Integrated Notes - Marketing - Recover

MARKETING
MANAGEMENT
Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 1

Contents
Marketing Management – Module 1 ............................................................................................................ 7
Definition: ................................................................................................................................................. 7
Characteristics:...................................................................................................................................... 7
Scope: .................................................................................................................................................... 8
Basic Concepts: ......................................................................................................................................... 9
Value: .................................................................................................................................................... 9
Needs, Wants, Demand, & Markets: ...................................................................................................... 11
Needs: ................................................................................................................................................. 11
Wants: ................................................................................................................................................. 12
Demands: ............................................................................................................................................ 12
Markets: .............................................................................................................................................. 12
Value Chain: ............................................................................................................................................ 14
Marketing Concepts ................................................................................................................................ 17
MARKETING MIX: 4P’s............................................................................................................................. 24
Additional P’s .......................................................................................................................................... 27
4 As of Marketing .................................................................................................................................... 28
Marketing Environment .......................................................................................................................... 29
Internal Environment: ......................................................................................................................... 30
Micro- Environment: ........................................................................................................................... 31
Macro- Environment: .......................................................................................................................... 32
Marketing Process .................................................................................................................................. 34
Customer Satisfaction, Relation and Loyalty .......................................................................................... 37
Customer satisfaction: ........................................................................................................................ 37
CRM: .................................................................................................................................................... 41
Loyalty: ................................................................................................................................................ 42
Marketing Research, Intelligence and MIS ............................................................................................. 43
Big Data & Data Analytics ....................................................................................................................... 47
Market Strategic Planning....................................................................................................................... 48
CONSUMER BEHAVIOUR ............................................................................................................................. 54
Consumer Characteristics: ...................................................................................................................... 56
Culture................................................................................................................................................. 57

Social Factors: ..................................................................................................................................... 59
Personal Factors: ................................................................................................................................. 61
Consumer Psychology: ............................................................................................................................ 63
Motivation: ......................................................................................................................................... 64
Perception: .......................................................................................................................................... 66
Learning & Emotions: .......................................................................................................................... 68
Memory:.............................................................................................................................................. 69
Consumer Buying Decision Process: ....................................................................................................... 70
Evaluation of the alternatives: ............................................................................................................ 71
Purchase Decision: .............................................................................................................................. 74
Post Purchase Behavior: ..................................................................................................................... 74
Customer buying roles: ....................................................................................................................... 75
Consumer buying behaviour types: .................................................................................................... 76
Industrial buying behavior: ..................................................................................................................... 79
Industrial Buying Behaviour: ............................................................................................................... 79
Buying Center Roles: ........................................................................................................................... 81
Going Global............................................................................................................................................ 82
Major International Marketing Decisions ........................................................................................... 83
Deciding on the Marketing Program:.................................................................................................. 87
Segmentation, Targeting & Positioning (STP) ......................................................................................... 90
SEGMENTATION: ................................................................................................................................. 93
TARGETING:....................................................................................................................................... 101
BRAND POSITIONING: ....................................................................................................................... 104
Competitor Analysis: ......................................................................................................................... 108
Product:..................................................................................................................................................... 118
P-S Continuum: ..................................................................................................................................... 118
Product classification: ........................................................................................................................... 119
Levels of product:.................................................................................................................................. 123
Differentiation:...................................................................................................................................... 125
Product differentiation: .................................................................................................................... 126
Service Differentiation: ..................................................................................................................... 127
Design differentiation: ...................................................................................................................... 130

Image based differentiation:............................................................................................................. 130
Product Mix: .......................................................................................................................................... 130
Maximisation of opportunity: ........................................................................................................... 131
Competitive advantage: .................................................................................................................... 132
Understanding product mix: ............................................................................................................. 133
Product Mix Decisions:...................................................................................................................... 134
Product line decisions: ...................................................................................................................... 137
Product packaging:............................................................................................................................ 139
Labelling: ........................................................................................................................................... 141
Guarantee and warranty:.................................................................................................................. 141
New products ........................................................................................................................................ 142
New Product Development............................................................................................................... 143
New Product Development Process: ................................................................................................ 145
Innovation Adoption Model:............................................................................................................. 148
PLC (Product Life Cycle) ........................................................................................................................ 149
PLC stages and characteristics: ......................................................................................................... 150
Types of PLC: ..................................................................................................................................... 154
SERVICES ............................................................................................................................................... 155
Service Characteristics: ..................................................................................................................... 156
Services Marketing Mix: .................................................................................................................... 159
Service Quality: ................................................................................................................................. 160
BRANDING ............................................................................................................................................. 161
Advantages of brands: ...................................................................................................................... 163
Branding process:.............................................................................................................................. 164
Brand Equity ...................................................................................................................................... 166
Benefits of Brand Equity: .................................................................................................................. 169
PRICING ..................................................................................................................................................... 170
Importance:........................................................................................................................................... 170
Factors affecting pricing:....................................................................................................................... 170
Steps in setting pricing policy: .............................................................................................................. 171
Changing Pricing Environment: ......................................................................................................... 175
Price Adaptation: .............................................................................................................................. 176

Price changes: ................................................................................................................................... 176
Psychology of pricing: ........................................................................................................................... 177

Module 1

Marketing Management – Module 1
Definition: There has been an evolving debate on the conceptual domain called marketing,
albeit with its controversies. The controversies have revolved around facts like whether
marketing is an art or science? How is marketing different from non-marketing activities? What
kind of organizations involve in marketing? And so on. However, the debate seems to have
settled, towards the end decades of 20th century, by agreeing up on the crux of marketing to be
concept of “value” and idea of “exchange” or transaction. The definition of marketing is still
evolving as can be seen from the modifications in the definition of various authors and
institutions. AMA (American Marketing Association) defines marketing as “the activity, set of
institutions, and process for creating, communicating, delivering and exchanging offerings that
have value for customers, clients, partners, and society at large”. Kotler & Keller defines
marketing as ‘art and science of choosing target markets and getting, keeping and growing
customers through creating, delivering and communicating superior customer value’; a definition
more from an organizational or managerial perspective. They also define marketing as ‘societal
process by which individuals and groups obtain what they need and want through creating
,offering and freely exchanging products and services of value with others’; treating the subject
from a social perspective. For this course we will look at a more comprehensive definition that
will include both organization and the society and will define marketing as “a ‘social &
managerial’ process by which individuals and groups obtain what they need and want, through
creating and exchanging value with other in a mutually sustainable & perpetual manner”.
Characteristics: A good definition should bring out all characteristics of the subject matter being
defined. The characteristics help us in distinguishing the subject matter from all other things.
Based on the above definition we can identify the following characteristics of marketing that will
differentiate it from any other organizational function.
 Marketing involves two stakeholders; one the marketer/ manager who creates products
and services of value which in turn is consumed by the second stakeholder who can be
called the customer/society. It should be noted that both stakeholders can be individuals
or artificial persons or groups of some kind.
 Marketing is based on the needs, wants & demands of the customers. A marketer will not
have a marketing opportunity unless there is an underlying need whether stated or
unstated by the customer.
 Marketing involves ‘value’ exchange. ‘Value’ here is the ability to satisfy a need. The
customer finds the ‘value’ in the products or services he buys from the marketer as it
satisfy his needs and the marketer finds value in the price paid by the customer.
 Marketing involves exchange. The values are exchanged and not given for free. If the
marketer provides value to the customer for free it has to considered as charity and not
marketing.
 It should be sustainable. Marketing should be a sustainable endeavour in that it should
result in practices that care for people, planet and profit. It should care for its consumers

and general public by marketing products and services that make their lives better. It
should ensure environmental sustainability through appropriate business process and
ensure that the investors of the organization get a decent return for their investment.
 Marketing should be perpetual in that the relation between the customer and the marketer
should be based on long term view; in that it should not be merely ‘transactional’ but
‘relational’ in its objective and try to maximize the customer lifetime values.
Scope: The scope of marketing has been long debated to decide on what can be included in
the scope of marketing. We can look at scope from the ‘value’ or ‘organisational’ perspective
to decide on ‘what can be marketed’ and ‘who can market’. Looking at the ‘value’ offering,
marketing primarily lovers about 10 different types of value offering that are as follows.
 Products: Tangible goods dominate the marketing landscape and come in different
forms. We are every day marketed from anything as small as a candy to some things
large as a car.
 Services: As economies advance the services activities grow. Service domination in
an economy is usually an indication of economic development. We are everyday
marketed a slew of service that includes Banking, Healthcare, Hospitality,
Transportation and a long list of other services.
 Places: A whole list of countries, states, cities etcetera try to attract various
constituents that include tourists, investors, organizations etcetera. Kerala markets
itself as a top tourist attraction in various fora and media to different stakeholders by
promoting itself as the ‘God’s own country’.
 Events: both regular and one-off events are a great attraction to various stakeholders
and may have a financial objective of maximising revenue collections. These events
are widely marketed by the promoters and the examples include sports events like
Olympics & world cup, cultural events like film, music and arts festivals, political
events, and trade events like meetings and exhibitions etcetera.
 Experiences: involve all human senses and leave a lasting impression on the
experiencers. Experiences like theme parks, extreme sports, eco-tourism etcetera have
a huge demand and are widely marketed. We often come across advertisements from
theme parks like Disney, Wonderla, Black Thunder etcetera soliciting the use of their
facilities for memorable experiences.
 Persons: A slew of personalities, from various fields that range from politics, to
sports, to arts and entertainment, are marketed widely. In the 2014 election BJP
marketed Shri Narendra Modi and his vision for India to successfully to win the
Indian general elections. When personalities are marketed successfully, they bring
brand value & credibility not only to themselves but to the organizations they belong.
 Properties: of various kinds are marketed widely soliciting buyers, like real estate or
shares and stocks in a company. Marketing of properties widely seen in the
hospitality industry where certain exclusive property and the experience it offers, like

Rambagh Palace by Taj hotels in Jaipur, is marketed to the discerning customers of
luxury holidays.
 Organisations: sometimes need patronage for their survival. Organizations like
museums, zoos, planetariums, etc exist for the customer public and need to generate
revenues from them. These organizations use marketing to reach out to prospective
customers. Organizations also market themselves to enhance their reputation there by
attracting right pool of talent and other resources. For example the Indian armed
forces market themselves as places of exciting and rewarding careers there by
drawing in young talent to work in the armed forces.
 Information: A wide variety of information sources are marketed widely. All
publications essentially are a part of this information industry and market their ability
to provide the most appropriate information. There are also commercial organizations
that engage in marketing of information, like Thomson Reuters, that may provide its
clients with data, information and research.
 Ideas: Ideas change lives and society and needs to be marketed to the appropriate
target audience. ‘Swachch Bharath’ is an Idea that promotes improved hygiene
practices among citizens there by improving various health indicators. Some of the
Ideas that have been successfully marketed by the current government include ‘Beti
Padao - Beti Bachao’ and ‘make in India’. Private business also markets ideas in the
form of cause marketing an example of which could be ‘Tata-Jaago Re’ campaign.
Basic Concepts: Before we dwell deep into the subject of marketing we have to clarify or
make clear to ourselves with some of the basic concepts of marketing, which we will study in
detail later. If you remember the definition of marketing word that clearly stands out in all
definition is the concept of ‘value’. Let us examine value first.
Value: Value has been varying described as the importance, worth or usefulness of something
(noun) or as estimated monetary worth (verb). Culturally ‘value’ refers to the beliefs or ideals
shared by members of a community. As a marketer value should be defined as ‘the ability to
satisfy a need’. The marketer should always ask what ‘value’ is his offering providing to the
customer. i.e. what need of the customer is being satisfied by the market offering
(product/service…). Unless the marketer is able to satisfy a customer need, he will not be
offering value to the customer and his products will not be in demand. Having said this; one also
should understand the 4 basic characteristics of ‘value’ which shall also apply to the marketer’s
products, services or any other offering.
 Value is contextual: The value of a product is contextual and is lost when the context
changes. For example we will value medicine only when we are sick. The sales of
moisturizing soap improves during winter when there is more chance of dry skin and as
summer sets in people may prefer a deodorant soap as they start perspiring more. Thus a

marketing offering will have ‘value’ only in a suitable context and the same has to be
understood by the marketer to succeed.
 Value is relative: value is generally relative and depends on the price paid for the
product. The price may not be only the money paid but other efforts and risks taken by
the customer to acquire and use the product. However, the relativity differs based on the
class of product. For a luxury product higher price may increase the value and may be
vice-versa for a product that can be called or considered a commodity, like cement or
petrol etcetera.
 Value is comparative: Value can be understood only when compared with something
similar. For example, when evaluating a ‘shirt brand’ the customer will understand the
value only when there is another shirt to compare with (or another clothing with similar
use like that of shirt). This becomes very important when there is a new product
(absolutely new in concept) being introduced. It often becomes very difficult for the
customer to understand the value as there is no comparative standards and customer
adoption becomes slow. For example, it took long for Maggi (first noodles brand in India
in the FMCG space when there were no competitors at all) to establish itself as an
acceptable product. However, the following brands that came later-had it easy as they
could be readily compared to Maggi.
 Value is perceptual: The value is based on the perception of the customer or the
prospect. For examples, two millionaires may not value luxury item similarly because of
their value system. One of them may prefer to show off his wealth and prefer a luxurious
house or car; while the other person may not have any value for this possession and may
show his wealth and influence through charity. Marketers also should understand these
basic characteristics of value and how it affects their marketing process in terms of
selection of customers, products, pricing, promotion and distribution.
Customers also derive different value from a product. There are basically two types of value that
customer finds in a product. The first is the use value; the value customer gets by using the
product (For example soft & unblemished skin by using a moisturising cream in winter). The
second type of value is the exchange value of the product; where customer finds it possible to
own a product that can be exchanged later to realize its monetary worth (generally for a profit),
as in the case of a retail shopkeeper buying moisturising cream to re-sell it at a profit. The type of
value sought becomes important as difference in the marketing may be needed based on the
value sought. For example you may communicate more about the functional benefits of your
cream to an end user, where as to a retailer the message may be in terms of higher sales of your
brand and higher profits offered, thus.

