the company’s products or services. Prizes (contests, sweepstakes, games): Prizes are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls for consumers to submit an entry to be examined by a panel of judges who will select the best entries. A sweepstakes asks consumers to submit their names in a drawing. A game presents consumers with something every time they buy-bingo numbers, missing letters which might help them win a prize. Patronage Awards: Values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors. Free Trials: Inviting prospective purchasers to try the product without cost in the hope that they will buy. 48

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Product Warranties: Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period. Tie-in Promotions: Two or more brands or companies team up on coupons, refunds, and contests to increase pulling power. Cross-Promotions: Using one brand to advertise another noncompeting brand. Point-of-Purchase (P-O-P) Displays and Demonstrations: P-O-P displays and demonstrations take place at the point of purchase or sale. Selecting Trade-Promotion Tools Manufacturers use a number of trade-promotion tools, a higher proportion of the promotion pie is devoted to trade-promotion tools than to consumer promotion. Manufacturers award money to the trade: To persuade the retailer or wholesaler to carry the brand, To persuade the retailer or wholesaler to carry more units than the normal amount, To induce retailers to promote the brand by featuring, displaying, and reducing prices, To stimulate retailers and their sales clerks to push the product. The growing power of large retailers has increased their ability to demand trade promotions at the expense of consumer promotion and advertising. Manufacturers face several challenges in managing trade promotions: They often find it difficult to police retailers. Manufacturers are increasingly insisting on proof of performance before paying allowance More retailers are doing forward buying - buying a greater quantity during the deal period than they can sell during the deal period Retailers are doing more diverting. Manufacturers are trying to handle forward buying and diverting by limiting the amount that they will sell at a discount. Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased during a stated time period. Allowance: An amount offered in return for the retailer's agreeing to feature the manufacturer's products in some way. An advertising allowance compensates retailers for advertising the manufacturer's product. A display allowance compensates them for carrying a special product display. Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or who feature a certain flavor or size.

Q. 35. What are the functions of intermediaries? Explain. Answer: Intermediaries in a distribution channel provide services that enable manufacturers to reach different types of customers. A channel might include a number of intermediaries, such as agents, wholesalers, distributors and retailers. Intermediaries act as middlemen between different members of the distribution chain, buying from one party and selling to another.

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They also may hold stock and carry out logistical and marketing functions on behalf of manufacturers. Reaching More Customers Through Retailers 

Independent stores and retail chains sell products to consumers and business customers.

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By appointing retailers, manufacturers can reach different areas of the country and target smaller customers they could not afford to serve directly.

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Retailers buy products for resale direct from manufacturers or from wholesalers.

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They generally stock goods from many different suppliers, including competitive offerings in the same product category, so manufacturers must use incentives and discounts to encourage retailers to push their products in order to achieve strong sales. Simplifying Logistics through Wholesalers

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Wholesalers buy products in bulk from a number of different manufacturers, stocking them in warehouses and selling them to retailers.

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By holding stock, wholesalers enable manufacturers to supply customers in different regions without investing in their own warehousing facilities.

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Wholesalers also help manufacturers reduce their logistics costs by delivering stock to retailers or offering stores a collection service. Cooperative Marketing Through Distributors

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Distributors carry out similar functions to wholesalers, but generally have closer working relationships with manufacturers.

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Distributors may have exclusive arrangements with manufacturers and do not carry competing products. They may be part of a franchise, only offering the products of one manufacturer.

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Like wholesalers, they provide valuable warehousing and logistical functions for manufacturers.

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

They may also participate in cooperative marketing programs with suppliers, improving sales for manufacturers. A firm needs to identify the types of intermediaries available to carry on its channel work. Companies should search for innovative marketing channels. Sometimes a company chooses an unconventional channel because of the difficulty or cost of working with the dominant channel. The advantage is that the company will encounter less competition during the initial move into this channel. Price Sensitivity Companies have to decide on the number of intermediaries to use at each channel level. Three strategies are available: exclusive distribution, selective distribution, and intensive distribution. Exclusive distribution means severely limiting the number of intermediaries. It is used when the producer wants to maintain control over the service level and outputs offered by the resellers. Often it involves exclusive dealing arrangements. Exclusive deals between suppliers and retailers are becoming a mainstay for specialists looking for an edge in a business world. Selective distribution involves the use of more than a few, but less than all, of the intermediaries who are willing to carry a particular product. Intensive distribution consists of the manufacturer placing goods or services in as many outlets as possible. Manufacturers are constantly tempted to move from exclusive or selective distribution to intensive distribution to increase coverage and sales. Terms and Responsibilities of Channel Members The producer must determine the rights and responsibilities of participating channel members. The main elements in the ―trade-relations mix are: Price policy Conditions of sale Distributors‘ territorial rights Mutual services and responsibilities Evaluating the Major Alternatives Each channel alternative needs to be evaluated against economic, control, and adaptive criteria. Economic Criteria Each channel will produce a different level of sales and costs. When sellers discover a convenient lower-cost channel, they try to get their customers to us it. Companies that are successful in switching customers to lower-cost channels, assuming no loss of sales or deterioration in service quality, will gain a channel advantage. Control and Adaptive Criteria To develop a channel, members must make some degree of commitment to each other for a specified period of time

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These commitments invariably lead to a decrease in the producer‘s ability to respond to a changing marketplace. In rapidly changing, volatile, or uncertain product markets, the producer needs channel structures and policies that provide high adaptability.

Q. 36. How has the retail scenario changed in the last decade in India? OR Explain briefly, how the growth of giant retailers threatens traditional retailers. Answer: In the past, retailers held customers by offering convenient locations, special or unique assortments of goods, greater or better services than competitors, and store credit cards. All of this has changed! Models for department stores success seem to be emerging. These include strong retail brand approach, the showcase store and supermarkets that have opened larger stores, with more variety of items and upgraded facilities. Here are some retail developments that are changing the way consumer buy and manufacturers and retailers sell: 1. New retail forms and combinations. 2. Growth of intertype competition. 3. Competition between store based and non-store based retailing. 4. Growth of giant retailers: Through their superior information systems, logistical systems, and buying power, giant retailers such as BigBazar are able to deliver good service and immense volumes of product at appealing prices to masses of consumers. They are crowding out smaller manufacturers that cannot deliver enough quantity and often dictate to the most powerful manufacturers what to make, how to price and promote, when and how to ship, and even how to improve production and management. Manufacturers need these accounts; otherwise they would lose 10% to 30% of the market. Some giant retailers are category killers that concentrate on one product category, such as home improvement (Home Town), or Electronics (Croma). Others are supercenters that combine grocery items with a huge selection of nonfood merchandise (Hypercity). 5. Decline of Middle-Market Retailers: Today we can characterize the retail market as hourglass or dog-bone shaped: Growth seems to be centered at the top (with luxury offerings from retailers such as ShopperStop) and at the bottom (with discount pricing from retailers such as DMart and BigBazar). Opportunities are scarcer in the middle where retailers and others have struggled or gone out of business. Supermarkets, department stores, and drugstores are most at risk or on the brink-fewer consumers have shopped these channels weekly in recent years as newer, more relevant places have come to serve their needs. As discount retailers improve their quality and image, consumers have been willing to trade down. 6. Growing Investment in Technology

Q. 37. What is retailing? How do services and store atmosphere affect retailing? Explain with examples some of latest retailing trends in India 52

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Answer: Retailing, includes all the activities involved in selling goods or services directly to final consumers for personal, non-business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.

Consumers’ Cognitive process

Atmospheric Cues _ Color _ Lighting _ Music _ Crowding _ Design and Layout _ Olfactory factors _ Tactile factors

Purchase intention

Patronage intention Store Image Shopping satisfaction

Customer Value

Positive word of mouth

Services and Store Atmosphere The services mix is a key tool for differentiating one store from another. Retailers must decide on the services mix to offer customers: Pre-purchase services, Post-purchase services and Ancillary services. Retailers also need to consider differentiating based on unerringly reliable customer service. Retailers are rediscovering the usefulness of customer service as a point of differentiation. Whatever retailers do to enhance customer service, they will have to keep women in mind. Approximately 85 percent of everything sold in this country is either bought or influenced by a woman. Atmosphere is another element in the store‘s arsenal. Every store has a ―look or ―feel that is influenced by colours, layout, smell, and music. Store Activities and Experiences The growth of e-commerce has forced traditional brick-and-mortar retailers to respond. In addition to the natural advantages over e-commerce: Products that consumers can actually see, touch & test, Real-life customer service and No delivery lag time They also provide a shopping experience as a strong differentiator. To entice Internet-savvy consumers to their stores, real-life retailers are developing new services and promotions: Calling each customer a ―guest Providing a place for people to congregate Creating in-store entertainment Creating ―showcase stores Super-regional malls are anchoring themselves with unique and interesting shops, rather than the brand-name department stores and national retailers of old. They want to become ―destination retail locations. 53

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Latest trends in retailing: Refer to previous question.

Q. 38. The days when all the sales force did was “sell, sell, and sell” are long gone. Today companies need to define the specific objectives they want their sales force to achieve. Discuss the various decisions organizations take for designing and managing the Sales Force? OR Explain the critical issues involved in recruitment, training and motivation of sales force. OR What is “Workload method” in deciding the sales force size? OR Which are the steps involved in managing the sales force? Answer: DESIGNING THE SALES FORCE The original and oldest form of direct marketing is the field sales call. Today most industrial companies rely heavily on a professional sales force to: Locate prospects, Develop them into customers and Grow the business Nearly 12 percent of the total workforce work full time in sales occupations. No one debates the importance of the sales force in marketing programmes. However, companies are sensitive to the high and rising costs of maintaining a sales force. The term sales representative covers a broad range of positions. Six can be distinguished, ranging from the least to the most creative types of selling: 1. Deliverer - A salesperson whose major task is the delivery of a product 2. Order taker - An inside order taker (standing behind the counter) or outside order taker (calling on the supermarket manager). 3. Missionary - A salesperson not expected or permitted to take an order but rather to build goodwill or educate the actual or potential user (the medical "detailer" representing an ethical pharmaceutical house). 4. Technician – A salesperson with a high level of technical knowledge 5. Demand creator - A salesperson who relies on creative methods for selling tangible products or intangible products. 6. Solution vendor - A salesperson whose expertise is solving a customer's problem, often with a system of the company's products and services Sales personnel serve as the company‘s personal link to the customers. The sales representative is the company to many of its customers. The sales representative brings back much needed information about the customer. Therefore, the company needs to carefully consider issues in sales force design, namely: Development of sales force objectives, Strategy, Structure, Size Compensation Sales-Force Objectives and Strategy

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The days when all the sales force would do was ―sell, sell, sell are long gone. Today, sales reps need to know how to diagnose a customer‘s problem and propose a solution. Salespeople show a customer-prospect how their company can help a customer improve profitability. Companies need to define the specific objectives they want their sales force to achieve. The specific allocation scheme depends on the kind of products and customers, but regardless salespeople will have one or more of the following specific tasks to perform: 1. Prospecting – searching for prospects or leads. 2. Targeting – deciding how to allocate their timing among prospects and customers. 3. Communicating – communicate the information about companies’ product or service 4. Selling – approaching, presenting, answering questions, overcoming objections and sales closing. 5. Servicing – providing various services to customers –consulting on problems, rendering assistance, arranging financing expediting delivery 6. Information gathering – conducting market research and doing intelligence work. 7. Allocating – deciding which customer will get scarce product during product shortage. Tasks such as lead generation, proposal writing, order fulfillment, and post-sale support are turned over to others. As a result, salespeople handle fewer accounts, but are awarded for key account growth. Today‘s sales representatives act as ―account manager who arrange fruitful contacts between various people in the buying and selling organisations. Selling increasingly calls for teamwork requiring the support of other personnel such as top management, technical people, customer service representatives and office staff. To maintain a market focus, salespeople should know how to: Analyze sales data, Measure market potential, Gather market intelligence and Develop marketing strategies and plans Once the company decides on an approach, it can use a direct or a contractual sales force. A direct (company) sales force consists of full- or part-time paid employees who work exclusively for the company. A contractual sales force consists of manufacturers‘reps, sales agents, and brokers who are paid a commission based on sales. Sales-Force Structure The sales-force strategy has implications for the sales-force structure. Established companies need to revise their sales-force structure as market and economic conditions change. Sales-Force Size Sales representatives are one of the company‘s most productive and expensive assets. Increasing their number will increase both sales and costs. Once the company establishes the number of 55