Needs, Wants, Demand, & Markets:
Needs: We saw that marketing is about delivering value to satisfy the needs of customers. So it
becomes important to define the word ‘need’. Need in simple terms is a ‘felt state of
deprivation’. For example, when we haven’t eaten for long our body is deprived of energy and
would need food (to produce energy and expressed as hunger). Our basic needs or ‘physiological
needs’ are easy to understand (they are biogenic in nature and shared by all living beings and are
tangible in nature) and sometimes cater to. However, our needs have sometimes ‘sociogenic’
origins and that can make it complex to comprehend and cater to, for a marketer. The best way to
understand human needs is to look at the Maslow’s need hierarchy. The lower level needs
(physiological and safety needs) are satisfied by the functional/ tangible benefits provided by the
product and is the core reason for purchasing of the product. However, the higher level needs
(social, esteem & self-actualisation needs) are acquired through our socialization (they are
intangible in nature). These needs are satisfied by the ‘terminal’ benefits offered by the product
(which may include imagery, branding etcetera) and many a times are the real reason for buying
the product.
It is easy to understand the

functional needs and is
generally recalled by the
conscious brain (ex:
protection offered by clothes)
However, understanding the
‘terminal’ needs require real
exploration as it is generally a
part of our subconscious
brain. For example we may
buy a particular brand of
snack primarily because we
are hungry (the functional
need of snack is to satisfy hunger in a tasty & hygienic manner). However, the real reason may
be more complex, for choosing the brand, which may include factors like; it may be the brand
commonly used by your friends, or may offer some social status or recognition of some kind or
may be it helps you achieve your ultimate aim of eating healthy (catering or satisfying your
social, esteem or self-actualisation needs respectively). It also becomes very difficult to
understand human needs as there may be vast difference between the stated and unstated needs.
The stated needs also may not be the real needs and there may be other needs closely associated
with buying the product. For example, a customer trying to buy a car may be having the
following needs.
 Stated need - Want an inexpensive car

 Real need - Not the price, but total cost of ownership should be low for the car

 Unstated need - expects good customer service throughout the ownership of the car
 Delight needs - Customer would be delighted to have a freebie like a free sound system
or insurance scheme offered
 Secret needs - may include expectation of appreciation from friends and family on
owning the car
A good marketer should be able to understand the various needs and its importance to the
customer, so that they can develop suitable ‘marketing plans’ to maximise customer satisfaction
by delivering superior value and gain competitive advantage in the market place (like Maruti-
Suzuki whose cars are well marketed there by satisfying most of the customer needs stated,
unstated, real, delight or secret).
Wants: are needs that are directed at specific objects/ items. Needs are influenced by culture and
personal characteristics of the customers to produce specific wants. For example, everyone needs
food. However, all people may not want the same food. A South Indian may prefer rice for lunch
where as a North Indian may want roti. Some needs like food, clothing etc are more influenced
by culture and personal characteristics than other needs like communication or computational
needs. Marketers, though satisfying needs, specifically look at wants as their products will be
satisfying the wants of the customers. The needs are also affected by personal variables like the
persons demography. For example most people have a transportation need but the demand differs
based on their income, education, skill, socio-economic status etcetera.
Demands: are wants backed by buying power. Demands actually decide the fate of industry.
Most people have a need transportation, many may want a Mercedes but only a few can actually
buy Mercedes (as they have the buying power) there by restricting its demand. Marketers often
project the demand for their product and study the market potential before entering a market to
prevent any unpleasant surprises of not having enough customers for their products.
Markets: are places where the seller meets the buyer and transact value (i.e. buy goods/ services
by paying money). It is a collection of buyers and sellers willing to transact a product and
facilitate the efficient exchange of a product or service. The markets have moved from traditional
physical forms to virtual ones today (‘market places’ to ‘market spaces’). Products like financial
securities; commodities etcetera today are fully transacted on virtual exchanges and then settled
outside them. Even the traditional consumer goods have found virtual markets in the form of e-
commerce and web stores. Markets are of extreme importance to any country as they facilitate
value exchange resulting in economic activity. Any economic entity needs efficient markets that
facilitate fair, free and competitive exchange of goods and services. A simple marketing system
will consist of an industry (a group of manufacturers and sellers of a particular product for
example, ‘housing’ industry) and a market (A collection of buyers including individuals and
groups). Goods/Services and communication flows from the industry to markets and money &
information flows from the markets to industry.

However, the modern economy is more complex with five different markets participating. The
economy consists of
A simple Marketing System
• Consumer markets
• Resource markets
• Manufacturer markets
• Intermediary markets
• Government markets
Structure of modern exchange economy These are interdependent

entities transacting directly
or indirectly with one
another. The consumer
markets provide two
factors of production
(labour and capital) to the
resource market and
receive money in
exchange. The resources
markets exploit and
produces various resources
(for ex: Steel) that they sell
to the manufacturer. The
manufacturer produces goods/services (ex: A car using steel) that is then sold through the
intermediaries market to the consumers who buy them for their uses. The government here is the
pivot who controls all other markets. They buy various goods/services and other inputs from
these four markets and provide them with various services like maintaining an infrastructure to
support the economic activity. Markets cater to the demands of customers. There can be various
types of demands that a marketer should be aware of. Some of the varying types of demands seen
are:
 Negative demand – Where customers avoid a product or even ready to pay to avoid it ex:
CRT screens today have a negative demand in most developed market
 Latent demand- The customers have a strong need for the product but unaware or
negligent of the same. For ex: most customers need insurance or vaccinations to prevent
diseases. However, customers generally neglect these needs till they are pushed in to
buying them either by the marketers or governments.

 Declining demand is one where the demand for the product or service is regular
declining. For ex: the demand feature phones today are in a constant state of reducing
demand and are being fast replaced by smart phones.
 Full demand is one where all the products produced are consumed by the buyers in the
market.
 Overfull demand indicates a customer demand more than the supply in the market. It is
indicated generally by customer waiting periods. For ex: the connection for piped LNG
gas finds an overall demand in many cities.
 Irregular or seasonal demand indicates seasonal variation in demand as illustrated by the
demand for an umbrella or woolen clothing.
 Unwholesome demand indicates the demand for a product with undesirable social
consequences as in tobacco or alcohol. These demands invite unfavorable government
policies like higher taxes and ban on advertising.
A marketer’s knowledge of the demand for their demand will help them plan their marketing and
supply chain activities better to match the supply and demand. This in turn will improve
operational capabilities and profits.
Meta Markets: A term coined by E J Kelly is a market focused around an industry or need rather
than a single product. It can be defined as a place where everything connected to a certain market
can be found. Meta markets are based on the principle that full potential of a product can be
maximised for customers by integrating closely related products into one industry as a whole.
Meta markets generally are virtual (web-based) and sell closely related products from different
industries. Technology revolution has been one of the primary contributors to formation of meta-
markets. An example of a Meta marketing would be a website that sells real estate like ‘magic
bricks’. The market space called magic bricks not only sells real estate but provide a host of
related services and products that may include housing finance, property insurance, Interior
decoration, furnishing, rental & lease facilities, contracting services, legal services etc. Here the
meta-market helps bring varying industries (satisfying the same customer need of home
ownership/ shelter) to the customer, thereby providing a one stop solution, and providing
enhanced shopping experience and satisfaction. Meta-markets make the exchange process
seamless for the participating industries and customers. Meta-markets bring together a set of
marketers to cater to a need of the customer.
Value Chain:
The primary function of a successful marketing program is to deliver customer value (in
exchange for value (a price). To deliver value, a marketer has to create value which is done
through the value chain. The concept of value chain was proposed by Michael Porter and
described in detail in his 1985 book ‘Competitive Advantage: Creating and Sustaining Superior
Performance’. Value chain can be studied at a business level or at industry level. The value chain
at the industry level has been described as ‘value system’ by Porter. The value chain can be

defined as a set of value adding activities that convert an input (inputs) in to a usable final
product (an output that
satisfies the customer
need).
We shall look at an industry

value chain for an example
a value chain for a cotton
shirt. A cotton shirt we buy
starts its journey as cotton
fiber from a farmer’s field.
The fiber is then bought and
made into threads and dyed into colors by a spinner. A spinner sells the threads to a weaver who
adds value by making cloth out of the threads. The cloth then ends up with a garment unit which
makes the shirt. The shirt is the branded and marketed by a marketer, who then sells it to the
final customer through a retailer. Thus the customer’s need, for clothing, is satisfied by a value
chain consisting of many different players. However, in some cases a single organisation may
involve itself at different stages in the value chain, for example Madura Garments & Fashions
Limited involves itself in weaving, stitching, marketing & retailing of garments. When studying
the value chain of a business, it can be observed that there are two types of activities; primary
and secondary activities. The primary activities consists of
 Inbound Logistics: Looks at the movement materials, parts, supplies etc from various
sources.
 Operations: Manage the process of converting the inputs into outputs.
 Outbound Logistics: Looks at the flow of finished products and other necessities towards
the end user.
 Marketing & Sales: Involves creating, communicating and delivering value (products,
services etc) to the various customers.
 Services: Include all activities that are required to keep the product functioning,
throughout its life, once it has been sold.
When creating customer value using a value chain the primary activities add the actual value.
Inbound logistics, operations & outbound logistics primarily add the tangible value and
marketing and accompanying service primarily add intangible value. Though the primary
activities are most important for creation of value, it is impossible to do the same without the
support activities that include
 Infrastructure: Consists of activities such as accounting, legal services, financing, control,

public relations etc and are important for the functioning of the organisation itself. A
company may have its own infrastructure, may share it with other/sister organisation or
outsource the services.

 Technological development: Looks at the technical facilities and knowledge that helps
the organisation in transforming inputs into outputs. It also will include capabilities to
design research and invent new products or technologies as per evolving customer
requirements. The technological development will take care of the various equipments,
hard wares, soft wares and materialistic requirements of the organisation.
 Human Resources: or human capital is one of the core supporting resources for an
organisation, especially so for a service organisation. The HR activities will include
recruitment, selection, training, developing, retaining & retrenchment of appropriate
manpower and skill sets as demanded from time to time.
 Procurement: Involves acquisition of goods (raw materials, parts, supplies…..) and
services that are critical to the operations/ production process. Procurement can be very
critical, especially when there is a need to develop new design, technology, and parts
with the help of outside organisations. The vendor development in certain cases can take
long and often ends up in a partnership sustained over long time frames.
The value chain for an industry can be broken down into the supply chain and demand chain. In
the previous example of the cotton shirt (garment industry), let us assume that company ‘x’ is a
Value Chain = Supply chain + Demand Chain
stitching unit that buys clothes from weavers and makes shirts. They sell the shirt to a marketing
organisation that brand the shirts and retails it. For company ‘x’ all activities preceding it (also
called upstream activities) forms its supply chain. A good supply chain is essential for business
success as it affects the organisations ability, to create excellent products and services delivering
superior value. Any trouble in supply chain can result in market disaster caused due to product
failures (poor material or parts causing product malfunctioning). The troubles faced by Samsung;
with its S7 model was a classical case. The company had to recall huge inventory, absorb
financial loses, bear reputation loss and get entangled in litigation; all due to defective battery
supplied by one of the vendor. Thus it becomes imperative for an organisation to develop and
maintain a good supply chain/network for successful value creation. The supply chain is usually
in the purview of the procurement and operations department who together develop, evaluate,
and maintain relations with a group of reliable suppliers there by ensuring supplier efficiency.
The demand chain for ‘x’ would include all the downstream activities (marketing and retailing)
and is equally important. It will have to develop good relations with successful marketers/brands
and supply them products of superior value (ensuring mutual success) so that they get a stream of
orders. Company ‘x’ will be a part of the supply chain of the marketing company (their direct
customer) which will expect all that is expected by company ‘x’ from its suppliers. The demand
chain is handled more by the Marketing & sales department who ensures a long term customer
relation through delivery of superior value (tangible and intangible). A value chain is of critical
importance to any organisation. The primary functions of Inbound Logistics, operations and
outbound logistics ensure creation of the physical product that satisfy the customer’s functional

need (of performance and security). These functions add tangible value (functional/ physical
value) to the product and are considered as a hygiene factor by all customers. For example, while
purchasing a watch keeping proper time without any hitch or trouble is a given must for all
brands under consideration by the customer. However, it is the Marketing/ Sales and the
aftersales service that often becomes the motivating factor for a customer to purchase a product.
These two functions add the intangibles (intangible value) to the product in terms of image,
personality, associations etc. for the product brand. It is Marketing/Sales and services (mostly
marketing only as services today are fast becoming a hygiene factor for most products especially
for durables and services) that generally adds terminal (intangible) value to the product that
becomes the real reason for a customer to buy the product. For example in the watch buying
instance, a customer will only considers those brands that he likes based on their image,
aesthetics or brand personality and not just because it indicates time without fail. Thus, a good
value chain can be of good advantage to an organisation in business. A good value chain
provides competitive advantage to the firm there by allowing it to deliver and capture more value
(indicated by the pricing power). A good value chain helps the organisation differentiate its
products through better design, quality, service, image, etcetera and position uniquely through
appropriate communication. For example, the value chain of Gillette allows it to produce
technically advanced razors through constant innovation and rightly position their shaving
product as ‘the best a man can get’. Good value chain also help organisations to create long,
enduring and profitable relationship with its stakeholders including customers, suppliers, channel
partners, investors and employees. Superiors value chain also helps raise entry barriers there by
allowing the organisation to stave off competitors even in a commoditised market. Often
successful value chains in industries end up as value networks where a set of organisations
continuously work together to cater
to a customer need. Intel, Microsoft
and Dell have forged a close value
chain association to successfully
cater to the computational needs of
different customers. A good value
chain also ensures improved pricing
power and margins for the
participating organisations. A simple
value chain for a cotton garment
industry is given in the above table
and indicates the value added and the
margin offered by each stage.
Marketing Concepts
Marketing concepts, also called as ‘marketing management orientation’ or ‘marketing
philosophies’, spell out the philosophical orientation of the organisation towards the market. It
basically looks at ways organisation adopt to explore, create and deliver value to satisfy the

customer needs. The evolution of
marketing concepts can be traced
to evolution of marketing function
itself. Marketing evolved as a
commercial activity with the
advent of industrial revolution.
Prior to industrial revolution,
production of goods and services
were restricted as they were solely
dependent on non-mechanical,
non-mass efforts. The producers
were mostly natural beings (persons) who had a limitation in the amount of goods and services
produced. This made marketing easy as the produces were bartered for other necessities with
other artisans/ producers of different good and services. The marketing was restricted to a social
activity that happened at the local marketplace and the customers were all known resulting in a
social contract to produce and exchange of value.
However, things changed with industrial revolution. The production became mechanised and the
producers artificial persons or companies. There were no more social contracts and contracts
became more commercialised. The modernisation of banking system eliminated the barter
system and made ‘money’ the common exchange. The invention of steam power also vastly
increased the reach of the producers who could access geographically diverse markets easily.
This brought in the commercialisation of the marketing activity that now concentrated on
creating customers for the company’s goods and services. Over a period of time the marketers
used different set of approaches to the marketing activities of exploring, creating, and delivering
customers values which came to be known as ‘marketing philosophies’ or ‘marketing
orientations’ or ‘marketing concepts’ as they are differently referred to as.
 Production concept: was one of the earliest philosophies and was direct product of the
industrial revolution. The demand for goods and services were high and it was posited
that consumers will prefer product that we relatively inexpensive and widely available.
Large scale production created economies of scale, which reduced the prices and
improved the availability, boosting sales on its own. The production concept even today
is widely used in commodities markets (like cement, steel, grains…), by achieving large
scale production cost is reduced and availability is improved due to large supply, in
comparison to competitors, resulting in improved sales. The primary objectives were to
create a highly standardised product, attain production efficiency and improve
availability through mass production. However, quality, customer’s needs and product
improvements were never much concentrated or focused on.
 Product concept: followed the production concept in the evolution of marketing
orientation. As industrialisation caught up there was an increase in competition in every

category and mass producing standardised good became untenable as it offered no
advantages in the market place. As an alternative, organisations adapted ‘product
concept’. It holds that consumers will favour products that are differentiated in quality,
design, performance and features. So it became core to marketing success that the
organisation constantly innovates and improves its product so as to deliver higher value
than the competitors. The technology industry is replete with examples of the
organisations that resorted to (and still) product concepts; like Philips, Sony etc.
However, the product concept assumes that the customers are capable of evaluating the
differences in products of the various competitors. It also trapped organisations in
improving their products (product obsession) that they many a times lost sight of the
changing consumers requirements and in achieving conspicuous precision that was
unnecessary. The production concept also increased costs and made products
unaffordable. The difference between the production concept and product concept could
be understood by studying the success of Ford under Henry Ford and GM under Alfred
Sloan. Ford mass produced a standard car at low cost and making it available widely and
affordably. The later constantly improving his products and bringing those with newer
features constantly.
 Selling concept: was a result of making the best mouse trap but not being able to sell
them. The product concept led to vast improvement in products with the various players
in the industry inventing newer features and the same being incorporated by all the
players in the industry. This led to standardisation of products making it difficult for
customers to choose between different options due to a choice induced paradox. The
selling concept concentrates on the actual selling of the product and recommended
aggressive promotional and selling efforts to stimulate demand. The selling concept
focuses mainly on converting the products and services into cash by stimulating demand.
There was scant respect for the customers or his needs, building relationships or a long
term perspective. The selling concept holds true in situations where products are highly
standardised/ commoditised and in situations where goods are of an unsought nature (like
insurance or vaccination). The cellphone services in India are a classical example where
we no more see any differentiation between the various services providers (in terms of
value added services). All customers have access to cell services and only way to make a
sale is to aggressively promote and sell the product through various promotional
schemes. The selling concept proposed a push marketing to stimulate demand and sale of
the company’s product. However, this has also brought in accusation of creating or
promoting customers dependencies on product by economists like JK Galbraith.
 Marketing concept: the origin of marketing concept was in response to the concern for
customers. The previous orientation were primarily based on the capabilities of the
organisations and considered customers to be a passive receiver of the marketer’s product
and services. The marketing concept flipped this approach and made the ‘customer’ the
focal piece of the marketing activity. It posited the idea that organisational goals

depended on knowing the need and wants of the target markets and delivering value to
create customers satisfaction; better than the competitors. This resonated with the
Marketing 2.0 proposed by Kotler and considered customers with a mind of their own
and thus own needs (The previous concepts considered marketing to be products centric,
where the products satisfied customer needs; which arose mostly because of their bodily
existence and were akin to Marketing 1.0 proposed by Kotler). A classic example of
marketing concept is how organisations like Dell and Lego reoriented themselves to
changing customer need. Dell and Lego understood that the customer needs for their
products varied and called for differing values (products & services). They allowed their
customers to customise the products and services at the company website enabling them
to meet their individual need better (in comparison to buying a ready to use/off the shelf
product). This ensured better need satisfaction and higher customer satisfaction helping
them garner larger volumes and profits. The difference between the selling and marketing
concept has been summerised in the table below.
Selling Concept Marketing Concept
Focuses on the capability of the seller. Focus on the need of the customer.
Concept is suitable for commoditised or Concept is suitable for differentiated products.

unsought product.
Uses large scale selling efforts – push Uses customer attraction & enhanced satisfaction
marketing through customised offering – pull marketing.
Profits through large volume & low Profits through higher pricing powers & profit
cost/price margins.
Economies of scale resorted to Uses economies of scope.
Starts with the company/factory/product Starts with customers in mind

in mind
Matches organisational capabilities to Develop organisational capabilities to match

customer requirement. customer requirements.
Strong competitive forces Relatively differentiated and low in competition.
The changing technology environment also has helped grow the marketing concept. Today it is
easy to understand individual customer needs better through use of digital technologies, analyze
the data using analytics and customize products and services accordingly. 3D printing is another
revolution that helps in mass customization of products to cater to individual customer needs.

The digital market place, another technology revolution, helps customers examine a wide range
of products and services help to choose the appropriate ones and have it delivered at their
convenience; all without moving out of their zones or expending vast amounts of time, energy
and money.
 Societal marketing concept: The societal marketing concept has its origin in balancing
between the customers short term wants and long run welfare. This concept has its origin
in the triple bottom line and the marketer is expensed to care for the customers, the
profits and the society. According societal
marketing concept marketers should deliver
value to not only to satisfy customer’s
immediate need but also improve the customers
and the society’s long term well-being. It calls
for satisfying present customer needs, looking at
environmentally sustainable practices,
generating profits, the customer’s well-being
and the society’s well-being. One of the earliest proponents of societal marketing concept
was Anita Roddick’s of Body shop. The Body Shop not only made great products and
delivered good value to their customers and investor, but also lived by tenets like no
animal testing, supporting community trade, defending human rights and protecting the
planet. Another organization that has turned ‘societal’ in marketing efforts is Pepsi. The
company, under leadership of Indira Nooyi has shifted their focus towards healthful
products. The company has continuously reduced their dependence on sweetened sodas
and created a portfolio of healthful brands like Quaker, Tropicana, and Gatorade etc. This
has (or is supposed to) help improve the health profiles of its customers especially the
young and create a better society. The company also has gone environment friendly
through turning water and carbon positive. Societal marketing helps organizations to
connect with relevant social causes (cause related marketing) and stay relevant not only
to customers but also society at large.
 Holistic marketing concept: The dynamic environment of the 21st century has made
marketing complex phenomenon. Marketing is no more restricted to the marketing
department and need to be ably
supported by other departments
and functions. According to
Kotler the holistic marketing is
based on the concept of
developing, designing and
implementing of marketing
programs, process and activities
that recognizes their breadth and

interdependence. The holistic marketing concept is more about walking marketing than
just talking about marketing. Holistic marketing primarily has four components which
has are explained in detail below:
Relationship marketing: aims to build mutually beneficial and enduring relationship with
company’s various stakeholders including customers, employees, investors and partners
(suppliers, distributors and other facilitators). This result in creation of a marketing network that
helps develop superior value network. Customers are one of the most important constituents with
whom an organization has to maintain good relation. It is much easier to, and profitable to, retain
a customer than create a new one. Good relation with customers also ensure an increased
customer lifetime value and customer share of purse. Today technological support like CRM
applications is available to manage relationship with customers across their lifecycle through
appropriate marketing strategies and programs. Two Indian companies that practice excellent
CRM are Shoppers Stop and Suzuki Motors India limited (SMIL). For SMIL, about 60% of their
sale is to existing customers and the figure is higher for shoppers stop. They have a whole lot of
customer data on tastes, preferences, behavior etc. that can be exploited through appropriate
marketing programs.
Partners are another key stakeholder who affects the company’s ability to create value. Good
partners ensure a strong value network that can consistently deliver superior customer value. The
partners may include supplies, distributors or other facilitators like advertising agencies or
logistic partners. The importance of suppliers cannot be overstated at all. Good suppliers will
provide reliable materials and parts that add value to the final product and services. The lack of
reliable suppliers may result in tangible and intangible losses as seen from the Samsung S7 or the
Jeep-Compass or the Toyota Prius recall fiascos.
Employees are another group of key stakeholders. They affect the organizations ability to deliver
the value by converting the marketing talk into a marketing walk. Employees can be a key
differentiator in any industry where there is an element of service and are often the sole reason
for customers to return. A set of satisfied employees ensures that the ‘interactive marketing’
(while delivering the product or service) is a pleasant experience for the customer. It is
imperative for any organization to maintain good relationship with its employees to maximize
the customer value delivery. In the aviation sector in India, people prefer private airlines to
national ones only because of the responsive employees; as all other factors like the type of
aircraft, the airport facilities, catering services etc. are shared and the pricing of air travel is
purely demand based. Suzuki Cars in India had a severe disruption in production and supply of
cars due to employee unrest affecting their ability to deliver cars on time forcing some customers
to migrate to competing brands.
Financial intermediaries provide needed resources to grow and maintain the business and affect
the ability of the organizations to deliver value. A good example of the investor support can be
seen in the ITC case where the company was wholeheartedly supported by FI shareholders when

they wanted to expand into the non-tobacco business and the same was being opposed by BAT
(British American Tobacco, their parent company). Two decades down the line the FMCG (non-
tobacco) business contributes more to the turnover of ITC and is one of their fastest growing
business segments.
Internal marketing: entails inducing a marketing orientation across the organization that results
in a customer first attitude in all employees and departments. Though marketing is the customer
inter-facing department, it cannot deliver value without the support of all other departments. It
needs support from an R&D department that develops new and improved products to meet
customer needs, The Production department needs to produce these products effectively and
efficiently, The HR department needs to recruit, train and deploy the right manpower for all
these activities and the Finance department has to efficiently manage resources needed for these
activities. A good internal marketing will ensure that all the departments, irrespective of their
function, understands the importance of customer service, realizes the fact that customer is the
reason for organizations existence and help incorporate customer orientation as a core
component of the organizational culture. The involvement of the top management and an
appropriate reward system is necessary for effective internal marketing. Effective internal
marketing is a prerequisite for effective interactive marketing (while handling customer and
delivering the products and services) both of which will follow an effective external marketing.
For example an employee of a financing company may promise loan to an eligible customer in 7
days flat. However the same urgency and commitment will have to be shown by the credit
department, the administration department and the operations department.
Performance marketing: looks at the key metrics to be achieved as a result of internal,

integrated and relationship marketing. The performance marketing measures financial indicators
like sales, revenue and profit. However, it also looks at a slew of other key performance
indicators that include the effect of marketing on brand and customer equity, the conformance to
ethical and legal parameters in the performance of the organizations, environmental impact of the
business and its marketing activities and the social impact of the marketing. Performance
marketing goes beyond measuring only sales related parameters and introduces a holistic
approach to measuring marketing performance.
Integrated marketing: aims to create a synergistic marketing program where the marketing mix
is supportive of each other. The customer value is delivered through the marketing mix and it is
imperative that all the 4Ps deliver a clear and consistent value position to the customer. For
example if a marketer introducing a new premium range of formal wear aimed at the executive
segment and positioning it as a status symbol; the ensuing marketing program should be
integrated to deliver the promised value. The product should be made of premium material,
restricted in quantity, appropriately styles and branded. The pricing should be kept premium and
distribution exclusively through channels that convey its status and frequented by the target. The
communication plan should ensure conveying of the ‘status symbol’ message through
appropriate advertisement and be supported by promotional activities like corporate events. This

will ensure an integration of the marketing activity and maximize value delivery. Any
contradicting component in the marketing mix will dis-integrate the marketing effort and alter
the value delivered. For example consider if the above said product was not of the best quality or
design, was distributed through super markets & discount stores, the products were priced low to
the reach of a blue-collar worker or a price discount was offered as a sales promotion tool, what
would happen to the ‘value’ promised? Thus integrating marketing should aim to achieve a
marketing program that is well integrated and synergetic so as to implement the proposed
marketing strategy. The customer understands the value proposition as an integrated whole and
not in its components; necessitating marketers to apply an integrated marketing approach to their
marketing program.
MARKETING MIX: 4P’s

Marketing mix in marketing literature has reference to many academicians who had
contributed to the proposition of the concept. However, the 4Ps of modern marketing was
proposed, in its present form, by Prof. Paul McCarthy in the 1960’s or Neil Borden, slightly
earlier. It is defined as the set of marketing tools that the firm uses to pursue its marketing
objectives in the target. Needless to say all marketers develop marketing strategies to achieve the
marketing objectives. The marketing strategy is indicated by the segmentation, targeting and
positioning proposed by the marketer. The marketing strategy is implemented through a
marketing mix consisting of the 4 P’s (now extended to 7 or 8 P’s by different authors). The
customer understands the total value delivered through the 4P’s (or 7/8 P’s) and understands it as
an integrated whole. As discussed in holistic marketing (integrating marketing) the 4P’s should
be integrated in order to convey maximum value. The 4 P’s should be synergistic and the sum
total of all of them should be more than their individual total. The components of the 4Ps are
briefly explained below:
• Product: Is generally an item (product, service, idea, and experience) that satisfies a
customer need or want. A customer may examine a product in terms of its design, features,
quality, variety, services, warranties, packaging and the branding. Product is the core item in the
delivery of the customer value.
• Price: Price is the value a customer pays for the acquiring the product. Price may not
include only the monetary payment but also the sacrifices he/ she makes in terms of time and
effort to acquire the product and services. Price is important for many reasons. Firstly it
influences customer perceived value of the product. Higher the value he pays lower the customer
perceived value (may reverse for some categories like luxury goods). Secondly price is the most
flexible and adaptable tool in the marketing mix. Thirdly price affects the revenue by affecting
the demand for the product and the optimal price will maximize demand and revenue (practically
the price will show a bell curve type relationship with demand). Fourthly, and slightly in
contradiction to the first point, will indicate quality. A higher price is generally considered as an
indication of higher quality, especially so in consumer goods. Lastly price is open to a lot of

psychological manipulation as it is perceptual in nature. The price of the product should be based
on the marketing strategy (the STP) and should be in sync with rest of the 3Ps. Using price only
as a competitive tool (lowest prices) is possible when the product is commoditized in nature (for
example, cellphone services in India today- to a great extent) and generally not resorted to by
smart marketers.
• Place: or distribution is all the activities involved in making the goods/service available
to the consumer for purchase. Distribution provides economic utility through making available
the right form of the product, at the right time as demanded by the customer, at the right place
maximizing convenience and by facilitating the transfer of ownership (purchase by payment).
Distribution also widely involves partners like distributors and retailers. In such case it becomes
imperative to have the right channel partners (who can interface with the customers well and
provide the requisite services at the highest levels) for an organization to succeed in the market
place. Distribution also assumes significance as it involves cost (margins to the channel
members) and can affect the product prices.
• Promotion: Promotion is a blend of communication tools that is used to inform of or

persuade about the product. Promotion is carried out through the promotional mix and aims to
bring an attitudinal change towards the promoted product/brand. Promotion aims to take the
customer through a hierarchy of effects where the first stage is to create awareness about the
product, which is followed by interest building in the product among the target, followed by
desire triggering to buy and use the product and culminating in actual purchase and use of the
product. Promotion also assumes significance in that it is most widely seen/ experienced
marketing mix, by the customer and often thought as real marketing by them. Promotion also
assumes significance in the fact that it helps in adding intangible value (in the form of emotions/
imagery/ associations etc.) to the product; which often is the terminal reason for product
purchase.
Though we use 4 distinct (7/8 according to some) tools in marketing mix, the customers
understand the value delivered as a whole and not in individual parts of the mix. For example
when a customer tries to evaluate a mobile (let us consider Sony and Oppo) he sees the value
delivered as a whole. Let us look at the 4 Ps of Sony and Oppo and rate them on a scale of 5 and
total it to find the total value delivered by them (we are assuming that customers give equal
weightages to all the 4 Ps and this is only demonstrative in nature).
SONY OPPO
Product 5/5 (superior technically) 3/5 ( product is fine But not as

good as Sony)