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customers it wants to reach, it can use a workload approach to establish sales-force size. This method has five steps: Group customers into size classes according to annual sales volume. Establish desirable call frequencies (number of calls on an account per year) for each customer class. Multiply the number of accounts in each size class by the corresponding call frequencyˇ to arrive at the total workload for the country, in sales calls per year.ˇ Determine the average number of calls a sales representative can make per year. Divide the total annual calls required by the average annual calls made by a sales representative, to arrive at the number of sales representatives needed. Sales-Force Compensation To attract top-quality sales reps, the company has to develop an attractive compensation package. A company must use the following four components in determining sales-force compensation: The fixed amount The variable amount Expense allowances Benefits Fixed compensation receives more emphasis in jobs with a high ratio of non-selling to selling duties and in jobs where the selling task is technically complex and involves teamwork. Variable compensation receives more emphasis in jobs where sales are cyclical or depend on individual initiative. Fixed and variable compensation give rise to three basis types of compensation plans: Straight salary Straight commission Combination salary and commission Some companies see a new trend toward de-emphasising volume measures in favours of factors such as profitability, customer satisfaction, and customer retention. Other companies are basing the rep‘s reward partly on a sales team‘s performance or even company wide performance. Managing the Sales Force Once the company has established objectives, strategy, structure, size and compensation, it has to recruit, select, train, supervise, motivate, and evaluate sales representatives. Recruiting and Selecting Representatives At the heart of a successful sales force is the selection of effective representatives. One survey revealed that the top 27 percent of the sales force brought in over 52 percent of the sales. Selecting sales reps would be simple if one knew what traits to look for. One good starting point is to ask customers what traits they prefer. Finding what traits will actually lead to sales success 56

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is challenging. Numerous studies have shown little relationship between sales performance and background and experience variables. Once management develops its selection criteria it must then recruit. Training and Supervising Sales Representatives Today‘s customers expect salespeople to have deep product knowledge, to add ideas to improve the customer‘s operations, and to be efficient and reliable. Companies use sales-promotion tools to draw a stronger and quicker buyer response. These demands have required companies to make a much higher investment in sales training. New reps may spend a few weeks to several months in training. Training time varies with the complexity of the selling task and the type of person recruited into the sales organisation. New methods of training are continually emerging. Companies vary in how closely they supervise sales reps. Sales Rep Productivity Some research has suggested that today‘s sales reps are spending too much time selling to smaller, less profitable accounts when they should be focusing more of their efforts on selling to larger, more profitable accounts. Norms for Prospect Calls Companies often specify how much time reps should spend prospecting for new accounts. Companies set up prospecting standards for a number of reasons. Left to their own devices, many reps will spend most of their time with current customers. Some companies rely on a missionary sales force to open new accounts. The appeal of public relations and publicity is based on the following three distinctive qualities: (1) Using Sales Time Efficiently Studies have shown that the best sales reps are those who manage their time effectively. One planning tool is time-and-duty analysis. Companies are constantly seeking ways to improve sales-force productivity. To cut costs, reduce time demands on their outside sales force, and take advantage of computer and telecommunications innovations, many companies have increased the size and responsibilities of their inside sales force. Inside salespeople are of three types: Technical support people Sales assistants Telemarketers The inside sales force frees the outside reps to spend more time: Selling to major accounts 1. Identifying and converting new major prospects 2. Placing electronic ordering systems in customers‘ facilities 3. Obtaining more blanket orders and systems contracts (2) Motivating Sales Representatives 57

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The majority of sales representatives require encouragement and special incentives. Most marketers believe that the higher the salesperson‘s motivation, the greater the effort and the resulting performance, rewards, and satisfaction, and thus further motivation. Such thinking is based on several assumptions. Sales managers must be able to convince salespeople that they can sell more by working harder or by being trained to work smarter. Sales managers must be able to convince salespeople that the rewards for better performance are worth the extra effort. To increase motivation, marketers reinforce intrinsic and extrinsic rewards of all types. (3) Evaluating Sales Representatives We have been describing the feed-forward aspects of sales supervision - how management communicates what the sales reps should be doing and motivates them to do it, but good feedforward requires good feedback, which means getting regular information from reps to evaluate performance. Q. 39. Define the term “marketing channels.” Being a “channel manager” for your firm, you have been asked by senior managers to identify new distribution channels for the launch of a new LCD television set. Describes a channel- design and channel management decisions for the same, in detail for your presentation to top management. OR What decisions do companies face in designing their channels? What are the steps involved in designing a channel system? Explain with examples. OR List and explain the channel management decisions with the help of a suitable example OR How shall you decide on each of the major channel design decisions for devising a channel structure for distribution of ready to eat snacks? Answer: INTRODUCTION:

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Successful value creation needs successful value delivery. Holistic marketers are increasingly taking a value network view of their businesses. Instead of limiting their focus to their immediate suppliers, distributers, and customers, they are examining the whole supply chain that links raw materials, components and manufactured goods and shows how they move toward the final consumers. Companies are looking at their suppliers’ suppliers upstream and at their distributors’’ customers downstream. They are looking at customer segments and considering a wide range of new and different means to sell, distribute and service their offerings. Most producers do not sell their goods directly to the final users between them stands a set of intermediaries performing a variety of functions. These intermediaries constitute a marketing channel ( also called a trade channel or distribution channel).

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DEFINITION:“Marketing channels are sets of interdependent organization participating in the process of making a product or service available for use or consumption. They are the set of pathways a products or service follows after production, culminating in purchase and consumption by the final end users.” 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. SELECTING CHANNEL MEMBERS

Companies need to select their channel members carefully. To facilitate channel member selection, producers should determine what characteristics distinguish better intermediaries. They should evaluate the: Number of years in business, Other lines carried, Growth and profit records, Financial strength, Cooperativeness, Service reputation. If the intermediaries are sales agents, producers should evaluate the number and character of other lines carried and the size and quality of the sales force. If the intermediaries are department stores that want exclusive distribution, the producer should evaluate: Locations, Future growth potential and Type of clientele TRAINING AND MOTIVATING CHANNEL MEMBERS

Companies need to plan and implement careful training programmes for their intermediaries. Motivating Channel Members A company needs to determine intermediaries‘ needs and construct a channel position such that its channel offering is tailored to provide superior value to these intermediaries. Stimulating channel members to top performance starts with understanding their needs and wants. The company should provide training programmes and market research programmes to improve intermediaries‘ performance. The company must constantly communicate its view that the intermediaries are partners in a joint effort to satisfy end users of the product. Producers vary greatly in skill in managing distributors. Channel power can be defined as the ability to alter channel members behaviour. ► COERCIVE POWER ► REWARD POWER ► LEGITIMATE POWER ► EXPERT POWER ► REFERENT POWER CHANNEL PARTNERSHIPS

EVALUATING CHANNEL MEMBERS

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Producers must periodically evaluate intermediaries performance against such standards as sales quota attainment, average inventory levels, customer delivery times, treatment of damaged and lost goods, and cooperation in promotional and training programmes. Under performers need to be counseled, retrained, motivated, or terminated. MODIFYING CHANNEL DESIGN AND ARRANGEMENTS

A producer must periodically review and modify its channel arrangements. Modification becomes necessary when the distribution channel is not working as planned. This usually occurs when: consumer-buying patterns change, the market expands, new competition arises, innovative distribution channels emerge and the product moves into the later stages in the product life cycle No marketing channel will remain effective over the whole product life cycle. In competitive markets with low entry barriers, the optimal channel structure will inevitably change over time. The change could involve adding or dropping individual channel members, adding or dropping particular market channels and developing a totally new way to sell goods. The most difficult decision involves revising the overall channel strategy. CHANNEL EVOLUTION CHANNEL MODIFICATION DECISIONS GLOBAL CHANNEL CONSIDERATIONS

Q. 40. Explain Vertical and Horizontal Marketing Systems, with examples. Answer: Distribution channels do not stand still. New wholesaling and retailing institutions emerge, and new channel systems evolve. Vertical Marketing Systems One of the most significant recent channel developments is the rise of vertical marketing systems. A conventional marketing system comprises an independent producer, wholesaler(s), and retailer(s). A vertical marketing system (VMS), by contrast, comprises the producer, wholesaler(s), and retailer(s) acting as a unified system. One channel member, the channel captain, owns the others, franchises them, or has so much power that they all cooperate. VMSs arose as a result of strong channel members‘ attempts to control channel behaviour and eliminate the conflict that results when independent members pursue their own objectives. VMSs achieve economies through: size, bargaining power and the elimination of duplicated services. There are three types of VMS: corporate, administered. and contractual. Corporate VMS A corporate VMS combines successive stages of production and distribution under single ownership. Administered VMS An administered VMS coordinates successive stages of production and distribution through the size and power of one of the members. Manufacturers of a dominant brand are able to secure strong trade cooperation and support from resellers. The most advanced supply-distributor 60

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arrangement for administered VMS involves distribution programmeming that can be defined as building a planned, professionally managed, vertical marketing system that meets the needs of both manufacturer and distributors. The manufacturer establishes a department within the company called distributor-relations planning. Its job is to identify distributor needs and build up merchandising programmes to help each distributor operate as efficiently as possible. Contractual VMS A contractual VMS consists of independent firms at different levels of production and distribution integrating their programmes on a contractual basis to obtain more economies or sales impact than they could achieve alone. Contractual VMSs now constitute one of the most significant developments in the economy. They are of three types: Wholesaler-sponsored voluntary chains, Retailer cooperatives, Franchise organizations. The traditional system is the manufacturer-sponsored retailer franchise. Another is the manufacturer-sponsored wholesaler franchise. A new system is the service-firm-sponsored retailer franchise. The New Competition in Retailing The new competition in retailing is no longer between independent business units but between whole systems of centrally programmemed networks (corporate, administered, and contractual) competing against one another to achieve the best cost economies and customer response. Horizontal Marketing Systems Another channel development is the horizontal marketing system, in which two or more unrelated companies put together resources or programmes to exploit an emerging marketing opportunity. A horizontal marketing system is a distribution channel arrangement whereby two or more organizations at the same level join together for marketing purposes to capitalize on a new opportunity. For example: a bank and a supermarket agree to have the bank’s ATMs located at the supermarket’s locations; two manufacturers combining to achieve economies of scale otherwise not possible with each acting alone to meet the needs and demands of a very large retailer; or two wholesalers joining together to serve a particular region at a certain time of year. An example is APPLE and STARBUCKS, who announced a music partnership in 2007. The purpose of this partnership was to allow Starbucks' customers to wirelessly browse, search, preview, buy, and download music from iTunes store onto their iPod touch, iPhone, or PC or Mac running iTunes. Apple’s leadership in digital music, together with the unique Starbucks experience, created a partnership that offered customers a world class digital music experience. Q. 41. Through a problem with goal inconsistency, a manufacturer of cooking utensils is having a disagreement with a retail chain that carries its product line. The disagreement is new and has not reached the stage where it requires third-party intervention. What method(s) can be used to settle this conflict? What method(s) are likely to work? Answer: Channel conflict is generated when one channel member‘s actions prevents the channel from achieving its goal. Channel coordination occurs when channel members are brought 61

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together to advance the goals of the channel, as opposed to their own potentially incompatible goals. Types of Conflict and Competition Vertical channel conflict means conflict between different levels within the same channel. Horizontal channel conflict involves conflict between members at the same level within the channel. Multi-channel conflict exists when the manufacturer has established two or more channels that sell to the same market. Multi-channel conflict is likely to be especially intense when the members of one channel get a lower price (based on larger volume purchases) or work with a lower margin. Causes of Channel Conflict One major cause is goal incompatibility. Some conflict arises from unclear roles and rights. Conflicts can also stem from differences in perception. Conflict might additionally arise because of the intermediary‘s dependence on the manufacturer. Managing Channel Conflict As companies add channels to grow sales, they run the risk of creating channel conflict. Some channel conflict can be constructive and lead to better adaptation to a changing environment, but too much is dysfunctional. The challenge is not to eliminate conflict but to manage it better. There are several mechanisms for effective conflict management. One is the adoption of superordinate goals. Channel members come to an agreement on the fundamental goal they are jointly seeking. A useful step is to exchange persons between two or more channel levels. Co-optation is an effort by one organisation to win the support of the leaders of another organisation by including them in advisory councils, and the like. Much can be accomplished by encouraging joint membership in and between trade associations. When conflict is chronic or acute, the parties may have to resort to: Diplomacy, Mediation & Arbitration and Lawsuits.