Price 3/5 (costly to buy) 5/5 ( offers good value for the
money paid)
Place 2/5 (not widely available) 5/5 (very widely available)
Promotion 3/5 ( limited communication 4/5 ( widely promoted & high

& visibility) visibility)
Total Value 13/20 17/20
Though Sony has a better product, Oppo provides a better value to the customer overall. This is
reflected in their sales with Oppo far outselling Sony (in India). The marketing mix has also got
to be synergetic with the tools complementing each other. When a product is positioned as a
‘Premium’ offering; the price has to be premium, the distribution exclusive, communication
through appropriate media and message and a product that is distinctly superior. Even is one of
the ‘P’ is out of sync with the marketing strategy and the rest of the marketing mix there will be
as disintegration ( as opposed to integrating Marketing as proposed in Holistic marketing ) of the
marketing leading to poor value delivery.
Though value is delivered through the marketing mix and understood as a whole; some
organization depend more on one of the Ps (instead of making a perfect balance between the
four) to deliver value. For example: Sony’s most important tool is ‘product’. Sony always brings
technologically contemporary and superior product to the market. They widely celebrate and
communicate their break through products and promise the delivery of value through a superior
product in terms of technology and performance. In FMCG, the thrust is usually on the imagery.
The products are more or less similar and what differentiate them are the communication and the
intangible value added in terms of imagery. For example among the Colas, a user may not be
able to identify the product in a blind taste (unless he is an expert). However, the customers
differentiate the product in terms of imagery. They associate Action/ thunder with Thumps-up,
Happiness with coke, Youth with Pepsi etc. Yet others may use distribution as a source of better
value. More customers prefer Dominos not because if it is the most economical, tastiest or best
promoted product- but because you are assured of a half-hour delivery and convenience
associated with it. Dell changed the way computers were made and distributed. It allowed
customers to buy directly from the company (reducing intermediaries and the various costs
associated with them) and allowed customers to design/ customize their products (making it
superior to the competitors) there by capturing the home computing market. The use of price to
deliver greater value is practiced only when the product is commoditized (no distinction between
the competing brands like eg: the cell phone services in India today). To be successful he pricing
should convey the VFM (Value for Money) proposition and not make an impression of being
‘costly’ or ‘cheap’.

Additional P’s
The marketing mix has been expanded to include more ‘P’s since its proposal by Jerome
McCarthy in the 1960s (sometimes also attributed to Neil Borden slightly earlier to 1960s). With
the advent of service 3 additional Ps; People, Process and Physical evidence, were added to the
marketing mix as the customer evaluated the value delivered to include the additional 3Ps in case
of services. Different authors have been treating the subject differently with additional ‘P’s
coming up on and off. We will examine 4 additional ‘P’s as proposed by Kotler & Keller.
• People: are one of the key resources to create and deliver customer value, especially so
when they have a customer interfacing role. Having good people is also a reflection of ‘internal
marketing’ (part of holistic marketing) where the company has successfully created a whole
organization of customer centric employees belonging to different departments; working
seamlessly together to create customer satisfaction. People become the most critical of resources
for marketers from the service industry (where the offerings are intangible & inseparable). Well
trained personnel willing to go the extra mile in creating customer satisfaction can be the
difference between success and failure in the market.
• Process: Having strong marketing process ensures superior value delivery. A marketer
should have the right structure, discipline, procedures & methods that support their systematic
marketing efforts. The marketing efforts, when lacking a process often results in disjoined and
incomprehensible efforts (may be brilliant and creative but without continuity) that does not
persuade the customers towards forming a mutually beneficial relation with the organization.
• Programs: Reflect all the consumer directed activities of the firm (apart from the regular
marketing mix) and should be synchronized with regular activities. These programs may be
online or offline and increase the customer touch point and involvement with the brands of the
organization. There are many programs that have become the core of customer attraction for
brands. For example HOG (Harley Owners Group) or Lakme Fashion Week (LPW) have created
dedicated communities around these brands. These customers not only act as the ambassadors of
the brand but also help through their ‘reverse’ marketing’ (where customers tell the company
how to market- indicates complete brand ownership by the customers).
• Performance: We saw in holistic marketing that an organization’s marketing efforts

should result in performance marketing. Performance marketing involves spreading the
marketing efforts through achieving sales & brand performance, being ethical in their conduct,
by being environmentally concerned, confirm in to legal controls and through concern for
community. When the organization strives to achieve their target in each of these areas, it acts as
synergistic booster to rest of the activities and enhances the organizational reputation as a whole.

A detailed list of the various elements of the different ‘P’s can be found in the following figure
(Program & Performance is not included). A customer may look at one or more elements of each
‘P’s while evaluating the market offering.
4 As of Marketing
The concept of 4As for delivering (very similar to 4Ps) was proposed by Jagdish Sheth &
Rajendra Sisodia. This slightly different approach to the marketing mix has been proposed to
include customer centricity and improved customer knowledge. They believe that the most
important customer values are;
• Acceptability: Which is; the extent to which customer expectations are met or exceeded
by the firm’s offering. The core of the product success is dependent on understanding the need of
the customer and surpassing his expectation so that the customer is satisfied. ’Acceptability’
differs from the product in that it answers the key question of whether the market offering is
meeting the customer’s expectation (being acceptable to him) and not whether it is good or not
good or not in isolation. For example the success of Chinese smart phones in India has been their
ability to develop product that are fully acceptable to the customers (based on the customer
understanding) and not the best. They understood the difference in needs of rural customers like
long battery life, rugged designs, and loudness-of-music etcetera and successfully incorporated
the same in to their products. They eliminated high end features that were not demanded by rural
customers and kept the cost low.
• Affordability: Is the willingness of the customers to pay for the offering. A customer may
have the ability to pay for the product but many may not be really willing as he may not consider
the product worth so much or may find some features un-necessary. It is also possible that the
customer is willing to pay for the product but cannot, as he lacks the ability. It is imperative that
the organization should create affordability for the market offering (both ability and willingness
to pay), to succeed in the market place, through appropriate marketing strategy and programs.

• Accessibility: Is the ability of the customers to acquire the product for his use and has the
dimensions of availability and convenience. Marketers should make the value offering
conveniently available to the customers through all possible channels for market success.
• Awareness: The last of the 4As refers to how well the customers are informed and
persuaded about a product. It involves product knowledge and brand awareness and both being
critical to the customer’s ability to comprehend about a market offering and their willingness to
associate with it (right from ‘trial’ to ‘regular’ use to ‘advocating’). The promotional program
should be appropriately designed to maximize awareness about the market offering.
The 4As corresponds to the 4Ps. However, they differ critically in their view of the customer
value proposition. The 4Ps looks at value more from a company angle and is generally less
customer centric than 4As. 4As look at the value preposition from the customer angle more than
anything else. It may be beneficial to understand the 4As while researching the customer needs
(as a precursor to developing the marketing strategy and program) and develop the 4Ps
(marketing mix) accordingly for enhanced market success. In the comparison of ‘customer
perceived value’ we saw earlier; Oppo has got its 4As right in comparison to Sony thus more
successful in the market.
Marketing Environment
Study and understanding of the marketing environment is critical to business success. Business
does not exist in vacuum and operate in relation to other environmental factors. Business can be
considered as an open system (a system is a set of interacting parts that can work towards a
common objective. Business has many divisions/ functions that work towards converting the
inputs into outputs. An open system has a continuous interaction with the environment; the
environment provides the inputs in form of Land, Labour & Capital that is converted into
products & services. These products in turn are taken back/ consumed by the environment and
this continual relation is critical to survival of the business). The business system is also
cybernetic in nature (i.e., the system is intelligent and controls itself), where by it continuously
influences and adapts to the environment. The business environment can be broadly classified
into the external and internal environment. The internal environment is under the full control of
the organization and has to be matched to the external environment requirement (i.e., the internal
environment should be able to exploit the opportunities provided by the external environment
and also overcome the threats emanating from the external environment). The external
environment is external to the organization but influence the organization’s ability to conduct
regular business. The external environment can be broadly classified into Micro & Macro
Environment. The micro environment is of actors close to the business and can be influenced by
the business in some situations. Other times the organization may have to adapt to the
environmental forces. The external environmental forces are larger in their influence and are not
closer to organization. These forces are common to all industry participants (unlike micro
environmental factors) and have more or less common effect on all of them. However, the

internal environment will decide whether the external environment factors are an opportunity for
the organization or threat for the organization. The environmental factors are examined in detail
below;
Internal Environment: Include all factors under the direct control of the organization and can
have a significant effect on the organization’s ability to exploit its business opportunities and
overcome the business
threats. Some of the critical
factors from the internal
environment include:
Employees: Who affect the

organizations ability to
create and deliver customer
value and build strong and
sustainable customer
relation? It is imperative
that organizations focus
fully on creating a pool of
well trained and dedicated
employees that can be called ‘Human Capital’ or ‘Human Asset’. Excellent service organizations
like Thai Air, Southwest Airlines, Nordstrom, The Oberoi etcetera are known for their excellent
human capital providing them ability to deliver excellent service and create customer delight.
Culture: Is a set of shared values and beliefs that guide employee behavior. Having the right
culture ensures appropriate customer centric behavior. Companies like Disney ensure an
organizational culture that puts the customer at the center of all their behavior. The employees at
all level are trained to behave in a way that ensures achievement of their vision of ‘making
people happy’ by providing timely, excellent and empathic services to customers.
Structure: The importance of organizational structure in exploiting business opportunities

cannot be downplayed. Any market driven organization should have an appropriate structure to
exploit the opportunities presented. The structure should be nimble, adaptive and contemporary
to the market/business environment. However, it should also ensure unity of direction, a shared
culture, appropriate system support and the right staff to ensure business success. Organisations
like Gore-Tex constantly adapt their structure to ensure market and customer centrism.

Assets: Include all
tangible and intangible
ones that help an
organization exploit
market opportunities.
Assets may include
physical assets like
facilities, financial
possessions or
intangible ones like
reputations, brand
equity or a supportive
culture. A culture of innovation is an asset for orgnisation’s like 3M and Google that are able to
reinvent them in an ever changing technological world they are in.
Micro- Environment: Micro-environment is a part of the external environment that is closer to

the business and affects and is affected by the business. Micro environment can be controlled by
the business organization (like developing a new delivery channel) but sometimes needs
adaptation to (for example a competitor and his strategy). Some of the important components of
the micro environment include
Competitors: One of the most important constituent in an organisation’s business. Their

strategies can directly affect the organisation’s business. Their strategies can directly affect the
organization and are in turn are influenced by the company’s business strategy. A company has
to have clear business plans to tackle its competitors. An organization can decide to fight a
competitor head on or can differentiate itself from them. The former decision may create ‘read
oceans’ of decreased profitability but benefits the customers. The latter decision is more win-win
and helps organiations develop clear identities and command better value for its offering.
Organisation sometimes also come across disruptive competitors who can completely change the
way industry does business (example of Reliance Communications and Reliance Jio is worthy of
mention in the telecommunications industry. Deccan airways in aviation, Youtube in
entertainment, Visa/ master card in financial services, CNN in news etcetera have been
disruptive in their business).
Channel Partners: Includes various intermediaries that facilitate an organsation’s interactions

with its customers. Some of the important channel partners include distributors who help deliver
the product/service and add economic value to it in terms of form, time, place and possession.
Media is another channel partner that helps the organsation to maintain a continuous two way
communication open. Other channel partners include financial services providers, service
providers, and logistic firm’s etcetera. Service providers are critical in marketing, especially of
durables, as they ensure customer satisfaction by providing timely services that will keep the

product functioning. For example: selling of water purifiers, that need regular services, will be
impossible without a proper service networks.
Suppliers: are another important constituent in customer value creation and delivery. Having
right suppliers is critical to creating good products/ services that will ensure customer
satisfaction and loyalty. Any problems with products/services due to suppliers will result in
monetary losses due to product recalls and failures, loss of reputation and image and litigation
losses. Having a good supplier network is critical to creating strong value chains (value
partnerships) and contributes to market success-like the relation between Intel & MS & Dell.
Troubles with supply and suppliers have created troubles for marketers through product failures
and recalls- like Samsung S7, Jeep-Compass, Toyota-Prius problems etcetera.
Stake holders: an organization has various external stakeholders like owners, civil society
organization, and social action group’s etcetera. All these stakeholders can affect and change the
prospects of the organization in the market. The shareholders often exercise their power through
their role in the board and voting in decision making. They can help or prevent an organization
taking certain market related decisions. For example: the Chinese government prevented Cooper
tires acquisition by Apollo tires. The Chinese government and trade union refused Indian
Management at Cooper tires China plants that led to reversal of the decision by Apollo tires.
Social groups like religions and cast groups can influence the marketing activities. For example:
the movie Padmavathy has been stalled by organisations like Karni Sena at various stages. A
marketer should understand the influence of its various stakeholders and act prudentially to
prevent any negative impact and to amplify any positive impact.
Consumers/customer: have a significant influence on the market success of an organization.

Any marketer who is able to confirm to customer expectation can ensure greater market success.
For example: Indian customers have a penchant for foreign brands and the same has been
successfully exploited by brands like Peter England, John Miller, Da Milano etcetera; all of
which sound foreign but are Indian by origin (others include Caprese, Ladida, Lino Perros,
Peperone, Lavie, D’damas)
Macro- Environment: The macro-environment consists of all forces that affect the market
prospect of an organization. However, the marketer has no influence or control on these forces
and has to adjust / adapt to these forces to successfully survive in the marketplace. The macro-
environmental forces majorly consist of Politico-legal forces, Economic forces, Ecological/
environmental forces, socio-cultural forces and technological forces. It is commonly studied as
PEST/STEEP/PESTEL analysis while studying business environment. The macro-environmental
forces generally change gradually and sudden changes are not commonly visible though
disruptions may be seen in any of the macro-environmental forces. Some of these forces and
their impact on marketing are examined in detail.
Socio-Cultural environment: includes various parameters like Demographic environment,
cultural environment, social institutions etc. They generally show a slow change and provide

ample time to adapt for the marketer. For example: the shift in demographic parameters.
Developed countries are seeing a gradual shift in their age wise composition of population. The
Age pyramids are getting inverted with population being dominated by adults & older people.
This has caused troubles for marketers of baby products like J&J. These companies have been
forced to shift to developing and under-developed nations whose birth rates are still high and
population dominated by large proportion of kids. However this has also been causing troubles.
Though the number of customers is large, their affluence is poor needing changes in products
and pricing. Culture is another factor seeing gradual change. In India we have seen a gradual
change in food and dressing habits that have produced newer marketing opportunities (like
noodles or western attire) for some. Organisations that have re-invented their product line to
successfully adapt to this cultural shift have been rewarded with market success.
Economic Environment: The economic performance of a market is generally cyclical and

affects the prospects of a marketer. An organization may be affected by various economic
indicators like GDP, per capita income, tax rates, inflation, and interest rates and so on. For
example: per capita income and price levels influence demand for goods and services. Increase
in income levels increases the demand for goods and decrease in price also increase demand. The
improvement in per capital income also can have an effect on the type of goods and service
demanded. For example: there has been a gradual increase in the per capita & household income
among Indians that has affected the demand for Car in two ways. The first influence has been on
the number of cards being sold in the market. The second being the type of the car demanded;
the demand has shifted from small cars to medium sized cars from the 1990s to the new
millennium. A reduction in per capita income also may affect the type of consumption. If there is
a reduction in income consumers generally compensate this by reducing the discretionary
consumption items (like cosmetics, entertainment, furnishings…). Interest rates also may affect
the consumption with increases in interest reducing credit based consumption. A marketer has to
estimate the impact of various economic variables on his products and services sale and develop
suitable strategies & programs to tackle the same.
Environmental/ Ecological factors: can influence marketing significantly. They may bring in
opportunities for some and threats for others. The evolving environmental laws have made it
difficult for the automotive manufacturers of internal combustion vehicles, needing constant
product upgrades that are resource intense. However, it also has thrown open a vast opportunity
to companies like Tesla, manufacturer of electric vehicles. Air & water pollution has created a
vast market for air and water purifiers that hitherto did not exist. Customers also demand
environmentally sustainable products from marketers increasingly. There is a whole new lifestyle
and consumer behavior of LOHAS (life style of health & sustainability) that has centered on
customer’s ecological concerns that marketers have to adapt to.
Political-legal environment: Sets the context for conduct of business by setting up of the legal
framework. The polity of the country is the Chief architect of the legal system and affects the
way business and its functions are run. Political system’s foremost influence is on the economic

system. The type of economic framework and market is decided by the political system. A
communist regime generally restricts the market forces and propagates a system of controlled
economy. The opposite - free & fair competition is espoused by the capitalist and the socialist
follow a middle path. This affects the market and the prospects of the business operating in them.
When the Late Hugo Chavez took over as the president of Venezuela, he nationalized all the
strategic industries including the oil industry causing severe losses to oil giants like Exxon and
Shell. The ‘laws of the land’ also affects the marketing mix of the company. Indian laws prevent
tobacco and liquor companies from advertising directly to the customers. Distribution of
medicines in India is controlled by laws. Indian government also has laws that restrict the pricing
option of marketers through the National Anti-Profiteering Authority (NAA) under the GST act.
Introducing new products are also controlled through various legal regulations in India. To
introduce a new automotive in India the vehicle has to be tested and homogenized by the
Automotive Research Association of India (ARAI). Thus a marketer has to be aware of the
political and legal forces that affect the business they are into and work towards confirming to
these forces to be able to successfully conduct business.
Technological Forces: are one of the most influential and disruptive external forces. A change
in technological environment, especially a disruptive one, will require the organization to modify
or change its marketing plans. The introduction of smart phones and increase in the
communication speeds have ensured that marketing have to shift their communication plans from
traditional to digital media. The evolution of mobile technology especially the smart phones have
caused the demise of the feature phones and brand like Nokia. The failure of organizations like
Moser-Baer, once the world’s largest manufacturer of optical storage, can be attributed to the
advent of pen drives a family of solid state devices – a revolutionary technology that can store
vast amount of data. Legendary brands like Sony-Walkman have vanished from markets in a
short while due to change in technology – replaced by digital music player like i-pod. It is
imperative that a marketer understands and constantly scans his technological environment for
opportunities and threats. They also need to constantly evolve to handle the changing
environment through development of appropriate plans.
Marketing environment and its effect on a marketer can be critical to success. A well run
marketing should be able to understand the opportunities and threats offered by their marketing
environment. They should develop appropriate strengths and overcome weaknesses in light of
the external environment and maximize
the exploration of opportunities
presented to them.
Marketing Process
Marketing has been defined as the
creation and exchange of value to
satisfy customer needs. Considering

this, the process of marketing needless to say has to start with understanding the customer needs.
Any organization that need to succeed in the market place has to start by understanding what are
the needs of the customer; so that marketers can create an appropriate value proposition that will
satisfy these needs. This is done through researching the customers. A marketer also has to
research the market to understand the key competing players and their position, trends in
demands, unmet needs, growth patterns etc. This will help them create a value proposition that is
differentiated from the competitors and offer strategic advantage. For eg, let us consider the case
of a successful brand like ‘Manyavar’ from ‘Vedant’ fashions introduced in 1999. At this time
there was a fast growing market for ready to wear garments in India and had many strong players
and brands from Aravind, Birla, ITC etcetera. So the market for ready-to-wear existed as
customers demanded them and was very attractive due to its growth. However, Manyavar very
clearly understood that the market consisted of only players catering to western wear and there
was a vacuum in the ethnic wear segment. Vedant fashions exploited this need and gap in
serving the need by introducing the Manyavar brand. In a short span of about 15 years they have
opened 450 plus stores in 173 cities in India and abroad. The success of Manyavar can be
attributed to their ability of clearly understanding the customer needs and the market place. It is
not enough that the marketer develops good knowledge of customers and market place, they also
should ensure development of an appropriate marketing information systems (MIS) that still
internalize the knowledge (convert it from tacit to explicit form) and provide timely information
to marketing department for effective decision making. This is not one time process but a
continuous one as the customer needs and market dynamics continuously change and the same
has to be incorporated successfully into the marketing plan. Once a good understanding of the
customer and the market place is developed, the next step is to formulate the marketing strategy
that offers competitive advantage and is customer driven. A successful marketing strategy will
consist of appropriate segmentation, targeting, differentiation and positioning. Segmentation will
involve dividing the customers into groups with similar needs (for eg: men and women have
distinct personal grooming needs) and targeting involves selecting the segments to serve.
Company generally target segments/segment it can serve the best. Once the targets are decided
the next important decision is on differentiation. Differentiation is the act of making a company
offering different from that of its competitors. There are many methods of differentiation and the
same will be discussed later. Differentiation is a prerequisite for positioning. Positioning
involves creating a distinct image in the minds of the customers regarding the company’s
product. Differentiation and positioning are critical to branding the product and when well
thought out they give competitive advantage to the marketer and help him deliver superior value
(and also capture back higher value through better price realization in relation to undifferentiated
and purely positioned competitors). Development of a marketing strategy is followed by a
formulation of a marketing program (4Ps) that helps implement the marketing strategy and
achieve the marketing objectives. The marketing program generally indicates the total value the
customer derives. The customer understands “the value” in terms of 4Ps. The marketer has to
look at the 4P's (Marketing Program) from the Holistic Marketing Concept where they are

complementary to each other and synergistic in nature. As the customer perceives value as a total
of the 4P's any mis-match of the marketing mix will result customer perception of poor value.
For eg: a unique product with premium pricing has to be distributed through appropriate
channels (do not
aim to increase
retail reach that is
irrelevant) and
communicated
accordingly
(giving discounts
on such a product
will be
counterproductive). The product/service should be designed keeping in mind the customer needs
and proposed marketing strategy. A strong brand building effort should be undertaken to ensure
success in the face of competition in the marketplace. The pricing should convey the intended
value based on the positioning (for example something positioned at premium has to be high
priced and when the positioning is value for money the pricing should be economical/
affordable) Marketer should not price the product based on his cost structure or competitor prices
and should be based solely to convey the value it delivers. The distribution should ensure
integration of supply and demand chains and deliver economic value through form, time, place
and possession as desired by the customer. The last of the 4P's Promotion should
convey/communicate the intended value preposition. The promotion should use an IMC
(Integrated Marketing Communication) perspective that integrated and leverages the use of all
intended promotional mixes to deliver a clear and consistent message. The promotion should
achieve the set objectives (like creating brand awareness, inducing brand trials etcetera) quickest
and cheapest and should be consistently measured for its effectiveness. A successful marketing
communication will ensure that the customers are smoothly taken through the AIDA (awareness,
interest, desire and action) hierarchy quickly. When a marketing program is designed and
implemented effectively and delivers superior value; it creates customer satisfaction/delight.
Customer satisfaction is the foundation for building long and profitable relation with the target
customers. An organization should not only build relation with its customers, but also with
partners who are integral to the value delivery process. Having a set of satisfied partners, which
includes suppliers, distributors, media partners, service providers etcetera will ensure consistent

and superior value delivery, creating further customer satisfaction (it is generally a cyclical effect
– satisfied partners help deliver superior value, which improves customer satisfaction resulting in
superior sales and this in turn increases the partner satisfaction). The success of pizza chain
Dominos in India can be attributed largely to having an efficient partner, jubilant food works,
who ensures superior value delivery in terms of good products and great service. A marketer
should ensure that the relation with not only customers but also value chain partners is
maintained for creating satisfied customers. Ensuring customer satisfaction and long term
customer relation ensures organizations ability to capture value from customers and make
profits. Satisfied customers buy more of company’s products, they stay with the company longer
and spread positive message about the company to their Kith & Kin. This ensures an increase in
market share and market success in relation to the competitors. A set of loyal customer’s
purchase more of company’s product and service and stay longer with the company will increase
company’s customer equity that is reflected in the brand equity and company valuations. More
on customer satisfaction, relation and loyalty is being examined in the next section. The detailed
marketing process is give below.
Customer Satisfaction, Relation and Loyalty
Customer satisfaction: we saw, was the cornerstone of building customer relationship and
loyalty. Customer satisfaction can be defined as ‘a person’s feeling of pleasure or disappointment
that results from the comparison of a products perceived performance to expected performance’.
The expectation about a product is built by marketing communication and other sources of
communications and persuade a customer to buy and use the product (other sources may include
friend recommendations, customer review from a website etc). Customer expectations are also
built by the remaining two P’s of price and place. For example higher the price higher the
expectation of performance/ value expected by the customer. When a product is distributed
through high-end, full service outlets customer naturally tend to have an increased performance
expectation from the product. The performance of a product is based on the value customer
derives from a product. Customer value can be defined as the sum total of all benefits, tangible
and intangible, derived by the customer while using the product. Customer evaluates a product
through the value triad of product
features and quality, services mix and
quality, and prices. Product features and
quality and the services mix and quality
positively affect the customer value and
prices negatively affect the customer
value perception (i.e. higher price he
pays, Higher his expectation. For
example, you bought 2 pens, one at
10rs and other at 15rs. After using the
2, you found out that they are of same

quality and features; in such case you will value the 10rs pen more than 15rs pen.)
However the customers decide on the final purchase based on customer perceived value.
Customer perceived value is the difference between customer’s evaluation of all the benefits and
costs of an offering and the perceived alternatives. The customer benefits may be tangible (like
the product’s performance) or
intangible (like the service
benefits, personnel quality or
imagery derived from product
usage). The customer costs
consists of monitory costs
(tangible) and other non-tangible
components like time spent on
acquiring the product, every
spent and psychological cost (for
example: the fear of risks
associated with using a brand for
the first time). There is also a
concept of ‘customer delivered
value’ that is the difference between customer cost and benefits (here comparison with
competitors are not done). To understand the concept of customer perceived value let us look at
the evaluation of 2 smartphones of similar/comparable product features. Let brand A be Sony
and brand B be Oppo. Both brands provides the same product benefits (as they are of similar
features) and service levels. However Sony provides higher status or image benefits. The total
benefit offered by Sony and Oppo are 26 and 24 respectively. When we look at the cost side,
monitory cost of acquiring a Sony is higher than Oppo as Sony is costly. The time cost also is
higher for Sony as the availability of
the product is lesser and customer has
to invest extra time to locate a
showroom and try the products.
However, the risk associated with
Sony is lower than Oppo as it is an
older and more established brand with
a reputation for performance. The
total cost for acquiring Sony is 22 and
Oppo is 19 and customer perceived
value is higher for Oppo (5 to Sony’s
4) as the cost of acquiring an Oppo is lesser than Sony (even though Sony provides more
customer benefits). Under such circumstances the customer will prefer buying Oppo over Sony