Q. 42. What is differentiated distribution strategy? Describe how a wholesaler can use this strategy to provide better service. Answer: Online Distribution Strategy Tools for Direct Online Distribution: - Web positioning. - Search Engine Advertising. - Email Marketing. - Advertising using affiliates. - Viral Marketing. - Guerrilla Marketing: bulletins, news, blogs, etc. 62

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- Mobile marketing. - Social Media.

Hybrid Channels

Omni-channel Retailing - 360̊ Marketing

Q. 43. Define ‘brand’. What are the advantages of branding? Enumerate branding options prevalent in the marketplace. OR What criteria are important in ‘branding’ decisions of a consumer product? Explain with relevant illustration(s). Answer: A name, term, sign, symbol, or design, or a combination of them, intended to identify goods or services of one seller or group of sellers and to differentiate them from those of competitors. These differences may be functional, rational, or tangible-related to the product performance of the brand. They may also be more symbolic, emotional, or intangible-related to what the brand represents. The Role of Brands Brands identify the source or maker of a product and allow consumers to assign responsibility to a particular manufacturer or distributor. Consumers learn about brands through past experiences with the product and its marketing programme. Brands perform valuable functions for the firm. Brands can signal a certain level of quality so that satisfied buyers can easily choose the product again. Brand loyalty provides predictability and security of demand for the firm and creates barriers to entry for other firms. Branding can be seen as a powerful means to secure a competitive advantage. To firms, brands thus represent enormously valuable pieces of legal property that can influence consumer behaviour, be bought and sold, and provide the security of sustained future revenues to their owner. The Scope of Branding How then do you ―brand a product? A brand, is a perceptual entity that is rooted in reality but reflects the perceptions and perhaps even the idiosyncrasies of consumers. Branding is endowing products and services with the power of a brand. Branding is all about creating differences. To brand a product, it is necessary to teach consumers ―who the product is, 63

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―what the product does, and ―why consumers should care. Branding involves creating mental structures and helping consumers organise their knowledge about products and services in a way that clarifies their decision-making and provides value to the firm. For branding strategies to be successful and brand value to be created, consumers must be convinced that there are meaningful differences among brands in the product or service category. The key to branding is that consumers must not think that all brands in the category are the same. Brand differences often are related to attributes or benefits of the product itself. Branding can be applied virtually in any context where a consumer has a choice. Example: LIFEBOUY - Launched in India 1895 in a brick red color and the cresylic, perfume. Lifebuoy underwent several changes over the years for the growth and expansion of the brand customer franchise. With the prelaunch lifebuoy made conscious shift in its segmentation and positioning from its previous focus on the men to a warmer and more versatile benefit on health for the entire family. Line extensions that included liquid soap reinforced the contemporary image. Q. 44. What do you mean by term brand equity? OR Explain the concept of Brand Equity for any popular brand that you know. OR Define Customer Based Brand Equity. Briefly explain the process of choosing brand elements for creating brand equity. OR Define CBBE. Explain brand building according to the ‘Brand Resonance Model’ Answer: Defining Brand Equity Brand equity is the added value endowed to products and services. This value may be reflected in how consumers, think, feel, and act with respect to the brand as well as the prices, market share, and profitability that the brand commands for the firm. Brand equity is an important intangible asset to the firm that has psychological and financial value. Marketers and researchers use various perspectives to study brand equity. Customer-based brand equity can be defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand. A brand is said to have positive customerbased brand equity when consumers react more favourably to a product and the way it is marketed when the brand is identified as compared to when it is not. A brand is said to have negative customer-based equity if consumers react less favourably to marketing activity for the brand under the same circumstances. Brand equity arises from differences in consumer response as a result of consumer‘s knowledge about the brand. Brand knowledge consists of all thoughts, feelings, images, experiences, beliefs, and so on that become associated with the brand. The challenge for marketers in building a strong brand is in ensuring that customers have the right type of experiences with products and services and that their marketing programmes create the desired brand knowledge structures for the brand. Customer knowledge is what drives the differences that manifest themselves in brand equity. 64

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The brand resonance model views brand building as an ascending, sequential series of steps, from bottom to top as per figure. These are: 1. Enduring identification of the brand with customers and an association of the brand in customers‘ minds with a specific product class or customer need. 2. Firmly establishing the totality of brand meaning in the minds of customers by strategically linking a host of tangible and intangible brand associations. 3. Eliciting the proper customer responses in terms of brand-related judgment and feelings. 4. Converting brand response to create an intense, active loyalty relationship between customers and the brand. These brand building blocks can be assembled to build a brand pyramid with customers. Brand salience relates to how often and easily the brand is evoked under various purchase or consumption situations. Brand performance relates to how the product or service meets

customers‘ functional needs. Brand imagery deals with the extrinsic properties of the product or service, including the ways in which the brand attempts to meet customers‘ psychological or social needs. Brand judgments focus on customers‘ own personal opinions and evaluations. Brand feelings are customers‘ emotional responses and reactions with respect to the brand. Figure depicts the brand resonance pyramid. • Brand salience - is how often and how easily customers think of the brand under various purchase or consumption situations. • Brand performance - is how well the product or service meets customers' functional needs. • Brand imagery - describes the extrinsic properties of the product or service, including the ways in which the brand attempts to meet customers' psychological or social needs. • Brand judgments - focus on customers' own personal opinions and evaluations.

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• Brand feelings - are customers' emotional responses and reactions with respect to the brand. • Brand resonance - refers to the nature of the relationship customers have with the brand and the extent to which they feel they're "in sync" "with it. Brand resonance refers to the nature of the relationship that customers have with the brand and the extent to which customers feel that they are ―in sync with the brand. Resonance is characterised in terms of the intensity or depth of the psychological bond customers have with the brand, as well as the level of activity engendered by this loyalty. Q. 45. Explain the concept of brand extension and line extension with the help of suitable examples. Answer: Brand extensions can be broadly classified into two general categories: Line Extension and Category Extension: In a line extension, the parent brand is used to brand a new product that targets a new market segment within a product category currently served by the parent brand. For example Lux soap comes in different variants like Lux Crystal Shine, Lux International etc. So when Lux comes with a new variant, it is a line extension. In a category extension, the parent brand is used to enter a different product category from that currently served by the parent brand. For example Woodlands extending to apparels is broadly a brand extension and more specifically a category extension. Brand Line: A brand line consists of all products - original as well as line and category extensions sold under a particular brand. A brand mix (or brand assortment) is the set of all brand lines that a particular seller makes available to buyers. Many companies are now introducing branded variants that are specific brand lines supplied to specific retailers or distribution channels. A licensed product is one whose brand name has been licensed to other manufacturers who actually make the product. Advantages of Brand Extensions Recognising that one of the most valuable assets is a firm‘s brand, many have decided to leverage that asset by introducing a host of new products under some of its strongest brand names. Brand extensions have two main advantages: Facilitate new product acceptance Provide positive feedback to the parent brand and company. New Product Success Brand extensions improve the odds of new product success in a number of ways. Consumers can make inferences and form expectations as to the likely composition and performance of a new product based on what they already know about the parent brand itself. Extensions reduce risk and costs of the introductory launch campaign. They can avoid the difficulty of coming up with a new name and allow for packaging and labelling efficiencies. Positive Feedback Effects 66

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Brand extensions can help clarify the meaning of a brand and its core brand values or improve consumer perceptions of the credibility of the company behind the extension. Line extensions can renew interest and liking for the brand and benefit the parent brand by expanding market coverage. One benefit of a successful extension is that it may also serve as the basis for subsequent extensions. Disadvantage of Brand Extensions Line extensions may cause the brand name to not be as strongly identified with any one product. Brand dilution occurs when consumers no longer associate a brand with a specific product or highly similar products and start thinking less of the brand. If a firm launches extensions consumers deem inappropriate, it may question the integrity and competence of the brand. Different varieties of line extensions may confuse and perhaps even frustrate consumers. The worst possible scenario with an extension is that not only does it fail, but also it harms the parent brand image in the process. Even if sales of a brand extension are high and meet targets, it is possible that this revenue will have resulted from consumers switching to the extension from existing product offerings of the parent brand- called cannibalising the parent brand. Intra-brand shifts in sales may not necessarily be so undesirable, as they can be thought of as a form of preemptive cannibalisation. The firm foregoes the chance to create a new brand with its own unique image and equity. Success Characteristics A potential new product extension for a brand must be judged by how effectively it leverages existing brand equity from the parent brand to the new product, as well as how effectively the extension contributes to the equity of the parent brand. The most important consideration with extensions is that there is ―fit‖ in the minds of the consumer. One major mistake in evaluating extension opportunities is failing to take all of the consumers‘ brand knowledge structures into account.

Q. 46. What is a product life cycle? Explain how does the product life cycle will influence the marketing mix decisions? OR Discuss the various marketing strategies that should be used at each stage of the Product Life Cycle OR What are the various stages of PLC and strategies in these stages OR Explain the marketing strategies applicable to various stages of the Product Life cycle. Answer: PRODUCT LIFE-CYCLE MARKETING STRATEGIES A company‘s positioning and differentiation strategy must, change as the product, market, and competitors change over the product life cycle (PLC). Products have a limited life. Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller. Profits rise and fall at different stages of the product life cycle. Products require different 67

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marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage. Product Life Cycles Figure below portrays the bell-shaped life-cycle curve. The product life-cycle as shown in Figure is divided into four stages: Introduction - A period of slow sales growth as the product is introduced in the market Profits are nonexistent because of the heavy expenses of product introduction. Example: - In 1992 launched a first handheld GSM phone, Nokia 1011. - Sold both GSM & CDMA phones. - Launched first model Nokia 2100 with Nokia tune. Growth - A period of rapid market acceptance and substantial profit improvement. Example: - Launched phone without external antenna. - Better feature like games, alarm, display etc…. - Launched mobiles like N95 to compete with Apple i-phone. Maturity - A slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition. Example: - Launched a lot off touch screen model. - Dropped mobile prices. - Most profit gain. Decline - Sales show a downward drift and profits erode. - Poor product design which did not attract the consumers. - Change in technology environment. The PLC concept can be used to analyze a product category, a product form, a product, or a brand. Common Product Life Cycle Patterns

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Growth-slump-maturity pattern, often characteristic of small kitchen appliances such as handheld mixers and bread makers. Sales grow rapidly when the product is first introduced'and then fall to a "petrified" level that is sustained by late adopters buying the product for the first time and early adopters replacing it. Cycle-recycle pattern often describes the sales of new drugs. The pharmaceutical company aggressively promotes its new drug, and this produces the first cycle. Later, sales start declining and the company gives the drug another promotion push, which produces a second cycle. In Scalloped pattern sales pass through a succession of life cycles based on the discovery of new-product characteristics, uses, or users. Style, Fashion, and Fad Life Cycles A style is a basic and distinctive mode of expression appearing in a field of human endeavor. A fashion is a currently accepted or popular style in a given field. Marketing Strategies: Introduction Stage and Pioneer Advantage Profits are negative or low in the introduction stage. Promotional expenditures are at their highest ration to sales because of the need to inform potential consumers, induce product trial and secure distribution in retail outlets. Companies that plan to introduce a new product must decide when to enter the market. To be first can be rewarding, but risky and expensive. To come in later makes sense if the firm can bring superior technology, quality, or brand strength. Speeding up innovation time is essential in an age of shortening product life cycles. Most studies indicate that the market pioneer gains the most advantage. Marketing Strategies: Growth Stage 69

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The growth stage is marked by rapid climb in sales. Early adopters like the product, and additional consumers start buying it. New competitors enter, attracted by the opportunities. Prices remain where they are or fall slightly. Companies maintain their promotional expenditures at the same or at a slightly increased level to meet competition and to continue to educate the market. Sales rise much faster than promotional expenditures, profits increase and manufacturing costs fall faster than price declines owing to the producer learning effect. During this stage, the firm uses several strategies to sustain rapid market growth. The firm: Improves product quality and adds new product features and improved styling. Adds new models and flanker products. Enters new market segments. Increases its distribution coverage and enters new distribution channels. Shifts from product-awareness advertising to product-preference advertising. Lowers prices to attract the next layer of price-sensitive buyers. A firm in the growth stage faces a trade-off between high market share and high current profits. By spending money on product improvement, promotion, and distribution, it can capture a dominant position. Marketing Strategies: Maturity Stage At some point, the rate of sales growth will slow, and the product will enter a stage of relative maturity. This stage normally lasts longer than the previous stages and poses big challenges to marketing management. Most products are in the maturity stage of the life cycle, and most marketing managers cope with the problem of marketing the mature product. The maturity stage divides into three phases: 1. Growth - where the sales growth rate starts to decline. 2. Stable - where sales flatten on a per capita basis because of market saturation. 3. Decaying maturity - where the absolute level of sales starts to decline, and customers begin switching to other products. The sales slowdown creates overcapacity in the industry that leads to intensified competition. The industry eventually consists of well-entrenched competitors whose basic drive is to gain or maintain market share. Dominating the industry are a few giant firms that serve the whole market and make their profits mainly through high volume. Surrounding these dominant firms is a multitude of market nichers. The issue facing a firm in a mature market is whether to become one of the ―big three or pursue a niching strategy. Some companies at this stage abandon weaker products and concentrate on products that are more profitable and on new products.

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Market Modification The company might try to expand the market for its mature brand by working with the two factors that make up sales volume: Volume = number of brand users x usage rate per user. It can try to expand the number of brands users by converting nonusers. It can also try to expand the number of brand users by entering new market segments. A third way to expand the number of brand users is winning competitors‘ customers. Volume can also be increased by convincing current users to increase their brand usage by: 1. Using the product on more occasions 2. Using more of the product on each occasion 3. Using the product in new ways Product Modification Managers also try to stimulate sales by modifying the product‘s characteristics through quality improvement, feature improvement, or style improvement. Quality improvement aims at increasing the product‘s functional performance while feature improvement aims at adding new features that expand the product‘s performance, versatility, safety, or convenience. This strategy has several advantages: New features build the company‘s image as an innovator Wins the loyalty of market segments that value these features Provide an opportunity for free publicity Generate sales force and distributor enthusiasm The chief disadvantage is that feature improvements might not pay off in the long run. Style improvement aims at increasing the product‘s aesthetic appeal. Marketing Programme Modification Product managers might also try to stimulate sales by modifying other marketing programme elements that include prices, distribution, advertising, sales promotion and personal selling. Marketers often debate which tools are most effective in the mature stage. Marketing Strategies: Decline Stage Sales decline for a number of reasons, including technological advances, shifts in consumer tastes, and increased domestic and foreign competition. All lead to overcapacity, increased pricecutting, and profit erosion. As sales and profits decline, some firms withdraw from the market. Those remaining may reduce the number of products they offer. In handling aging products, a company faces a number of tasks and decisions. In a study of company strategies in declining industries, five strategies are available to the firm: Increase the firm‘s investment Maintain the firm‘s investment level until uncertainties about the industry are resolved 71

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Decrease the firm‘s investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening the firm‘s investment in lucrative niches Harvesting the firm‘s investment to recover cash quickly Divesting the business quickly by disposing of its assets as advantageously as possible The appropriate strategy depends on the industry‘s relative attractiveness and the company‘s competitive strength in that industry. Companies that successfully restage or rejuvenate a mature product often do so by adding value to the original product. Q. 47. “In an economy of change, continuous innovation is necessary. Most companies rarely innovate, some innovate occasionally, and a few innovate continuously.”- Explain the process for new product development with a suitable example. OR Briefly, explain the process of developing a new product. Which are the prominent pricesetting methods adopted by marketers to set prices for their offerings? OR Think of any product Idea, turn it into a concept that people can buy & design a test plan for that concept. OR Explain the stage of Concept Development and Concept Testing in the new product development process with a suitable example OR Explain the stage-gate approach to new product development. OR Discuss the various steps involved in new product development OR Consider the following situation: A large cosmetics company has developed a breakthrough technology of producing a Gel that can erase surgery marks on the body. Convert this product idea into 3 alternative product concepts. Which one should this company choose? Why? Answer: MANAGING THE DEVELOPMENT PROCESS: IDEAS The new product development process starts with the search for ideas.

1. Idea Generation New product ideas can come from interacting with various groups and from using creativitygenerating techniques. Some marketing experts believe the greatest opportunities and highest leverage with new products are found by uncovering the best possible set of unmet customer needs or technological innovation. Interacting with Others Ideas for new products can come from many sources, such as customers, scientists, competitors, employees, channel members, and top management. Customer needs and wants are the logical place to start the search. One-on-one interviews and focus group discussions can explore product needs and reactions. Technical companies can learn a great deal by studying customers who 72

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make the most advanced use of the company‘s products and who recognise the need for improvements before other customers do. Employees throughout the company can be a source of ideas for improving production, products, and services. Companies can also find good ideas by researching competitors‘ products and services. They can find out what customers like and dislike about competitors‘ products. They can buy the competitors products and take them apart. Company sales representatives and intermediaries are a particularly good source of ideas. Although ideas can flow from a variety of sources, receiving these ideas often depends upon someone in the organisation taking the role of product champion. Creative Techniques Here is a sampling of techniques for stimulating creativity in individuals and groups: Attribute listing – List attributes of the object Forced relationships – List several ideas and consider each in relation to each other idea. Morphological analysis – start with a problem Reverse assumption analysis – list all the normal assumptions about the entity and then reverse them. New contexts – take familiar processes Mind-mapping – start with a thought Increasingly, new product ideas arise from lateral marketing that combines two product concepts or ideas to create a new offering.

2. Idea Screening A company should motivate its employees to submit new ideas to an idea manager. Ideas should be written down and reviewed each week by an idea committee. The company then sorts the proposed ideas into three groups: Promising ideas, Marginal ideas, Rejects MANAGING THE DEVELOPMENT PROCESS: CONCEPT TO STRATEGY Attractive ideas must be refined into testable product concepts. A product idea is a possible product the company might offer to the market. A product concept is an elaborated version of the idea expressed in consumer terms.

3. Concept Development and Testing A product idea can be turned into several concepts. Questions to ask include: Who will use this product? What primary benefit should this product provide? When will people consume this product? Each concept represents a category concept that defines the product‘s competition. Next, the product concept has to be turned into a brand concept. Concept Testing 73

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Concept testing involves presenting the product concept to target consumers and getting their reactions. The concepts can be presented symbolically or physically. In the past, creating physical prototypes was costly and time-consuming. Today firms can use rapid prototyping to design products. Companies are also using virtual reality to test product concepts. Concept testing entails presenting consumers with an elaborated version of the concept. After receiving information, researchers measure product dimensions by having consumers respond to the following: Communicability and believability, Need level, Gap level, Perceived value, Purchase intention and User targets, purchase occasions, purchasing frequency The respondents‘ answers indicate: Whether the concept has a broad consumer appeal What products this new product competes against Which consumers are the best targets Conjoint Analysis Consumers‘ preferences for alternative product concepts can be measured through conjoint analysis, a method for deriving the utility values that consumers attach to varying levels of a product‘s attributes. Respondents are shown different hypothetical offers formed by combining varying levels of the attributes, then asked to rank the various offers. Management can identify the most appealing offer and the estimated market share and profit the company might realize. The marketer now uses a statistical programme to derive the consumer‘s utility functions for each of the five attributes. The higher the utility, the stronger the consumer‘s preference for that level of attribute.

4. Marketing Strategy Following a successful concept test, the new-product manager will develop a preliminary strategy plan for introducing the new product into the market. The plan consists of three parts: 1) The first part describes the: - Target market‘s size - Structure - Behaviour - Planned product‘s positioning - Sales - Market share - Profit goals in the first few years 2) The second part outlines: - Planned price - Distribution strategy - Marketing budget for the first year 3) The third part describes the: - Long-run sales and profit goals 74

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- Marketing-mix strategy over time 5. Business Analysis After management develops the product concept and marketing strategy, it can evaluate the proposal‘s business attractiveness. Management needs to prepare sales, cost, and profit projections to determine whether they satisfy company objectives. If it does, then the concept can move into the development stage. Estimating Total Sales Total estimated sales are the sum of estimated first-time sales, replacement sales, and repeat sales. Sales-estimation methods depend on whether the product is a one-time purchase, an infrequently purchased product, or a frequently purchased product. Infrequently purchased products exhibit replacement cycles dictated by physical wearing out or by obsolescence. Frequently purchased products have product life cycles sales. In estimating sales, the manager‘s first task is to estimate first-time purchases of the new product in each period. To estimate replacement sales, management has to research the product‘s survival-age distribution. Because replacement sales are difficult to estimate before the product is in use, some manufacturers base the decision to launch a new product solely on the estimate of first-time sales. For a frequently purchased new-product, the seller has to estimate repeat sales as well as first-time sales. Estimating Costs and Profits Costs are estimated by the RandD, manufacturing, marketing, and finance departments. The payback period here is approximately three and a half years. Management has to decide whether to risk a maximum investment loss of $4.6 million and a possible payback period of three and a half years. Companies use other financial measures to evaluate the merit of a new-product proposal. The simplest is breakeven analysis. The more complex method is risk analysis. MANAGING THE DEVELOPMENT PROCESS: DEVELOPMENT TO COMMERCIALISATION At this stage, the company will determine if the product idea can be translated into a technically and commercially feasible product.

6. Product Development The job of translating target customer requirements into a working prototype is helped by a set of methods known as quality function deployment (QFD). This methodology takes the list of desired customer attributes (CAs) and turns them into a list of engineering attributes (EAs). A major contribution of QFD is that it improves communication between marketers, engineers, and the manufacturing people. Physical Prototypes The R & D department will develop one or more physical versions of the product concept. Its goal is to find a prototype that embodies the key attributes described in the product-concept statement that performs safely under normal use and conditions and can be produced within the budgeted manufacturing costs. With the emergence of the Web, there is a need for more rapid prototyping and more flexible development processes. Lab scientists must also communicate the 75

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products psychological aspects through physical cues. Marketers need to supply lab people with information on what attributes consumers seek and how consumers judge whether these attributes are present. Customer Tests When the prototypes are ready, they must be put through rigorous functional tests and consumer tests. Alpha testing is a name given to testing the product within the company. Beta testing is testing the product with customers. Consumer testing can take several forms: 1) Bringing consumers into the laboratory 2) Give them samples to use in their homes Consumer preferences can be measured in several ways: The rank-order method The paired-comparison method The monadic-rating method

7. Market Testing The new product is introduced into an authentic setting to learn how large the market is and how consumers and dealers react to handling, using and repurchasing the product. Not all companies undertake market testing. Many companies believe that market testing can yield valuable information about buyers, dealers, marketing programme effectiveness, and market potential. The amount of market testing is influenced by the investment cost, risk on the one hand, and time pressure and research on the other. High investment - high-risk products, where the chance of failure is high, must be market tested. High-risk products, those that create new-product categories or have novel features, warrant more market testing than modified products. Consumer-Goods Market Testing In testing consumer products, the company seeks to estimate four variables: Trial First repeat Adoption Purchase frequency According to Kotler and Keller (2009:628 629) the following are four major methods of consumer goods market testing, from the least to most costly: 1) Sales-Wave Research In sales-wave research, consumers who initially try the product at no cost are re-offered the product, or a competitor‘s product, at slightly reduced prices. They might be offered the product as many as five times (sales wave) with the company noting how many customers selected the product again and their reported levels of satisfaction. 76

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2) Simulated Test Marketing Simulated test-marketing calls for finding 30 to 40 qualified shoppers and questioning them about brand familiarity and preferences in a specific product category. These people are then invited to a brief screening of both well-known and new commercials or print ads. Consumers receive a small amount of money and are invited into a store where they may buy any items they wish. 3) Controlled Test Marketing In this method, a research firm manages a panel of stores that will carry new products for a fee. The company specifies the number of stores and the geographic locations it wants to test. The research firm delivers the product and controls shelf positioning, the number of facings, displays, point-of-purchase promotions, and pricing. 4) Test Markets The ultimate way to test a new consumer product is to put it into full-blown test markets. The company chooses the cities, the sales force tries to sell the trade on carrying the product and giving it good shelf exposure. The company puts on a full advertising and promotion campaign. The company can also test alternative marketing plans by varying the marketing programme in different cities. Management faces several decisions. These include: How many test cities, Which cities, Length of test, What information and What action to take In spite of its benefits, many companies today skip test marketing and rely on faster and more economical testing methods. Business-Goods Market Testing Business goods can also benefit from market testing. Expensive industrial goods and new technologies will normally undergo alpha and beta testing (with vendors). A second common test method for business goods is to introduce the new product at trade shows. New industrial products can be tested in distributor and dealer display rooms. Industrial manufacturers come close to using full test marketing when they give a limited supply of the product to the sales force to sell in a limited number of areas that receive promotion support and printed catalogue sheets.