(This is under the assumption that customers give equal weightages to all 4 P’s and act rationally
and are not influenced by external forces).
The customer perceived value forms the basis for product evaluation and purchase by customers.
After the use of product, he compares the product performance to his expectation he has built
about the product from various information sources. If the perceived performance is less than the
expected performance, the customer is disappointed and stops using the product. He may even
spread negative message about the product. When the perceived performance equals his
expectation, the customer is satisfied. However marketers try to create customer delight where
they try to deliver performance in excess of customer expectation. Delighted or satisfied
customers are very important as they:
 Buy more of company’s products: This is called increased share of customer or share
of wallet/ purse. For example, when a customer is satisfied with Gillette razor, they
also buy other products like shaving foam and after shave lotion from them. So of the
total expenditure on shaving products, a satisfied or delighted customer will spend
more on Gillette increasing his share of purse in favour of the brand. Share of purse/
wallet can be defined as the amount spent on a particular brand to the total customer
expenditure in the category.
 They stay long with the company’s products: satisfied customers have longer
association with the organization. This is called customer life time value. It includes
all the future revenues that a customer will bring in, over his length of association
with the marketer.
 Delighted customers turn marketers themselves: and talk favorably about the brand to
others. This will attract more new customers and increase customer equity. Customer
equity is the sum of all customer lifetime values of a marketer and affects the brand
equity and valuation. Higher customer equity also will ensure higher enterprise
valuation.
 Satisfied customers also pay less attention to competing brands and are difficult to
convert for a new marketer. When a customer is satisfied with a product, it becomes
difficult to convince him to switch product/brands and will entail delivering more
value that his current brand choice. So the marketer will have to have a substantially
improved product (than the one he is currently using) or charge far lesser. For
example, to convert a Gillette customer into a new brand of shaving blade will
involve providing a superior shaving blade at the same price as Gillette (difficult
considering Gillette’s technical competence in the field of shaving product) or
charging far lesser for a blade of same quality as Gillette.
 Satisfied customers are less ‘price sensitive’. A satisfied customer has a psychological
cost in switching product/brand. He has a risk associated with using a new product
that is alien to him (he may perceive a physical risk or a reputation risk). He also may
have to acquire new skill or knowledge that involve efforts; hence cost. This prompts

a satisfied customer to stay with current brands even at a premium. This is the
primary reason for new entrants finding it difficult to dislodge an existing brand that
scores high on customer satisfaction. Examples of products like Gillette shaving
blades, Wrigley’s chewing gum and MS-Office suits are a testimony to this
phenomenon.
To understand the concept customer share of wallet or purse, customer lifetime value and
customer equity; let us look at an example. A man who has shaving needs spend 300 rupees per
month on shaving product purchase that includes 100 rupees each on blade, foam and after shave
lotion. Let us say currently he is spending these on 3 different brands.
Share of purse to each brand given below is 33.3%
100 Rs – Max super blades
100 Rs – Godrej foam
100 Rs – Old spice after shave
Some of his friends (delighted and loyal Gillette customers) recommended him to try out
Gillette blades (may even gift a new Gillette shaving system on an occasion). He buys and uses
the blades and finds it exceeding his expectation and is ‘delighted’. He also learns that Gillette
makes shaving foam and tries it and finds it also good. No his spending pattern is
100 Rs – Gillette blade
100 Rs – Gillette foam
100 Rs – Old spice after share
Share of purse to Gillette is 66.6% and 33.3% to old spice.
He now actually spend Rs 2400 on Gillette per year and if a Gillette customer stays for
about 20 years with the brand on average the
Customer lifetime value = 2400*20 = 48000Rs/ customer.
(This is assuming that all future expenditures are currently valued at 2400/ year after
discounting. The average lifetime taken here is for demonstration purpose and a brand may have
some customers with short lifetime and some with long lifetime)
Now let us assume that Gillette has about 100 million customers. The customer equity will be,
48000*100 million = 480000 crore or about 70 billion USD considering a customer lifetime of
20 years. It should be noted that generally customer lifetime is not considered more than 10 years
for most products as a longer duration may be extremely difficult to predict. The lifetime for

FMCG may be more than technology products where changes may occur much faster and
lifetimes may not be more than 2-3 years (brands like Apple, world’s most valuable brand may
be an exception to this case). It also has to be noted that for any brand there may be a constant
churn of customers where in new customers are created constantly and older customers may drop
off constantly.
CRM: While developing long term relationship with customers, a company also should
understand that all relationships may not
be profitable. There are products and
customers who can contribute to a
company’s profits and the same should be
understood by the ‘Customer Profitability
Analysis’. Today the MIS and CRM
software’s help an organization to
conduct customer profitability analysis
and build maintain relation with only the
profitable customers. The ‘+’ in the
diagram can be called as friends, the
‘blank’ ones-butterflies and the ‘-’ ones
barnacles. Company should upgrade the
customers to the ‘friends’ category or else
drop them from customer base. A good
customer relationship management will help
the marketer to reduce customer defection
and increase customer lifetime. It also will
help the organization ‘cross-sell’ and ‘up-
sell’ there by increasing share of purse. A
good CRM system will also help the
marketer in effective customer
discrimination (To differentiate profitable
customers from un-profitable ones and treat
them separately). A good CRM system will help organization move its customers through the
marketing funnel successfully where the target customers are converted in to loyal customers
over a period of time (The CRM system also may be ably supported by a Sales Force
Automation system in some organisations for this purpose).
CRM is the process of carefully managing detailed information about individual customers,
gained from different ‘touch points’ to maximize loyalty. The touch points may include various
sources. For example a bank’s customer may interact with the bank through bank branches,
ATMs mobile apps and internet banking and provide with different information about them.
These information can be used to personalize marketing to these customers and to increase

customer involvement by allowing them to co-create value (All four Ps may be created along
with customers). For example Airtel allows customers to design their own plans with varying
components of calls, data and SMS. Most marketers co-opt you to their communication where
customers can choose what kind of messages they want to receive (for example e-tailer may be
allowed to send only messages about offers on certain kind of products and not others). The
customers may also choose convenient channels (for example Lenskart allows choice of home
delivery or showroom pickup and trial of orders) or prices (pricing schemes and methods like
cash on delivery). A good CRM will also help in listening to the customer conversations like
review, complaints and compliments about the brands and incorporate them in to their marketing
strategy. Relationships need to be consciously managed to sustain loyalty over a period of time.
Loyalty: Companies have different methods of building customer brand loyalty. The loyalty
building measures mainly depend on the type of marketing (direct or indirect- in direct marketing
the marketer can directly interact with the customers through one or more touch points for
example banking services. In indirect marketing the marketer does not come directly in contact
with the customers for example FMCG product like toothpaste, soaps etc.) and the type of the
product. Some of the customer loyalty building programs commonly used are
- Customer communication: where by the marketer is in constant communication with the

customer informing him, persuading him and reassuring him about the company’s products and
brands. In FMCG the only way to maintain relation is through constant communications. For
example Surf Excel may bring in different campaigns like ‘Daag Achche Hai’ to constantly re-
assure the home maker about the product and its benefits for her family.
- Loyalty programs: are very successful instruments in improving customer loyalty. The
frequent flier programs are a classic example where by the frequent flier is rewarded for his
loyalty. Retailers also use loyalty programs where the customers earn increasing rewards for
increasing patronage. Credit cards also have widely publicized loyalty programs where higher
purchases entail a customer to higher rewards.
- Brand communities are excellent way to create/build loyalty: The community members
act as a close knit social group; for example Harley owners group (HOG). They promote the
brand widely, are very loyal to the brand and help in co-creation of value. They are also very
open to up-selling and cross-selling. For example Harley is able to sell Harley merchandise
including boots, jackets, gloves, helmets etc; whose value is often more than the product itself.
- Customer tie-ups: is another way to improve customer loyalty especially in B2B

marketing context. Coco-cola for example provides cooling solutions to the retailers there by
making them loyal to the brand. Master and visa card compete to enroll the retailers to use their
payment solutions there by ensuring customer loyalty.
- Interacting closely with customers: is another way to ensure customer loyalty. In B2B
context, salesman often call up on the customers to know their feedback on the performance of

the product and also to ensure them of all the support to maximize the benefits for the customer
that may include consultations, services, add-ons etc. this also helps the organisation in better
understanding of customer needs and in product improvements and inventions.
Marketing Research, Intelligence and MIS

It was seen that the beginning of all marketing processes started with the understanding
of customer needs and the market place (who are the current players in the category, what
segment needs do they satisfy and what need gaps exist). It is not just adequate to understand the
customer needs and market place; the marketer also has to manage this marketing information
systematically through building up of appropriate information systems. A well designed
marketing information system will help internalize the customer and market knowledge and will
provide information needed for marketing decision making.
A MIS will consist of people, equipments and procedures to gather, sort, analyze, evaluate and
distribute relevant data & information in an accurate, need based and timely manner to the
marketing decision makers. The MIS relies on three sources for its data and information; viz.
internal records, marketing intelligence and marketing research.
Internal data consists of all data generated and stored by the organization over a period of time. It
gives historical data that are results of its various actions and activity. The data can be very
useful in analyzing trends for future decision making. For example internal data on advertising
expenditure and sales can give an idea of the promotional elasticity of the company’s productive
and this historical information can be used to plan future promotional campaigns. There are
various sources of internal data and information. This may include the MIS and its various
components like the sales information system, finance and accounting system etc. The CRM and
customer compliant system is another provider of vast amounts of reliable internal data. It can
give reliable information of the instances of product complaints, types of complaints, resolution
of complaints, and customer satisfaction among others. These information will help the
marketers to make product and service improvements to deliver increased customer satisfaction
and delight. Company websites are another source of information. The websites can capture the
visitor details and data about their behavior which can be used for various marketing purposes.
The social media pages of the organization are another source of information. It can give details
about the customer reaction towards the company’s posts and messages. How many people have
liked the messages and shared it, what are they talking about the company/products and brands.
The data thus captured can be used to construct a ‘netnography’ or ‘net ethnography’ of the
company’s customers. Many organizations today have sales force automation system (SFA). The
SFA carries a whole lot of data and information about the customers especially their stages in the
marketing funnel, their preferences and requirements etc. All these internal sources and
information can be great aid in marketing decision marketing based on the past.

Marketing intelligence (MI) is the
perpetual process of collecting
everyday information from the
marketing environment useful for
the decision making by
marketers. It gives ‘happenings’
in the external marketing
environment that includes micro
and macro environment. This
information can be analyzed to
understand their impact on the
organization and appropriate actions taken; for example the price changes by a competitor is
definitely going to alter the customer perceived value and the market prospects of the product.
Marketing intelligence scans for useful information from all environments that may include
PEST environment, competitors, customers, suppliers, distributors etc and incorporates these into
the information system. If the company has a Decision Support System (DSS), it can directly
incorporate market intelligence into marketing decision making. For example the top
management may be supported in setting product pricing based on the changes in raw material
prices. Head of a petroleum refining company can vary their prices based on the variations in
crude prices in the international market. There can be various sources of market intelligence.
Well trained sales force is a good source of general and competitor market information. Channel
partners, including distributor, logistics partners, advertising agencies, media houses etc, all can
be sources of various information. There are industry and scientific fora that gives rich
environmental information about legal and technical environment. Industry associations like
FICCI, ASSOCHAM, and NASSCOM etcetera can provide vast information, especially
regarding the government policies, to its members. Scientific and professional associations like
IEEE have regular programs and publications regarding the advancement in the relevant
technological areas. Then there are commercial information providers like Bloomberg that
collects, sorts, and analyses vast amount of data and provide relevant information to its
subscribers. Industrial spying and espionage also can provide intelligence but may invite
litigation. The 2000 litigation initiated by UniLever against P&G was based on such act of
industrial spying where P&G is supposed to have indulged in ‘dumpster diving’ at UniLever. MI
is a continuous process and is not done to collect any specific information to solve any specific
problem. It is done on a continuous basis to gain actionable insights and is based on the
secondary data available from the business environment.
Market research (MR) is opposite to MI, in that it is a systematic effort to collect specific
information that will solve a marketing problem through formulation of appropriate marketing
plan. MR is an objective (to solve a problem) based effort and collects information only relevant
to achieving the object. It is not a continuous effort and is ad-hoc. There is an immediate
application of the research finding by the marketer and develop a solution to the problem in

hand. MR is mostly primary data based and is generally time bound activity. For example a
company that is planning to introduce a range of jams may do a market research to find out the
preferences of the customers regarding various flavors of jam. It will speak to a set of jam
consumers to understand their taste preferences regarding the flavors, their current purchase
habits and choices and any gaps or unmet needs they have. This research effort will be very
systematic and structured in nature. They also may do a taste test of their variants (also may
compare it with the competitors variants) to know the customer’s preferences, before rolling out
the marketing program.
The process of market research starts with a

business problem that is hampering the marketer
in his objective achievement. A researcher then
converts this into a research problem and
identifies the information needs. The next logical
step is to design the research. The research design
will have two parts one consisting of the data
collection and the other about sampling. Data
collection aims to develop suitable methods of
collecting data; like survey through
questionnaires, interviews, group discussions,
observations etc. the sampling will look at
methods of selecting the research subjects from
the population. Once the research is implemented,
as per the design and data
collected the researcher
analyses the data and reports
the research findings and
suggestions to the marketer,
who in turn will use the
information to solve the
problem at hand. The usual
targets of a research may
include customers/ consumers,
users of competitor product, channel partners and various experts like industry experts,
behavioral experts, and sociologist etcetera. As mentioned earlier MR is a systematic effort and
follows a procedure. It is generally time bound and once it meets its objective the project is
terminated. The main difference between MR and MI is summarized as below.
The understanding of a customer and the market place is critical to the success of a marketer.
This needs constant monitoring, gathering, analysis and dissemination of information to the
relevant constituents. It is also imperative that the information and knowledge gained thus is

internalized and managed efficiently and effectively through the development of appropriate
information systems.

Big Data & Data Analytics
The advancements in technology have afforded capturing of vast amount of data relevant to an
organizations’ business. The concept of big data involves large amount of user generated data
that is characterised by
•Volume: the volume of data generated is large often running in to petabytes. This necessitates
large storage spaces, specialized data handling skills and use of technology to analyse such vast
amounts of data.
•Velocity: big data is available real time and has high velocity; i.e. it changes every millisecond.
This makes the data highly dynamic and suitable for certain kind of analysis like evolving trends.
For e.g. the stock market price data is available real-time and may change every millisecond.
This makes it extremely difficult to handle and analyse as there would be change in data by the
time analysis has been completed.
•Variety: big data also comes in varying forms. There may be text data from social media sites,
video data from YouTube, published data in various media like newspapers and magazines, user
generated transaction data and so on. This makes it difficult to integrate these different data and
analyze them. It will need technical skill on the part of users to convert them in to appropriate
formats so that they can be analysed seamlessly.
•Veracity: is another issue with big data (also may be referred to as volatility). As the sources
differ and the contents are user generated, their credibility may vary vastly. For e.g. in case of a
news/ video posted in YouTube or Facebook the credibility may be questioned or questionable.
However, it will take some time for the sites to understand or discover that the post is fake or
fictitious and take it down. By then the post might have travelled far through the viral route. This
make using of big data sometimes very difficult as the users may have to establish the credibility
of the source before application.
Big data has come to an integral part of business, providing valuable information for decisions
making. However, big data is worthless without data analytics. Data analytics is the process of
examining/ analysing large data sets to discover information with the aid of systems and
software. It would be impossible to handle such large amounts of data without the aid of
appropriate technical tools due to the 4Vs. The advent of artificial intelligence (AI) and machine
learning has helped the
fields of big data and
data analytics. Today
it is possible to
program computers to
incorporate their
learning in to their
computational process

and memory and constantly evolve in their analysis of big data. It also helps in automating many
complex analysis tasks that would have been impossible due to lack of appropriate talent. The
uses of big data and data analytics in marketing have been growing. The primary uses have been
to
“Customer engagement”: big data can deliver never insights in to customer like who they
are, their localities, their behaviour, and their lifestyles and schedules etcetera; that can be used
to build customer engagement. For example examining the customer call records and responses
of a bank service center may provide us insights in to information can be used to better engage
the customer like appropriate call time where the chances of customer rejecting the call is low.
Customer retention and loyalty: can be improved using data analytics. Discovery of
customer behaviour will throw light in to their preferences and what influences their satisfaction
and loyalty. This will help marketers create appropriate value and customer loyalty programs to
attract them and keep them with the company. For example a retailer can understand customer
preference by analysing his website search patterns and social media engagements and based on
the findings can provide/ suggest products and appropriate discounts/ cash backs that will ensure
conversion and purchase.
Market optimization and performance: can be achieved through big data and data
analytics applications. The customer generated data, especially from CRM software and SFA
software’s (sales force automation), can be also used to automate marketing. The information
system can analyse these data and personalize the marketing efforts to progress the customers
smoothly down the marketing funnel.
The use of big data and data analytics has been increasing in its application in the area of
marketing. It has been used to gain customer insights so as to customize marketing strategy and
marketing programs. Some practical applications have been in analyzing market basket, in text
analysis of social media posts, search engine optimization, search engine marketing etcetera.
Market Strategic Planning

All marketing plans are subordinate to higher level of plans like the corporate, division or
business planning. To understand
market planning, we need to
understand the planning process in
an organisation. The organisational
planning process is hierarchical
with the corporate plan at the top.
The corporate plans then are
converted in to business plans and
subsequently to division plan. The
division then will have to plan for

the various products or product line (this hierarchical is applicable for large organizations with
multiple business interest. For single business organizations the plan will start at business level
itself). For example Tata sons (the controlling company of all Tata business) will do the
corporate planning that will encompass all its business divisions. This is the followed by division
planning at its various divisions (TCS, Tata steel, Tata Motors, Tata chemicals, Tata housing,
Tata Global Beverages, JLR etc.) that develops plan specific to their areas of business
operations. This is followed by business plans for business units. If we take Tata Motors division
it has different business units that include Buses and Trucks, Defense Vehicles & Cars and
Utility vehicles (handling transportation of goods, people and special requirements like defense
and homeland security). In the business unit handling Cars & Utility vehicles there are different
products\product lines for which business plans will have to be developed like Cars, Hatchbacks,
and Utility Vehicles.
The strategic planning process, at all levels, envisions a desired future, translate this vision in
broad business objective and develop a sequence of steps/ activities (called strategies) to achieve
these objectives. The strategic planning process may take a top down or bottom up or mixed
approach to formulation of the strategic plan. This kind of detailed plan is necessary as an
organisation may have a divergent business portfolio (or product portfolio) that targets different
customers and operates in varying environment, which necessities the formulation of different
business plans. The “marketing plan” needless to say, is a functional plan to support the business
plan (there will also be other functional plans like financial, operations, HR, IT etcetera all
working synergistically to achieve the business plan) let us examine the business plan in slight
detail.
The business plan starts with the setting of business direction through the formulation of
directional statements. The directional statements may consist of mission, vision, value
statements etcetera (that sets the business direction and philosophy for its business journey. For
e.g. Disney’s vision
statement “to make
people happy” make
it clear what
objectives can
Disney set for its
business units-
Anything that people
happy). Once the
business mission
\direction is set the
next logical step is to
analyze the business
environment. The

environmental analysis will involve analyzing the external environment and the internal
environment. The external environment analysis will reveal the opportunities and threats to the
organisation and the internal environment will reveal the strength and weakness of the
organisation. The environmental analysis will proved the SWOT matrix that becomes the basic
document for development of business goals \objectives. The business objectives should be set in
such a way that the organization is able to exploits the environmental opportunities using its
strengths. It also should have objectives to negate its threats and overcome its weakness.
Let us take an example of Tata Motors, the business direction is defined by its vision, mission
and value system, which are as following
Vision: as a high performance organization, we are, by 2019
 Among top 3 in global CV and domestic PV

 Achieving financial performance
 Delivering exciting innovations
Mission: We innovate with passion, mobility solutions to enhance quality of life.
Values: (They live by)
 integrity
 teamwork
 accountability
 customer focus
 excellence
 speed
(The directional statements vary with organisation as some have vision, mission and value
system. Some may have only one. Academicians are also split on their opinion on what each
should mean or indicate)
Here from the vision statement the business objective for the Cars & Utility vehicle segment is
clear; to be one among the top 3 players in the domestic personal vehicles market for cars and
utility vehicles. Now that the context and directions are set the next logical step would be to do
an environmental analysis and arrive at a SWOT. The strength and weakness comes from the
internal environment and the opportunities and threats come from the external environment. A
successful business will be able to exploit its opportunities using its strengths. They also will
strive to overcome their weakness and ward off the threats they are facing. A SWOT analysis for
TATA motors PV business unit is presented below. Their greatest strengths are financial assets,
distribution or channel presence and reputation. The weakness includes lack of innovation
capabilities and recent product failures resulting in financial reputational losses. The
opportunities include growing domestic market where they have good reputation and distribution

presence. Especially important is the opportunity of rural growth. TATA is highly trusted in rural
market where they interact with
customers through their other business.
Rural customers also prefer establish
domestic brands like TATA or M&M.
they also have opportunities in terms of
international growth especially in South
America, Africa and parts of South Asia;
where the market conditions and
consumer demands are similar. Their threats include new international entrants that increase
consumer choice and competition. They are also seen shorter PLC’s where newer models keep
coming quick and the older models get replaced quickly. This will need them to be an aggressive
marketer who will show an urgency to establish their products. They will also have to constantly
introduce newer and improved products regularly. The company sets the business objective in
the light of SWOT analysis. The business objectives are set generally in terms of collective and
individual product sales targets. Once the business objective is set, the functional managers
develop their/derive their functional objectives and formulate plans to achieve the same.
For the marketing managers of the PV category in TATA motors the plans will depend on the
existing and new products the company has or plans to offer. He draws the detailed marketing
plan for each product/ product line that will include the marketing strategy (STP- for a new
product he will have to develop a new STP and for older product he may have to modify the
existing STP) and the marketing program (4Ps- again for a new product he will have to propose
new 4Ps based on the marketing strategy and for old products some modifications maybe
proposed). Currently for the marketing managers of TATA motors PV division his marketing
will center on their current range of products that include old and new products. The list of their
current product portfolio includes Nano, Indica, Indigo, Safari, Sumo, Bolt, Tigor, Tiago, Zest,
Hexa and Nexon. The first five brands are old brands that may need a different marketing plan
from the rest of the range which are new. Based on the product life cycle and portfolio it can be
planned that Nano – a designing and loss making brand should be retrenched (withdrawn).
Indica, Indigo, Safari, and Sumo – no more growing but still profitable- maybe sustained (sales
and marketing effort should ensure their sales are maintained at current level) through price
leadership strategies (where it is economically priced; making it attractive to the price sensitive
customers). The rest of the products, that are new brands, should be grown through intense sales
and marketing efforts by TATA Motors. The PV division should ensure that each of the brands
have a unique marketing strategy and program that ensures their differentiation from
competitors. This will ensure that they will gain sustainable advantage over their direct
competitors and deliver higher value creating customer delight. While making a marketing plan
one should ensure that it is well structured, simple and comprehensive-covering all relevant
areas. The major components of a business plan should include the following.

MARKETING PLAN
1. Executive summary
2. Situation analysis
a. Market summary in terms of size, growth, number of players, competitors,
outlook, policies etc.
b. Segments in the markets and the key players in the segment and what are their
value propositions.
c. Customer needs and KSA (key success factors) for the product category.
d. Strategic groups in the industry.
e. Current offerings and unmet customer needs.
f. SWOT analysis of the company.
3. Marketing strategy
a. Marketing objectives in terms of sales and other objective based on the SWOT
analysis.
b. Segmentation and targeting – who will you serve to achieve your sales objective.
c. How will you differentiate and position the product so as to deliver maximum
value of your target segment.
4. Marketing program
a. Product: what is your value proposition, how it is different from your competitors
and is unique delivering more value.
b. Pricing: what will be your pricing strategy and tactic?
c. Promotion: what message, media and methods of promotion will you use? How
will you integrate them?
d. Place: how will you distribute so as to reach most of your customers?
5. Financial analysis
a. Sales forecast and rationality.
b. Expenses.
c. Break even and profit.
6. Control
a. Organisation: how will you structure your organisation?
b. Implementation and schedule.
c. Controls.
d. Contingency plans.

MODULE 2

CONSUMER BEHAVIOUR
To offer value to customers, marketer should understand their thoughts, actions, perceptions,
attitudes and feelings clearly. This is done
through studying of consumer’s
behaviour and aims to answer all the W
& H questions regarding the consumer’s
use of a given product. Formal definition
of consumer behaviour can be ‘how
individuals, groups & organisations
select, buy, use and dispose of goods,
services or other value offerings to satisfy
their needs and wants’. The study of CB assumes significance in that it helps the marketers to
develop appropriate marketing plan consisting of the marketing strategy and marketing mix (for
example see the study of CB for footwear given below). The study of CB offers areas of
information that can be extensively used in development of the STP or the marketing mix.
Areas of Inquiry (FOOT Areas of Information Areas of Application

WEAR)
Why they buy foot wear / for Use of foot wear like Segmentation, product design,
what benefits? protection, style promotion
statements, sports
benefits, medical
benefits…..
Which brands are they Competition and their Differentiation and positioning,
currently buying and why? characters like VFM, promotion
personality, aspiration…
Where do they buy? Types of store, outlet etc Distribution decision
When do they buy? Occasion of purchase Promotion, distribution decision
How do they pay & how Cash, credits, type of Pricing, Add on services like
much? payment, order…. Payment, ordering options
Who buys? Customer / consumer Promotion decisions

Who advices or influences? Decision making unit Promotion
How many do they buy? Potential consumptions Pricing and promotions
What types of foot wear? Tastes, preferences, Product design, segmentation &
cultural influences etc promotion
What they don’t get currently? Gaps in current need Product, promotion…
fulfillment
Consumer’s buying decision to buy a product/ service starts with the problem/ need recognition.
The problem/ need is ‘felt state of deprivation’ that can be overcome by acquiring and using of
appropriate product/ service. The buying decision process generally starts with a stimulus that
helps the customers identify the need/ problem state (Many a times customers are unable to
identify their need/ problem state unless there is a stimulus. Marketers have been accused of
stimuli which create unnecessary needs in customers that help them sell their goods/ services).
This stimulus can be internal (like hunger or thirst) or external (like a marketing stimuli or any
other type of stimuli). However, all customers don’t respond to the stimuli in similar manner.
The stimuli are further acted upon by customer psychology & customer characteristics that may
lead to slightly different responses and different product/ service choice. For example two
hungry people (internal stimuli of hunger) may seek two different food items for satisfying their
hunger (cultural influence).
The key psychological process of consumers’ behaviour can be understood by studying the
stimulus – response model. The model works on the assumptions that certain stimulus triggers a
psychological
process in the
consumer
that result in
the purchase
of goods and
services to
satisfy the
needs and
wants. The
psychological
process is
affected by the consumers’ characteristics and consumer psychology that results in the purchase

and consumption decision. The starting point of the stimulus-response model of the consumer
behaviour is the stimuli that trigger a consumer conscious to the needs for a product or service to
satisfy a need/ want. The stimuli can be from multiple sources that may include marketing and
other environmental stimuli (these are external sources of stimuli and sometime internal sources
like hunger or thirst may also play a role). Marketing stimuli may be in the form of an
advertisement or other promotional mix that prompts the consumer to notice the value offerings.
It might also be the placement of the product. For example a customer may see the display of the
product at retailer (through merchandising) and may trigger a desire for product. This is
especially true for variety seeking products like food items. Pricing may be another stimulus. A
price discount or price reduction may trigger a person to consider buying a product. This is
especially so when the customer had a desire for the product but was unable to afford the same
till price reduction. The product itself may act like stimuli. A new product or the improvement of
the variant may trigger consumer desire for acquiring and using a product. For example an Apple
i-phone 7 user planning to change/upgrade may be enticed by a new Apple introduction like i-
phone X. There can also be non-marketing stimuli that comes from the customers’ environment.
These may include technological, economic, political, social, cultural etc. for example the up
gradation of cell phone networks to 3g from 2g technology will stimulate customers to upgrade
to 3g phones that are technologically and functionally superior. The source of consumer stimuli
also may be economical in its origin. For example a small car owner who gets promoted with
substantial salary increase may consider up-gradation of his car or home due to his increased
income. The promotion also may confer him higher social status that may have to be reflected in
higher materialistic possessions like a larger car, home, club membership etcetera. Another
common source of stimulus is the socio-cultural factors. A change in ‘style’ often leads to
demand of goods confirming to the style in vogue. As cultural shifts happen customers are
stimulated to seek new products and services. For example the changing food habits among
Indians have ensured that people have resorted to looking for newer products like Noodles,
Burgers, Pizza etcetera; that were hitherto not a part of the normal purchase plans. Political-legal
charges also act as stimulus for consumption. For example a change in the emission law may
necessitate change of personal transport and trigger the consumer to look for possible solutions.
The processing of stimulus, by the consumer, depends on two factors; one his characteristics and
the second his psychology. The consumer characteristics in turn include the cultural factors of
the consumer, his social factors and his personal factors like the demographics. The
psychological variables will include the consumer’s motivation, his perception, learning and
memory. We shall look into these two factors separately to understand their influence on the
consumer behavior process.
Consumer Characteristics:
A consumer’s characteristics are influenced by three important factors that include culture, social
and personal factors. These three factors influence a consumer by creating/influencing their
needs and wants. It is important for a marketer to understand the consumer characteristics and