8. Commercialization If the company goes ahead with commercialization, it will face its biggest costs to date. The company will have to contract for manufacturers or build or rent a full-scale manufacturing facility. Another major cost is marketing. When (Timing) In commercialising a new product, market-entry timing is critical. The company faces three choices: First entry Parallel entry Late entry Additional considerations regarding the timing of new product launches relate to: If the new product replaces an older product 77

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If the product is seasonal If a ―killer application is contemplated Complicating new product launches, many companies are encountering competitive ―designarounds- rivals are imitating inventions but making their own versions just different enough to avoid patent infringement and the need to pay royalties. Where (Geographic Strategy) The company must decide whether to launch the new product in a single locality, a region, several regions, the national market, or the international market. Most will develop a planned rollout over time. Small companies will select an attractive city and put on a blitz campaign, they will enter other cities one at a time. Larger companies will introduce their products into a whole region and then move to the next region. Some companies will launch their products to the national market. Most companies design new products to sell primarily in the domestic market. If the product does well, they may decide to roll it out to other countries. In choosing rollout markets, the major criteria are: Market potential Company‘s local reputation Cost of filling the pipeline Cost of communications media Influence of area on other areas Competitive penetration The presence of strong competitors will influence rollout strategy. With the Web connecting farflung parts of the globe, competition is more likely to cross national borders. To Whom (Target-Market Prospects) Within the rollout markets, the company must target its initial distribution and promotion to the best prospect groups. These would be the: Early adopters Heavy users Opinion leaders Reached at a low cost The company should rate the various prospect groups on these characteristics and target the best group. How (Introductory Market Strategy) The company must develop an action plan for introducing the new product into the rollout markets. To coordinate the many activities involved in launching a new product, management 78

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can use network-planning techniques such as critical path scheduling. Critical path scheduling (CPS) calls for developing a master chart showing the simultaneous and sequential activities that must take place to launch the product

Q. 48. Explain the types of pricing methods and Also discuss the different Product Mix pricing strategies with the help of suitable examples. OR What are various pricing methods? Explain each in detail OR Explain various approaches to setting prices. Write in detail the price-setting procedure. OR How does experience or learning curve affect the average cost? List and explain any three pricing methods that are used for determining prices Answer: SETTING THE PRICE A firm must set a price for the first time when it develops a new product, when it introduces its regular product into a new distribution channel or geographic area, and when it enters bids on new contract work. The firm must decide where to position its product on quality and price. Most marketers have 3– 5 price points or tiers. Consumers often rank brands according to price tiers in a category. Within any tier, there is a range of acceptable prices, called price brands. The price brand provides managers with some indication of the flexibility and breadth they can adopt in pricing their brands within a particular price tier. The firm has to consider many factors in setting its pricing policy. The following is a six-step procedure when setting pricing policy:  Selecting the pricing objective 

Determining demand

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Estimating costs

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Analysing competitors‘ costs, prices, and offers

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Selecting a pricing method

 Selecting the final price Step 1: Selecting the Pricing Objective The company first decides where it wants to position its market offering. The clearer a firm‘s objectives, the easier it is to set price. A company can pursue any of five major objectives through pricing:  Survival 79

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Maximum current profit

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Maximum market share

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Maximum market skimming (suitable for products that have short life cycles. Ex: digital technology, new dvd, etc.)

 Product-quality leadership Pricing Objective Survival Companies pursue survival, as their major objective when they are plagued with overcapacity, intense competition, or changing consumer wants. Survival is a short-run objective. Maximum Many companies try to set a price that will maximise current profits. They Current estimate the demand and costs associated with alternative prices and Profit choose the price that produces maximum current profit, cash flow, or rate of return on investment. This strategy assumes that the firm has knowledge of its demand and cost functions. Maximum Some companies want to maximise their market share. They believe that a Market Share higher sales volume will lead to lower unit costs and higher long-run profit. This practice is called market-penetration pricing. The following conditions favour setting a low price: the market is highly price-sensitive, and a low price stimulates market growth. Production and distribution costs fall with accumulated production experience. A low price discourages actual and potential competition. Maximum Companies unveiling a new technology favour setting high prices to Market maximise market skimming. This is also called market-skimming Skimming pricing, where prices start high and are slowly lowered over time. Market skimming makes sense under the following conditions: A sufficient number of buyers have a high current demand. The unit costs of producing a small volume are not so high that they cancel the advantage of charging what the traffic will bear. The high initial price does not attract more competitors to the market. The high price communicates the image of a superior product. ProductA company might aim to be the product quality leader in the market. Quality Many brands strive to be ―affordable luxuries‖—products or services Leadership characterised by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumer‘s reach. Other Objectives Non-profit and public organisations may have other pricing objectives. Whatever the specific objective, businesses that use price as a strategic tool will profit more than those who simply let costs or the market determine their pricing. Step 2: Determining Demand Each price will lead to a different level of demand and therefore have a different impact on a company‘s marketing objectives. The relation between alternative prices and the resulting current demand is captured in a demand curve. In the normal case, demand and price are 80

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inversely related; the higher the price, the lower the demand. In the case of prestige goods, the demand curve sometimes slopes upward. Price Sensitivity The demand curve shows the market‘s probable purchase quantity at alternative prices. The first step in estimating demand is to understand what affects price sensitivity. Generally speaking, customers are most price-sensitive to products that cost a lot or are bought frequently. Customers are less price-sensitive to low-cost items or items they buy infrequently. They are also less pricesensitive when price is only a small part of the total cost of obtaining, operating, and servicing the product over its lifetime (total cost of ownership—TCO). Companies prefer customers who are less price-sensitive. Estimating Demand Curves Most companies attempt to measure their demand curves using several different methods. Statistical analysis of past prices, quantities sold, and other factors can reveal their relationships. In measuring the price-demand relationship, the market researcher must control various factors that will influence demand. The competitor‘s response will make a difference.

Price Elasticity of Demand Marketers need to know how responsive or elastic demand would be to a change in price. If demand hardly changes with a small change in price, we say the demand is inelastic. If demand changes considerably, demand is elastic. Demand is likely to be less elastic under the following conditions:  There are few or no substitutes or competitors 

Buyers do not readily notice a higher price

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Buyers are slow to change their buying habits

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Buyers think the higher prices are justified

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If demand is elastic, sellers will consider lowering the price. A lower price will produce more total revenue as long as the costs of producing and selling more units do not increase disproportionately. It is a mistake not to consider the price elasticity of customers and their needs in developing marketing programmes. Price elasticity depends on the magnitude and direction of the contemplated price change. It may be negligible with a small price change or substantial with a large price change. It may differ for a price cut versus a price increase. There may be a price indifference band within which price changes have little or no effect. Long-run price elasticity may differ from short-run elasticity. Step 3: Estimating Costs Demand sets a ceiling on the price the company can charge for its product. Costs set the floor. Types of Costs and Levels of Production A company‘s costs take two forms, fixed and variable. Fixed costs (also known as overhead) are costs that do not vary with production or sales revenue. Variable costs vary directly with the level of production. Total costs consist of the sum of the fixed and variable costs for any given level of production. Average cost is the cost per unit at that level of production. Management wants to charge a price that will at least cover the total production costs at a given level of production. To price intelligently, management needs to know how its costs vary with different levels of production. Accumulated Production The decline in the average cost with accumulated production experience is called the experience curve or learning curve. Experience-curve pricing carries major risks. Aggressive pricing might give the product a cheap image. The strategy assumes that competitors are weak followers. Most experience-curve pricing has focused on manufacturing costs, but all costs, including marketing costs, can be improved on. Activity-Based Cost Accounting Today companies try to adapt their offers and terms to different buyers. To estimate the real profitability of dealing with different retailers, the manufacturer needs to use activity-based accounting (ABC). ABC accounting tries to identify the real costs associated with serving each customer. The key to effectively employing ABC is to define and judge ―activities properly. Target Costing Costs change with production scale and experience. They can also change as a result of a concentrated effort to reduce them through target costing. The objective is to bring the final cost projections into the target cost range. Step 4: Analysing Competitors’ Costs, Prices, and Offers 82

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Within the range of possible prices determined by market demand and company costs, the firm must take competitors‘ costs, prices, and possible price reactions into account. The firm should first consider the nearest competitor‘s price. Step 5: Selecting a Pricing Method Given the 3Cs - the customers‘ demand schedule, the cost function, and competitors‘ prices, the company is now ready to select a price. Costs set the floor to the price. Competitors‘ prices and the price of substitutes provide an orienting point. Customers‘ assessment of unique features establish the price ceiling. There are six price-setting methods: Markup pricing Target-return pricing Perceived-value pricing Value pricing Going-rate pricing Auction-type pricing Mark up Pricing The most elementary pricing method is to add a standard markup to the product‘s cost. Does the use of standard markups make logical sense? Generally, no. Any pricing method that ignores current demand, perceived value, and competition is not likely to lead to the optimal price. Markup pricing remains popular. Sellers can determine costs much more easily than they can estimate demand. By tying the price to cost, sellers simplify the pricing task. Where all firms in the industry use this pricing method, prices tend to be similar. Many people feel that cost-plus pricing is fairer to both buyers and sellers. For ex: Toaster manufacturer following costs and sale expectations: Variable cost per unit : Rs 10 Fixed costs: Rs 300000 Expected unit sales 50000 units Unit cost = vc + fc / unit sales ( 10 + 300000 / 50000 = Rs 16 ) Now assume earn a 20 % mark up on sales. Markup price = unit cost / 1 – desired return on sales (16 / 1 -0.20 = Rs 20) Target-Return Pricing In target-return pricing, the firm determines the price that would yield its target rate of return on investments (ROI). Target-return pricing tends to ignore price elasticity and competitors‘ prices. For ex: General Motors has priced its automobile to achieve a 15% to 20% ROI Toaster manufacturer following costs and sale expectations: Variable cost per unit: Rs 10 83

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Invested capital RS 1000000 Expected unit sales 50000 units Target - return price = unit cost + desired return * invested capital / unit sales Perceived Value Pricing An increasing number of companies base their price on the customer‘s perceived value. They must deliver the value promised by their value proposition, and the customer must perceive this value. Perceived value is made up of several characteristics: Buyer‘s image of the product performance Channel deliverables The warranty quality Customer support Softer attributes such as: - Supplier‘s reputation - Trustworthiness - Esteem Furthermore, each potential customer places different weights on these different elements, with the result that some will be: Price buyers Value buyers Loyal buyers Companies need different strategies for each of these three groups. The key to perceived-value pricing is to deliver more value than the competitor and to demonstrate this to prospective buyers. The company can try to determine the value of its offering in several ways: Managerial judgments within the company Value of similar products Focus groups Surveys Experimentation Analysis of historical data Conjoint analysis Going-Rate Pricing

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In going-rate pricing, the firm bases its price largely on competitor‘s prices. The firm might charge the same, more, or less than major competitor (s). Going-rate pricing is quite popular where costs are difficult to measure or competitive response is uncertain. Auction-type pricing Auction-type pricing is growing more popular, especially with the growth of the Internet. There are three types of auction-type pricing: English auctions (ascending bids) Dutch auctions (descending bids) Sealed-bid auctions Step 6: Selecting the Final Price Pricing methods narrow the range from which the company must select its final price. In selecting the price, the company must consider additional factors, including the impact of other marketing activities, company pricing policies, gain-and-risk sharing pricing, and the impact of price on other parties. Product-Mix Pricing Price-setting logic must be modified when the product is part of a product mix. Pricing is difficult because the various products have demand, cost interrelationships, and are subject to different degrees of competition. We can distinguish six situations involving product-mix pricing: product-line pricing, optional-feature pricing, captive-product pricing, two-part pricing, by-product pricing, and product bundling pricing. 1) Product-line pricing: Companies normally develop product lines rather than single products and introduce price steps. In many lines of trade, sellers use well-established price points for the products in its personal line. The seller‘s task is to establish perceived-quality differences that justify the price differences. 2) Optional-feature pricing: Many companies offer optional products, features, and services along with their main product. Pricing is a sticky problem, because companies must decide which items to include in the standard price and which to offer as options. 3) Captive-product pricing: Some products require the use of ancillary or captive products. There is a danger in pricing the captive product too high in the aftermarket. 4) Two-part pricing: Service firms often engage in two-part pricing, consisting of a fixed fee plus a variable usage fee. 5) By-product pricing: The production of certain goods often results in by-products. If the byproducts have value to a customer group, they should be priced on their value. 6) Product-bundling pricing: Sellers often bundle products and features. Pure bundling occurs when a firm only offers its products as a bundle (tied-in sales). In mixed-bundling, the seller offers goods both individually and in bundles. When offering a mixed bundle, the seller normally charges less for the bundle than if the items were purchased separately. Some customers will want less than the whole bundle. Studies have shown that as promotional activity increases on

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individual items in the bundle, buyers perceive less savings on the bundle and are less apt to pay for the bundle. Q. 49. Explain utility of “Reference Price” and “Price Cues” with regards to the consumer oriented pricing decisions in brief. Augment your response by suitable illustrations. Answer: Price, is not just a number on a tag or an item. Throughout most of history, prices were set by negotiation between buyers and sellers. Setting one price for all buyers is a relatively modern idea. Today the Internet is partially reversing the fixed pricing trend. Traditionally, price has operated as the major determinant of buyer choice. Price remains one of the most important elements determining market share and profitability. How Companies Price Companies do their pricing in a variety of ways. In small companies, prices are often set by the boss. In large companies, pricing is handled by division and product-line managers. In large companies, top management sets general pricing objectives, policies, and often approves the prices proposed by lower levels of management. In industries where pricing is a key factor, companies will often establish a pricing department to set or assist others in determining appropriate prices. Many companies do not handle pricing well. Others use price as a key strategic tool. There are customized prices and offerings based on segment value and costs. Effectively designing and implementing pricing strategies requires a thorough understanding of consumer pricing psychology and a systematic approach to setting, adapting, and changing prices. Consumer Psychology and Pricing Marketers recognise that consumers often actively process price information, interpreting prices in terms of their knowledge from prior purchasing experiences, formal communications, and point-of-purchase or online resources. Purchase decisions are based on how consumers perceive prices. What they consider the current actual price - not the marketer‘s stated price. Consumers may have a lower price threshold below which prices may signal inferior or unacceptable quality. Upper price threshold above which prices are prohibitive are seen as not worth the money. Reference Prices When examining products, consumers often employ reference prices. In considering an observed price, consumers often compare it to an internal reference price (pricing from memory) or an external frame of reference (posted ―regular retail price). All types of reference prices are possible. Sellers often attempt to manipulate reference prices. Reference-price thinking is also encouraged by stating a high manufacturer‘s suggested price or by indicating that the product was priced much higher originally or by pointing to a competitor‘s high price. Clever marketers try to frame the price to signal the best value possible. When consumers evoke one or more of these frames of reference, their perceived price can vary from the stated price. Price Cues

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Consumer perceptions of prices are also affected by alternative pricing strategies. Many sellers believe that prices should end in an odd number. Research has shown that consumers tend to process prices in a ―left-to-right manner rather than by rounding. ―Sale signs next to prices have been shown to spur demand, but only if not overused.

Q. 50. Discuss everyday low pricing (EDLP) in terms of how it compares to high-low pricing. Why is EDLP becoming a commonly used pricing technique? Answer: In recent years, several companies have adopted value pricing: They win loyal customers by charging a fairly low price for a high-quality offering. Value pricing is thus not a matter of simply setting lower prices; it is a matter of reengineering the company's operations to become a low-cost producer without sacrificing quality, to attract a large number of valueconscious customers. An important type of value pricing is everyday low pricing (EDLP), which takes place at the retail level. A retailer that holds to an EDLP pricing policy charges a constant low price with little or no price promotions and special sales. These constant prices eliminate week to-week price uncertainty and the "high-low" pricing of promotion-oriented competitors. In high-low pricing, the retailer charges higher prices on an everyday basis but then runs frequent promotions in which prices are temporarily lowered below the EDLP level. The two different pricing strategies have been shown to affect consumer price judgments-deep discounts (EDLP) can lead customers to perceive lower prices over time than frequent; shallow discounts (highlow), even if the actual averages are the same. Some retailers have even based their entire marketing strategy around what could be called extreme everyday low pricing. Every day low price (EDLP) is the pricing strategy used by retail stores that provides low prices to the customers every single day without any special pricing discount, sale, comparison shopping etc. Traditionally, retail stores used to keep regular pricing discounts, coupon clipping promotions, etc. to promote their sales and increase the footfall in their stores. But, this needs a lot of effort in terms of monetary aspects and physical aspects making it difficult to sustain the competitive advantage. The strategy of EDLP helps to convince the consumer that they will get better and low prices than other competitive stores everyday even though the promotions of competitors at regular intervals might provide lowest prices but they will not be available every day. EDLP also helps the retail stores to reduce their demand fluctuation that would occur due to promotions on some days, and also reduces the probability of consumers receiving time degraded products. Stores like Walmart and Spencers have used the EDLP strategy to a very good extent for their success. eg- EDLP has been used by BigBazar stores in their branding.

Question 51 Explain the product mix with appropriate example. Being a product manager of cosmetic company how will you build and manage the product mix for your organization?

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Answer: Product mix refers to the number of product lines that an organization offers to its customers. Product line is a group of related products manufactured or marketed by a single company. Such products function in similar manner, sold to the same customer group, sold through the same type of outlets, and fall within a same price range. Marketers must modify their price-setting logic when the product is a part of a product-mix. In product-mix pricing, the firm searches for a set of prices that maximizes profits on the total mix. Pricing is difficult because the various products have demand and cost interrelationships and are subject to different degrees of competition. We can distinguish six situations calling for product- mix pricing: product-line pricing, optionalfeature pricing, captive- product pricing, two-part pricing, by-product pricing, and productbundling pricing. PRODUCT-LINE PRICING: - companies normally develop product lines rather than single products and introduce price steps. In many lines of trade, sellers use well-established price points for the products in their line. A men’s clothing store might carry men’s shirts at three price levels: Rs.500, Rs.1000, and above Rs.1500. Customer will associate the low-, average-, and high quality shirts with three price points. OPTIONAL-FEATURE PRICING:- many companies offer optional products, features, and services along with their main product. The automobile buyer can order power window controls, remote adjustable mirrors, a sunroof, and theft protection, Pricing is a sticky problem, because companies must decide which items to include in the standard price and which to offer as options. Automobile companies advertise entry-level models at low prices to pull people into the show rooms. CAPTIVE-PRODUCT PRICING:- When pricing their core products, companies must look at several factors such as supply and demand, competitors' pricing and manufacturing costs. However, pricing the accessories, or captive products, sold separately to work with those products can be just as difficult, and may even affect sales of the core product itself. 88

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TWO-PART PRICING:- A pricing strategy normally used by service marketers, which consists of a fixed fee plus a variable usage fee. For example, telephone users pay a monthly fee plus charges for calls beyond a certain numbers. One problem the service firms face in this pricing method is the decision with regard to the proportion of each part of the pricing i.e., how much to charge for the basic service and how much for the variable usage. The fixed fee should be low enough to induce purchase of the service; the profit can then be made on the usage fee. BY-PRODUCT PRICING: - By product is something which is produced as a result of producing something else (the main product). Usually, the byproducts are disposed off and have little value. Example- when meat is processed for human consumption, the by product can be used as food for dog/cat. So the manufacturer can sell it in market to recover some of his expenses say transportation and storage costs. PRODUCT-BUILDING PRICING:- The act of placing several products or services together in a single package and selling for a lower price than would be charged if the items were sold separately. The package usually includes one big ticket product and at least one complementary good. Bundled pricing is a marketing method used by retailers to sell products in high supply Being a product manager of cosmetic company how will you build and manage the product mix for your organization? The Indian cosmetic company is characterized by highly competitive marketing strategies. It depends on ability to introduce rapidly innovative products into the market without endless delays. A strategic marketing plans helps a company to decide proper segmentation, targeting and positioning of the products. Developing a concise strategic marketing plan include clear vision of business, its goal and unique selling proposition. Significant of 4ps of marketing mix The right product, Sold at the right price, In the right place an, Using the most suitable promotion. To create right marketing mix, Business has to meet the following Conditions:Product: - The product has to have right features with broader choice and should satisfy consumer needs-such as ;it must look well and work well. Price: - The price must be right. The price of an item is clearly an important cause of the value of sales made. Price decides success of product in market.

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Place: - The goods must being the right place at right time. Making sure that the goods arrive when and where, as they are wanted is an important operation. Promotion: - It is the communication with the business customers. Product policy: size growth of product range, quality differentiation strategy and assortment renewal strategy. For a permanent satisfaction of consumers needs, Cosmetics company has to continue the horizontal assortment range diversification strategy. Cosmetics company which produces and sells a complex and modern range of cosmetic products, even for the most demanding tastes. That’s why the company should adapt constantly to the market requirements regarding the product novelty, make-up colors diversification, packaging methods, product manufacturing technology. The quality differentiation strategy should be maintained. It is very important to offer superior products that will satisfy all consumers’ categories, from those who want to use qualitative products at affordable prices to those who would spend anything for purchasing a prestigious product that will satisfy the most demanding wishes. The assortment renewal strategy is the most complex and dynamic strategy. The renewal assortment leads to the creation of new product lines within the existing range, for offering products that meet new demands of fashion and technology. Price policy The company approaches three aspects: the prices level, the degree of the prices diversification and the of prices mobility. Based on each product category, their characteristics and targeted consumer category, the company may adopt a strategy of moderate prices. Thus, prices can vary depending on the criterion that was the basis for its establishment. For price policy it is beneficial the maintaining of practices prices. This price level is justified by the quality of the products. Prices applied by the company for its products reflect the quality and the position on the market. Placement policy The main criteria underlying the distribution strategies are: the dimensions of the distribution channel, the size of the distribution, the degree of company’s participation, control degree, elasticity degree and the logistics of goods company applies the following strategies: direct distribution, distribution through personal device and high level of control. Promotion policy Promotion of the global image – image expansion strategy, conducting ongoing promotional activities, offensive promotional strategy, undifferentiated strategy, organizing promotional activities with the help of specialized institutions. Q. 52. Explain five dimensions on the basis of which a company can differentiate & position its market offering? Give example of each of dimensions. To be branded product must be differentiated. Physical products vary in their potential for differential. At one extreme, we find products that allow little variation chicken aspirin and steel. Yet even here some differentiation is possible. Here the seller faces an abundance of differentiation possibilities including form, features customization, performance quality, and 90

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style. Design has become increasingly important means of differentiation and we will discuss it separately. In services differentiation and we will discuss it separately. In services differential is achieved through the use of technology and by offering value services. Here is how one of the leading courier companies in india has achieved this. Blue Dart: Blue dart a leading player in the courier services industry in india, has become an important part of the supply chain of the companies by providing integrated services. In order to augment services the company uses several priority software that enable clients to track and monitor shipment status. The company has a feet of aircrafts to provide cargo services a ground fleet of vehicles large warehouse space and bounded in metro cities. The company alsop provides advisory services to clients to develop solution on distribution issues. Product Differentiation: Form: many products can be differentiated in form- the size, shape or physical structure of a product. Consider the many possible forms taken by products such as aspirin. Although aspirin is essentially a commodity, it can be differentiated by dosage size, shape, color or action time. Features: most products can be offered with varying features that differentiate their basic function. A company can identify and select appropriate new features by surveying recent buyers and then calculating customer value versus company costs for each potential feature. The company should also consider to prioritize those features that are included and final; way to information in terms of feature bundles or packages. Auto company often manufacture must also think in terms of this feature. Each com0pany must decide whether to offer feature customization. Performance quality: most products are established at one of four performance levels low average high and superior. Performance quality is the level at which the products primary characteristics can operate. Quality is becoming an increasingly important dimension for differentiation as companies adopt a value model and provide quality for less money. Firms however should not necessarily design the highest performance level. Conformance quality: buyers expect products to have a conformance quality. Which is the degree to which all produced units are identical and meet the promised notifications. Suppose a Porsche 911 is designed to accelerate 60miles per hour within 10 seconds if every Porsche 911 coming off the assembly line does this the model is said to have high conformance quality. Durability: durability a measure of the products expected operating life under natural or stressful conditions is a valued attribute for certain products. Duracell advertises itself a long lasting condition is a valued attribute for a premium price. Nokia phones are also known for their durability buyers will generally pay more for vehicles and kitchen appliances have a reputation 91

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for being long lasting. However this rule is subject to some qualifications the extra price must not be excessive. Furthermore the product must not the subject to rapid technological obsolescence as are personal computers and video cameras. Reliability: buyers normally will pay a premium for reliable products. Reliability is a measure of the profitability that a product will not malfunction or fail within a specified time period. Breakthrough marketing describes how that company has excelled at making and selling high quality, dependable automobiles. Q.53 Create a marketing plan for product /service of your choice. A marketing plan is a written document that summarize what the market has learned about the marketplace and indicate how the firm plans to reach its marketing objective. Marketing plans are becoming more customer and competitor oriented better reasoned and more realistic than in the past they draw more input for all the functions and are team developed. Planning is becoming a continuous process to respond to rapidly changing market conditions Executive summary The marketing plan should open with a brief summary for senior management of the main goals and recommendations. a table of content outline the rest of the plan and all the supporting rational and operational detail. Mithaila food products Ltd will initially tide up with two large retail chains as a privet brand supplier for them. However it plans to enter the domestic market, and subsequently the international market with its own brand once it has stabilize its product and generated enough financial resource. Its plans to do this through both internal accrual and venture capital funding Situation Analysis This section present relevant back ground data on sales costs the market, competitor and the various forces in the macro environment,. How to do we define the market how big is it, and how fast is it growing? What are the relevant trends? What is the product offering and what critical issues do we face ? Firm will use all this information to carry out a swot analysis. MFPL's owner -director analyzed the situation using 4C framework 4C stand for customer, company, competitor and context. the key success factor in the institutional market is the provision of quality products in the desired quantities , and at reasonable prices. access to quality raw material at low cost which is remunerative to the producers , is another requirement for success in this market. Marketing strategy

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Here the product manager define the mission , marketing and financial objectives , and groups and needs that the market offering are intended to satisfy the manager then establishment the product line's competitive positioning, which will inform the "GAME PLAN" to accomplish the plan objective. customer focus with the operation efficiency and customer intimacy. MFPL will position itself as value for money brand , one that is tasty, reliable, trustworthy , and fun to eat. They using marketing mix strategy 4P's stands for product , price , place , promotion . Financial projection Financial projection include a sales forecast an expense forecast, and break even analysis . on the revenue side , the projection shows the forecasted sales volume by month and product category on the expanse side they show the expected cost of marketing, broken down into final categories . the break even analysis shows how many unites the firm sale monthly to offset its monthly fixed cost and per unit variable cost. Implementation control The last section of marketing plan outlines the controls for monitoring and adjusting implementation of the plan. typically, it spells out the goals and budget for each month or quarter, so mgt can review each periods results and take corrective actions as needed. firm must also take number of different internal and external measures to access the progress and suggests possible modification. Q54 Describe the five product levels that are a part of customer value hierarchy? Product Levels: The Customer-value Hierarchy In planning its market offering, maintain that the marketer needs to address five product levels. Each level adds more customer value, and the five constitute a customer value hierarchy. Core benefit: The service or benefit the customer is really buying. The customer in search of a hotel room demand only rest and sleep from a marketer. Basic product: Now the marketer must turn the core benefit into Basic product. For example customer need basic things like bed, bathroom, chair, fan etc. Expected products: At the third level marketer must prepare for the expected product of the clients. a set of attributes and conditions buyers normally 93

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expect when they purchase this product. For example if bed, bathroom, fan are the basic product, then clean bed sheet, neat and clean bathroom are the expected products. Augmented product: At the fourth level, the marketers prepares an augmented product that exceeds customers expectations. For example, beautiful wall hanging, lovely balcony, Television set etc. Potential product: At the fifth level stands the potential product that the marketer need to search for the future operation. For example high speed internet, telephone line etc. Conclusion - Based on the background of the mobile industry, this paper proposes the framework and process of a mobile customers’ demands of unsought services/products by using customer demand analysis. This paper proposes a mobile customer demand analysis model and develops a mobile customer value hierarchy to capture customer demand knowledge. A well-formed model could identify the customer demand objectives dynamically from their engagement record; then a personalized product recommendation based on the customer value hierarchy is made. Q. 55. Discuss the four corporate strategic planning activities with suitable example. Some corporation gives their business units a lot of freedom to set their sales and profit goals and strategies. Other set goals of their business unit but let them develop their own strategies. Still other set of goals and participate in developing individual business unit strategies. All corporate headquarters undertake four planning activities. Defining the corporate mission Establishing strategic business units Assigning resources to each SBU Assessing growth opportunities Defining the corporate mission: An organization exists to accomplish something : to make cars, lend money, provide a night’s loading, and so on. Over time the mission may change, to take advantage of new opportunities or respond to new market condition. Amazon.com change its mission from being the world’s largest online bookstore to aspiring to become the world’s largest online store; and eBay changed its mission from running online auctions for collectors to running online auction of all kinds of goods.

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Organizations develop mission statements to share with managers, employees, and customers. A clear, thoughtful mission statement provides employee with a shared sense of purpose, direction, and opportunity. 2. Establishing strategic business units: Companies often define their businesses in term in terms of product: they are in the ‘auto business” or the “clothing business.” But harvards famed marketing professor ted levitt argued that market definition of a business as a customer satisfying process, not a goods producing process. Products are transient; basic need and customer group endure forever transportation is a need :the horse and carriage ,the automobile ,the railroad, the airline ,and the truck are products that meet that need. An SBU has three characteristics :It is a single business, or a collection or related business, that can be planned separately from the rest of the company. It has its own set of competitors It has a manager responsible for strategic planning and profit performance, who controls most of the factors affecting profit. 3. Assigning resources to each SBU: Once it has define SBUs , management must decide how to allocate corporate resources to each. The 1970s saw several portfolio-planning models introduce to provide an analytical mean for marketing investment decision The GE/Mckinsey Matrix classifies each SBU According to the extent of its competitive advantages and the attractibeness of its industry. 4. Assessing growth opportunities: Assessing growth opportunities includes planning new business, downsizing, and terminating older business. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it. Corporate management first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive growth opportunities is called a “ PRODUCT-MARKET EXPANTION GRID .”

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Current product

Current market

New market

Market strategy Market strategy

new product

penetration Product strategy

development

development Diversification strategy

Q. 56 Briefly explain the various methods for gathering market information. what are the techniques used for monitoring customer satisfaction? Various methods for gathering market information: The Order-to-Payment Cycle The heart of the internal records system is the order-to-payment cycle. Sales representatives, dealers, and customers send orders to the firm. The sales department prepares invoices and transmits copies to various departments. Out-of-stock items are back ordered. Shipped items are accompanied by shipping and billing documents that are sent to various departments. Today's companies need to perform these steps quickly and accurately. Customers favor firms that can promise timely delivery. Customers and sales representatives fax or e-mail their orders. Computerized warehouses quickly fill these orders. The billing department sends out invoices as quickly as possible. An increasing number of companies are using the Internet and extranets to improve the speed, accuracy, and efficiency of the order-to-payment cycle. Sales Information Systems Marketing managers need timely and accurate reports on current sales. Wal-Mart, for example, knows the sales of each product by store and total each evening. This enables it to transmit nightly orders to suppliers for new shipments of replacement stock. Wal-Mart shares its sales data with its larger suppliers such as P&G and expects P&G to re-supply Wal-Mart stores in a timely manner. Wal-Mart has entrusted P&G with the management of its inventory. Databases, Data Warehousing, and Data Mining Today companies organize their information in databases—customer databases, product databases, salesperson databases—and then combine data from the different databases. For example, the customer database will contain every customer's name, address, past transactions, and even demographics and psychographics (activities, interests, and opinions) in some instances. Instead of a company sending a mass "carpet bombing" mailing of a new offer to every customer in its database, it will score the different customers according to purchase 96

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recency, frequency, and monetary value. It will send the offer only to the highest scoring customers. Besides saving on mailing expenses, this will often achieve a double-digit response rate. Companies warehouse these data and make them easily accessible to decision makers. Furthermore, by hiring analysts skilled in sophisticated statistical methods, they can "mine" the data and garner fresh insights into neglected customer segments, recent customer trends, and other useful information. The customer information can be cross-tabbed with product and salesperson information to yield still deeper insights. To manage all the different databases efficiently and effectively, more firms are using business integration software (see "Marketing Insight: Putting Data to Work with Business Integration Software"). Using its own in-house technology, for example, Wells Fargo has developed the ability to track and analyze every bank transaction made by its 10 million retail customers—whether at ATMs, bank branches, or online. When transaction data are combined with personal information provided by customers, Wells Fargo can come up with targeted offerings to coincide with a customer's life-changing event. The Marketing Intelligence System The internal records system supplies results data, but the marketing intelligence system supplies happenings data. A marketing intelligence system is a set of procedures and sources managers use to obtain everyday information about developments in the marketing environment. Marketing managers collect marketing intelligence by reading books, newspapers, and trade publications; talking to customers, suppliers, and distributors; and meeting with other company managers. Techniques used for monitoring customer satisfaction A number of methods exist to measure customer satisfaction. Periodic surveys can track customer satisfaction directly. Respondents can also be asked additional questions to measure repurchase intention and the likelihood or willingness to recommend the company and brand to others. Paramount attributes the success of its five theme parks to the thousands of Web-based guest surveys it sends to customers who have agreed to be contacted. During the past year, the company conducted more than 55 Web-based surveys and netted 100,000 individual responses that described guest satisfaction on topics including rides, dining, shopping, games, and shows.20 Companies can monitor the customer loss rare and contact customers who have stopped buying or who have switched to another supplier to learn why this happened. Finally, companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company's and competitors' products. Managers themselves can enter company and competitor sales situations where they are unknown and experience firsthand the 97

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treatment they receive, or phone their own company with questions and complaints to see how the calls are handled. For customer satisfaction surveys, it's important that companies ask the right questions. Frederick Reichheld suggests that perhaps only one question really matters: "Would you recommend this product or service to a friend?" He maintains that marketing departments typically focus surveys on the areas they can control, such as brand image, pricing, and product features. According to Reichheld, a customer's willingness to recommend to a friend results from how well the customer is treated by front-line employees, which in turn is determined by all the functional areas that contribute to a customer's experience.21 In addition to tracking customer value expectations and satisfaction, companies need to monitor their competitors' performance in these areas. One company was pleased to find that 80 percent of its customers said they were satisfied. Then the CEO found out that its leading competitor had a 90 percent customer satisfaction score. He was further dismayed when he learned that this competitor was aiming for a 95 percent satisfaction score. For customer-centered companies, customer satisfaction is both a goal and a marketing tool. Companies need to be especially concerned today with their customer satisfaction level because the Internet provides a tool for consumers to spread bad word of mouth—as well as good word of mouth—to the rest of the world. On Web sites like troublebenz.com and lemonmb.com, angry Mercedes-Benz owners have been airing their complaints on everything from faulty key fobs and leaky sunroofs to balky electronics that leave drivers and their passengers stranded. Q.57. List the methods of market entry for global markets. What are the terms and responsibility of channel members? OR Which are the various method to enter a foreign market ? OR Enumerate and explain various international market entry strategies that can be adapted by a manufacturer and marketer of processed food products from south gujarat. Answer. INTRODUCTION Once a company decides to target particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. These five market entry strategies are shown in Figure. Each succeeding strategy entails more commitment, risk, control, and profit potential. 98

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Indirect and Direct Export The normal way to get involved in an international market is through export. Companies typically start with indirect exporting-that is, they work through independent intermediaries. Domestic-based export merchants buy the manufacturer's products and then sell them abroad. Domestic-based export agents seek and negotiate foreign purchases for a commission) Included in this group are trading companies. Cooperative organizations carry on exporting activities on behalf of several producers often of primary products such as fruits or nuts-and are partly under their administrative control. Export management companies agree to manage a company's export activities for a fee. Indirect export has two advantages. First, there is less investment. The firm doesn't have to develop an export department, an overseas sales force, or a set of international contacts. Second, there's less risk: Because international marketing intermediaries bring know-how and services to the relationship, the seller make fewer mistakes. Companies eventually may decide to handle their own exports.The investment and risk are somewhat greater, but so is the potential return .A company can carry on direct exporting in several ways: Domestic-based export department or division. This might evolve from a purely service function into a self-contained export department operating as its own profit center. Overseas sales branch or subsidiary. The sales branch handles sales and distribution and perhaps warehousing and promotion as well. It often serves as a display and customer- service center. Traveling export sales representatives. Home-based sales representatives travel abroad to find business. Foreign-based distributors or agents. These distributor s and agents can hold limited or exclusive rights to represent the company in that country. Many companies use direct or indirect exporting as a way to "test the waters" before building a plant and manufacturing a product overseas.

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Using a Global Web Strategy With the Web, it's now not even necessary to attend international trade shows to show your wares abroad: Electronic communication via the Internet is extending the reach of companies large and small, allowing them to attract new customers outside their home countries, support existing customers who live abroad, source from international suppliers, and build global brand awareness. These companies adapt their Web sites to provide country-specific content and services to their best potential international markets, ideally in the local language. The number of Internet users is rising quickly as access costs decline, local-language content increases, and infrastructure improves. After going online, upscale retailer and cataloger The Sharper Image found that more than 25% of its online business came from overseas customers. The Internet has become an effective means of conducting market research and offering customers a secure process for ordering and paying for products across time zones. Finding free information about trade and exporting has never been easier. Licensing Licensing is a simple way to engage in international marketing. The licensor issues a license to a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty the licensor gains entry at little risk; the licensee gains production expertise or a well-known product or brand name. Licensing has potential disadvantages. The licensor has less control over the licensee than it does over its own production and sales facilities. If the licensee is very successful, the firm has given up profits, and if and when the contract ends, the company might find it has created a competitor prevent this, the licensor usually supplies some proprietary product ingredients or components (as Coca-Cola does.) but the best strategy is to lead in innovation so the licensee will continue to depend on the licensor. There are variations on a licensing arrangement. Companies such as Hyatt and Marriott sell management contract to owners of foreign hotels to manage these businesses for a fee. The management firm may have the option to purchase some share in the managed company within a stated period. In contract manufacturing, the firm hires local manufacturers to produce the product. When Sears opened department stores in Mexico and Spain, it found qualified local manufacturers to produce many of its products. Contract manufacturing gives the company less control over the manufacturing process and risks loss of potential profits on manufacturing. However, it offers a chance to start faster, with the opportunity to form a partnership or buy out the local manufacturer later. 100

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Finally, a company can enter a foreign market through franchising, a more complete form of licensing, the franchisor offers a complete brand concept and operating system. In return, the franchisee invests in an pays certain fees to the franchisee McDonald's, KFC, and Avis have entered scores of countries by franchising their retail concepts and making sure their marketing is culturally relevant. Joint Ventures Historically, foreign investors have often joined with local investors to create a joint venture company in which they share ownership and control. For instance • Coca-Cola and Nestle joined forces to develop the international market for "ready-to- drink" tea and coffee, which currently they sell in significant amounts in Japan. • Procter & Gamble formed a joint venture with its Italian archrival Fater to cover babies' bottoms in the United Kingdom and Italy. • Whirlpool took a 53% stake in the Dutch electronics group Philips's white-goods business to leapfrog into the European market. In India, there are several joint ventures in various industries. Tata AIG, Birla Sun Life Financial Services, ICICI Prudential, HDFC Standard Life Insurance, and Bajaj Allianz General Insurance are some of the examples of joint ventures in the insurance sector. Maruti Suzuki India Limited was another successful joint venture in the automobile sector before it acquired the shares held by the Government of India. A joint venture may be necessary or desirable for economic or political reason (he foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone; or the foreign government might require joint ownership as a condition for entry. joint ownership has certain drawback. The partners might disagree over investment, marketing, or other policies. one might want to reinvest earnings for growth, and the other to declare more dividends joint ownership can also prevent a multinational company from carrying out specific manufacturing and marketing policies on a worldwide basis. Direct Investment The ultimate form of foreign involvement is direct ownership of foreign-base d assembly or manufacturing facilities. The foreign company can buy p art or full interest in a local company or build its own facilities. General Motors has invested billions of dollars in auto manufacturers around the world, such as Shanghai GM, Fiat Auto Holdings, Isuzu, Daewoo, Suzuki, Saab, Fuji Heavy Industries, Jinbei GM Automotive Co., and AvtoVAZ. If the market appears large enough, foreign production facilities offer distinct advantages.

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First, the firm secures cost economies in the form of cheaper labor or raw materials, foreign government investment incentives, and freight savings. Second, the firm strengthens its image in the host country because it creates jobs. Third, the firm develops a deeper relationship with government, customers, local suppliers, and distributors, enabling it to better adapt its products to the local environment. Fourth, the firm retains full control over its investment and therefore can develop manufacturing and marketing policies that serve its long-term international objectives. Fifth, the firm assures itself access to the market in case the host country insists locally purchased goods have domestic content. The main disadvantage of direct investment is that the firm exposes a large investment to risks such as blocked or devalued currencies, worsening markets, or expropriation. It can be expensive to reduce or close down operations, because the host country might require substantial severance pay to employees. Q. 58. How can a marketer of sports shoes differentiate his offering? Introduction Many people think a product is a tangible offering, but it can be more than that. Broadly , a product is anything that can be offered to market to satisfy a want or need , including physical goods , services , experiences ,events , persons ,place, properties ,organization ,information , and ideas. A marketer of sports shoes differentiate his offering as follow (1) Form - many products can be differentiated in form –the size, shape , physical statute of product in similar manner marketer of sports shoes can offer shoes of variant size and design (2)Features- most products can be offered with varying features that supplement there basic function. company can identify and select appropriate new features by surveying recent buyer then calculating customer value versus company cost for each potential features .in similar manner the marketer sports shoes can offer shoes in different colures, looks and comfortlessness level (3) Customization - marketers can differentiate products by making them customize to an individual. Mass communication is ability of the company to meet each customer requirement. Similarly ,marketer of sports shoes has to offer shoes in different colures, design extra as per customer requirement.

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(4) performance quality - most product are established at one of four performance level , low, average, high, superior . performance quality is the level at which the products primary characteristics operate quality is becoming an increasing important dimensions for differentiate as company’s adopt a value model and provide higher quality for less money. similarly marketer sports shoes has to maintain performance quality and has to offer high quality at low price (5)conformance quality buyers expect products to have a conformance quality, which is degree to which all the produced units are identical and meet the promised specification .here , marketer of sports shoes has to stick on comfortless level of each variety of shoes and has to meet the set standard (6) durability durability , a measure of products expected operating life under natural or stressful conditions ,is valued attribute for certain products .whatsoever verities is being offered by the marketer , but the product should be durable .without durability , the verities are of no use. (7) reliability - buyers normally will pay a premium for more reliable products . reliability is a major of the probability that a product will not fail within a specified time period . sports shoes , in the above example should be strong and comfortable able for at least six month so that the customer may rely on requirement. (8)style - style described the products look and feel to the buyer. On the other side , strong style does not always mean high performance . toddy generation want the sports shoes in various colures the different design with funky look .that means sports shoes should also be stylists enough to meet the customer it . Q. 59. Detail Note On BCG Matrix. It is also known as “Portfolio analysis”. This tool is developed by “Boston Consulting Group” to evaluate the position of different SBU’s within the organization. So, this technique is also known as SBU’s analysis because it is use to understand performance of SBU’s. This matrix is developed on the basis of Z parameter. Relative market share of SBU Growth rate of industry 103

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This 2 parameters are measured on high law frequencies. So, that 2 x 2 matrix provides 4 different position of an SBU’s within an organization. [1] Star: This SBU reflects that it has high market share and high growth rate so, due to high market share it enjoyed the leadership in the current market which leads to high sales high revenue and high profit earnings from SBU and high growth rate in industry also indicates that future of SBU is very bright and it will keep growing. For such a promising SBU it is important to maintain it’s current position for an organization to maintain the start category company Reinvest the profit earn by SBU in the business. [2] Cash Cow: This position refers that SBU has high market sharing in the competition but the industry in which it is operating is not growing industry. So due to high market share company will earn more profit but as growth rate of industry is less. Company show not re-invests that profit as it is not going to give future returned. So company will use this profit or cash in the development of others SBU, so the strategy use for this SBU is known as harvesting. [3] Question Mark : This SBU indicates high growth rate if industry and low market share of SBU’s this position shows that the industry is very promising and will give good future returns but the market share of company or sales position of company is not good So, this SBU needs to strong then it’s market share by interesting use various resources such as man power, money rate, etc. So the strategy use for the SBU is known as selective resources allocation. [4] Dog : This SBU indicates low market share and low growth rate. This is not a good SBU from company. Point of view either for present or for future as industry is not growing as well as the market share of SBU is not good. So the strategy use for this SBU is to either change the business if possible or stop the business IF not possible but it is not available to continue with the same SBU position.

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Q.60. Conduct a SWOT analysis for TataSky DTH or Starbucks coffee. Answer: A company needs to gather information about each competitor’s strengths and weaknesses. The following table shows the results of a company survey that asked customers to rate its three competitors, A, B and C on five attributes. Competitor A turns out to be well known and respected for producing high-quality products sold by a good sales force but is poor at providing product availability and technical assistance. Competitor B is good across the broad and excellent in product availability and sales force. Competitor C rates poor to fair on most attributes. This result suggests that the company could attack competitor A on product availability and technical assistance and competitor C on almost anything, but should not attack B, which has no glaring weaknesses. This can be explained by the following table:

CUSTOMER AWARENESS

PRODUCT QUALITY

PRODUCT AVAILABILITY

TECHNICA L ASSISTANC SELLING E STAFF

COMPETITOR A

E

E

P

P

G

COMPETITOR B

G

G

E

G

E

COMPETITOR C

F

P

G

F

F

NOTE: E= EXCELLENT, G= GOOD, F= FAIR, P= POOR

TATASKY SWOT ANALYSIS: TATA Sky Parent Company

JV between the TATA Group and STAR

Category

DTH and Broadcasting

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Sector

Media and Entertainment

Tagline/ Slogan

Iskolagadaala to life jingalala;Ab channel package wohi lo jopasandho

USP

Leading Direct-to-Home (DTH) service provider in India

STP Segment

DTH Subscribed TV viewers, Broadband subscribers

Target Group

Top and middle section of the pyramid

Positioning

One-stop shop for all the television entertainment needs of customers

SWOT Analysis 1. Leverage on brand TATA and high brand recall 2. Partnered with SKY Brand in the space of digital technology to bring a state-of-the-art satellite television service to India 3. Leader in introducing new packages and services 4. Rural penetration through ITC E-Chaupal and Godrej Aadhar 5. Innovative product offering TATA Sky plus 6. Adopted 360 degree marketing campaign that encapsulates television, print, radio and outdoor digital platforms 7. Tie ups with Sony Pictures, Fox for content – Pay per view service for exclusive events Strength

8. DVD Quality picture and CD Quality sound

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9. 24*7 customer service support in multiple languages 1.Not having first mover advantage as Dish TV captured market share 2. Dependency on broadcaster 3. Cannot match free service provided by DD 4. Customer service are usually busy and waiting period is usually very long Weakness

5. High initial cost of DTH equipment 1.Focus on segmentation and differentiated product offerings to expand its clients and spread its reach outside Tier-I cities across the country 2. Expand distribution network through exclusive stores 3. Growing demand for quality of service in the form of DTH over Cable 4. Increase in number of TVs sold 5. Penetrate market by competitively priced services, superior technologies, interactive services and customer support

Opportunity

6. Provide option of instalments and other promotional schemes to the new user 1.Interoperability regulations 2. Cables set top boxes provide easy switching due to negligible switching costs 3. Increasing competition 4. Dependency on broadcasters for their channel content and thus increase in cost

Threats

5. No Exclusivity in Content and Rule of ‘Must Carry’

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6. Cap on foreign investment Competition 1.Doordarshan 2. Sun Direct 3. Dish TV Competitors

4. Big TV

STARBUCKS SWOT ANALYSIS: Strengths. Starbucks Corporation is a very profitable organization, earning in excess of $600 million in 2004.The company generated revenue of more than $5000 million in the same year. It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries. ‘Starbucks’ mission statement is ‘Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.’ The following six guiding principles will help us measure the appropriateness of our decisions’ Weaknesses. Starbucks has a reputation for new product development and creativity. However, they remain vulnerable to the possibility that their innovation may falter over time.

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The organization has a strong presence in the United States of America with more than three quarters of their cafes located in the home market. It is often argued that they need to look for a portfolio of countries, in order to spread business risk. The organization is dependant on a main competitive advantage, the retail of coffee. This could make them slow to diversify into other sectors should the need arise. Opportunities. Starbucks are very good at taking advantage of opportunties. In 2004 the company created a CDburning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD. New products and services that can be retailed in their cafes, such as Fair Trade products. The company has the opportunity to expand its global operations. New markets for coffee such as India and the Pacific Rim nations are beginning to emerge. Co-branding with other manufacturers of food and drink, and brand franchising to manufacturers of other goods and services both have potential. Threats. Who knows if the market for coffee will grow and stay in favour with customers, or whether another type of beverage or leisure activity will replace coffee in the future? Starbucks are exposed to rises in the cost of coffee and dairy products. Since its conception in Pike Place Market, Seattle in 1971, Starbucks’ success has lead to the market entry of many competitors and copy cat brands that pose potential threats.

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