their influence on consumer needs and wants to successfully create and deliver appropriate
customer values.
Culture
Culture: is a set of shared norms, values, beliefs, rituals etcetera by a group of people. The
visible elements of the culture (literally the tip of the iceberg, as most important elements of the
culture are not visible) may include food habits, language, clothing, institutions etcetera.
However, the more important and invisible portion of culture may include value system, norms
and beliefs. Culture has a significant influence on the customer’s needs and wants and plays a
role in shaping them. In sociology the concept of ‘cultural determinism’ posits that the behaviour
of a person is affected by his culture. For example a visible element like food habit may differ so
widely that the marketer will have to adapt his products, prices, promotions and distribution
accordingly. For example McDonald’s, one of the leading QSR chains in the world, may have to
develop different products based on the country/region of operation. As the product differs, the
communication, pricing and distribution may have to be adapted. For example in Islamic
countries the food has to be halal, in India - vegetarian options may have to be developed, in
Japan Burgers are considered as snacks, and not a meal, and may have to be smaller and served
with green tea which is an integral part of their daily life. In Scandinavia, McDonald’s will have
to develop egg based product – as customers demand egg for breakfast and the same may find
acceptance in predominantly vegetarian country like India.
Sub cultures: are distinct groups of people, within the cultural group, that share value systems
based on common life experiences. Religions, nationalities, racial groups etc. can be sources of
sub cultures and provides a more specific identity to their members. For example, Indians may
belong to different religion like Hinduism, Islam, Buddhism, Sikhism, Christianity,
Zoroastrianism etcetera and members of these groups have more specific identity apart from
their common Indian identity. When cultural sub-groups are significant, they call for different
marketing plans. For example Indian railways may have a Jain food menu in certain parts of the
country with significant Jain population. Geography may be another source of cultural similarity
or sub-culture. India is divided in to 56 socio-cultural regions with identifiable differences.
Another source of sub-culture may be race of the person. For example Whites, Africans, Asians,
Mongoloids etcetera have different needs and can sometime call for different marketing strokes
even when they live in the same country like U.S.
Social Class: ‘are a relatively homogeneous and enduring division in the society, which is
hierarchically ordered and whose members share similar values, interests and behaviors’. The
social class exhibit very similar consumption habits and characteristics requiring similar
marketing efforts. SEC (socio-economic classification), that is used across the world, is a widely
used social classification that has immense use in marketing. The SEC for population in India is
a bivariate segmentation. The SEC is based on education and employment and divides the Indian
households in to 8 categories. For Urban India, the uppermost SEC is A1 followed by A2, B1,
B2, C, D, E1 and E2. A1 being the most educated and the highest employed and E2 being the

least employed and lowest in employment. The A section is generally referred to as the upper
class, B as the upper middle class and C and D being lower middle class. The E segment is the
economically weaker
section of the society.
The SEC segments

share many common
consumption habits due
to their similar levels of
employment, education,
affluence, close living
(in the same locality)
etcetera. They consume
similar products (for
example A segment
may opt for luxury cars
in comparison to B
segment whose
preference may be mid
segment cars), have
closer community associations (both personal and professional), media habits (for example A
segment may prefer national, English media and C and D may access more of local, vernacular
media and E may be media dark) etcetera. When the social classes are significant in terms of
size, it calls for development of separate marketing plan. It also should be noted that class
mobility in SEC is common and they have a hierarchical ordering with SEC-A in Indian being
the top of the pyramid.
A good method to study impact of culture in the consumer behavior (and in management science
in general) is to look at Hofstede’s cultural dimensions. Hofstede considers five cultural
dimensions that have significant influence on human behavior. His five dimensions are:
1. Power distance: is the degree to which people accept unequal distribution of power. Asians
accept high power distance whereas North Americans are more oriented towards low power
distance.
2. Individualism v/s collectivism: Collective societies are tightly knit with members of the
society confirming to socially accepted standards of behavior. In individualistic society people
are more independent of their social affiliations and give preference to individual expression to
social conformance

3. Masculinity v/s Feminity: Feminine cultures are indicative of co-operation, modesty, care and
quality of life. Masculinity on the other hand looks at competition, achievement, assertiveness
and materialistic possession.
4. Long term v/s Short term orientation: People with long term orientations gives importance to
maintenance of long term traditions and are refractive to change. They also indulge in long term
planning and may not have a short term perspective of things. People with short term orientations
are more pragmatic and quicker to change.
5. Uncertainty avoidance: Indicates willingness to take risks. People with high uncertainty
avoidance take less risks and are generally not willing to change. When uncertainty avoidance is
low the person is ready to take risk, indulge in new behavior, experiment and open to change.
6. Indulgence v/s Restraint: Cultures that are indulgent freely involve in gratification of their
needs and are hedonistic in nature. They are consumeristic and consumption is seen as an
acceptable social behavior.
The 6 dimensions of Hofstede affect consumer behavior in many ways. It will influence their
willingness to try and adapt new products, their willingness to spend, the way they receive and
perceive communication, the way they indulge in consumption and the way they accept or
receive company’s marketing efforts.
Social Factors: The social factors that affect a consumer’s behavior include reference groups,
family and social roles and status of the consumer.
Reference groups include all the groups, with whom the customers interact directly or indirectly,
that have an influence on the attitude and behavior of the consumer. The reference groups further
is classified in to membership and non-membership groups. Membership groups have a direct
influence on the person. There
are some membership groups
where a person interacts
closely and more frequently.
Their influence is significant
and can affect product choices.
The primary groups (also
called informal groups) may
include friends, co-workers,
hobby/sports group etc. For
example friends may have a
significant influence on your
consumer choices like clothing and vehicle through their suggestions or reactions to your
purchases. The secondary groups (formal groups) have a lesser influence on the consumer, in
comparison to the primary groups. Unlike primary groups, the secondary groups have lesser

interaction with the members and include ones like religious groups, professional associations
(for example MCI or Bar Council). These groups can influence certain behaviors of the
consumers. For example your membership in a religious association may prompt you to opt for a
pilgrimage. Your membership of a professional body, like MCI, may prompt you to attend a
certain professional meeting to learn about advancement in the profession. The secondary groups
also may influence consumption of certain goods & services; especially when group members
want to show conformity.
Non-membership groups are groups that have indirect influence on the consumer. These groups
can be classified into aspirational and dissociative groups. The aspirational groups are the ones
that a person wishes to be a member of. These groups have ‘referent power’ over the consumers
and elicit certain kinds of confirmative behavior. For example a young cricketer aspiring to be a
part of the national team may imitate some of the consumption behavior of national players like
using certain types of coaching, certain type of cricketing equipments etcetera. A young model
or actor may look at the successful ones as an aspirational group and adopt many behaviors
including consumption. The dissociative groups are those groups to which consumer does not
wish to belong to and want to be dissociated from. People belonging to one political party may
consider others (members of other parties) to be dissociative groups. They will ensure behavior
that is deviant from the dissociative groups. For example a football fan may consider cricket fans
to be a dissociative group and may not consume similar goods and services.
All groups have leaders (called opinion leaders) who have power and influence over the
members. The power may vary from expert power to referent power to formal authority (in case
of secondary groups like professional associations). These opinion leaders often have influence
on the group members. In primary (membership) groups the influence is more of expert or
referent in nature and is informally exercised. For example among your friends group there may
be experts on entertainment like movies, who influences the choice of movies you go for. Yet
another person may have expertise on fashion and influence your purchases of related items. The
influence of reference groups (whether membership or non-membership) can be summed up as
under.
 Reference groups expose you to new behaviors.

 They influence your attitude and self-concept.
 They create conformity pressures influencing your product/brand/consumption choices.
 Groups have ‘powers’ over its members that may be expert, referent or formal in nature.
 ‘Opinion leaders’ within the groups have the most important influence on the members
(the opinion leaders may change within the group depending on the subject matter under
consideration).
Family: is the oldest of the social institutions and exerts a significant influence on the consumer.
There are two families in a consumer’s life; the family of orientation and family of procreation.
The family of orientation includes our parents and siblings and influences our value system,

attitude towards things or topics, personality etc. The family of orientation can have a lasting
influence on the consumer behavior. For example your family may significantly influence your
attitude towards materialism and decide on your consumption levels (how much of goods &
services you buy) and indulgence. The family of procreation includes spouse and children. They
are often the decision makers in your purchase and jointly use the product/service a consumer
buys. For example while purchasing a new home the buyer will have to consider the opinion of
their spouse and children and all members of family will be sharing the place. While eating out a
customer will have to consider the choice of his family for example young children may prefer
McDonalds and grownup children may prefer a finer dining or a more happening place. Younger
children may influence parents on the purchase of food items, whereas older children may
influence on personal grooming or furnishing products. The influence of family members on
consumption has been changing due to the change in the family structures. In India family
system is seeing a shift from ‘joint’ to ‘nuclear’. As the family size shrinks, with lesser number
of children (an Indian urban family has a size of less than 4 today and rural family is about 4.5)
their influence and affluence have increased manifold today.
Roles & Status: of the consumer is another factor that influences the behaviour of the consumer.
A consumer has many roles in his various social organizations like family, profession, peer
groups, clubs, housing society etc. These roles confer a certain status and the consumer is
expected to confirm to these status and roles. For example a leading business man maybe often
expected to have materialistic possession commensurate to his wealth and may be influenced to
build a palatial house or choose a luxury car. A doctor may be expected to lead a healthy lifestyle
due to his professional knowledge (of good health care) and may be forced confirm to this social
expectation by choosing right kind of products and services that are considered healthful in
nature.
Personal Factors: The personal characteristics of a consumer like age, family life cycle, values
& lifestyle, personality, self-concept etcetera affect the consumption and product/services choice
of the consumer.
Age & Life Cycle: age of a consumer and his family life cycle will have a significant bearing on
his consumer habits. For example; with age the goods and services demanded changes. Need of a
kid are not similar to that of an adolescent and will be different from that of a family man. Even
as your age changes there are psychological changes (called psychological life cycle) and critical
life events that influence consumer behaviour. For example if we analyze the family life cycle,
newly married may look at consuming services like vacation. As they have children a life
changing event, their needs change they demand more products and services associated with
babies. As time evolves the family life cycle evolves and there many life changing events like
children’s education/graduation, their employment and moving out of home, retirement,
becoming grandparents etcetera; all leading to significantly different needs and thus
consumption habits.

Profession & Economic circumstances: also affect consumption. People of the same profession
share some value system and common characteristics leading to similarity in consumption
behavior. For example all members of armed force share certain common characteristics and
consumption habits for example they stay fit, are well groomed and exhibit more patriotism. The
economic circumstance of the consumer, indicated by his profession & position within it, also
affects the consumer behaviour. A sales representative and a sales manager may both need a car
for their mobility. However, the sales rep may look at a smaller value-for-money car with low
cost of ownership while the sales manager may look for a larger car that may signal his higher
status than the sales representative.
Personality & self-concept: is another trait that affects consumer behavior. Personality is a
distinguishing psychological trait that decides how people respond to environmental stimuli
(behave) and is relatively enduring. There are about 200 words in a standard dictionary that
describe personality like extrovert, adaptable, dominant, friendly, aggressive etcetera are used to
describe personality. Consumers try to use products & brands that identify/ resonate with their
personality. Jennifer Aaker, a leading voice in brand personality, has identified the following 5
brand personalities and their general traits (there might be slight change in the personality
dimensions based on the nationality; for example the 'ruggedness' personality may be replaced by
‘peacefulness’ in countries like Japan & Spain). Mostly consumer chooses brands with
personality that is consistent with their self-concept (how we view ourselves). For example an
adventurous, physically active and healthy person may choose brands that are rugged or exciting.
However there are chances that they may choose certain brands to signal their ideal self-concept
(how they would like to view themselves) or others self-concept (how we think others see us).
For example a middle aged man, in his mid-40s, may use BMW-Z series car to indicate
youthfulness. Someone may wear NIKE to show his desire for an active life that is healthier. We
also use brands and products that significantly differ in their personality to signify our multiple
selves. For example we may use a sophisticated brand while at club, at office the brands we use
may indicate "competence' and 'excitement' in other spheres of social life. The 5 brand
personalities and their characteristics are summerised below. It should be noted that these
compartments are not water tight and brands also may indicate multiple or straddled
personalities.
 Sincerity (down to earth, honest, wholesome & cheerful) Eg: Peter England (male
clothing) & BATA (footwear).
 Excitement (daring, spirited, imaginative & up to date) Eg: converse (footwear) & sprite
(cool drinks).
 Competence (reliable, intelligent & successful) Eg: Van Heusen, Arrow, LP (footwear &
clothing).
 Sophistication (upper class & charming) Eg: Raymond’s (clothing) Florshiem (footwear).
 Ruggedness (outdoorsy & tough) Eg: Woodlands, Timberland (clothing & Footwear).

Lifestyles & values: Lifestyles indicate a person’s pattern of living in the world and decides how
a person interacts with the environment. The lifestyles get expressed in terms of activities,
interests and opinions and affect the person’s consumption. For example a person with LOHAS
lifestyle (Lifestyle of Health and Sustainability) will look for organic & natural products that
have minimal environmental footprint. Some people are constrained for time and may have a
very hectic lifestyle. Such consumers may look for produced and services that support their
lifestyle like pre-cooked or ready to cook food items, beauty services at home etcetera. Values
are principles or standards of behavior a person lives by. It is the person’s judgment of what is
important in life. Some common values may be dedication, compassion, care, honesty etcetera.
The value system is generally imparted by social organizations and family of orientation. A
person’s value system significantly affects the consumer behaviour. For example a
compassionate individual may shun non-vegetarian food and may have a vegan life-style. They
also may look for products or brands that treat the value chain participant equitably like ‘Body
Shop’ or are endorsed by organisations like FTO (Fair Trade Organisation).
The 3 consumer characteristics of cultural, social and personality factors significantly influences
a consumer’s behaviour and need to be thoroughly understood by marketers to be successful.
However, there can be individual psychological differences among consumers that can further
affect their behaviour. The effect of consumer psychology on consumption behaviour is
examined in detail.
Consumer Psychology: The importance of consumer psychology in consumption behaviour

is very critical and can be understood by studying the stimulus-response model of consumer
behaviour. According to this model a stimulus (generally external like a marketing or
environmental stimuli However, it also sometimes is internal, like hunger) triggers a response
reaction that result in the purchase decision process and final purchase and consumption. For
example a person with an old cell phone, not adequately meeting his current communication
needs may find or come across an advertisement that may trigger in him a process of buying a
new phone. Sometime the stimulus may not be an advertisement but a news report about the 4G
technology that is far superior to his current phone that use 2G technology (this will be a
technological stimuli). It also may be that our customer here may have received a promotion with
significant salary increase prompting him to look at a new cell phone to match his new found
status. Otherwise it may be a combination of all of the above. Now this will lead to triggering of
his buying decision process and the same will be affected by his motivation, perception, learning
and memory. They are explored in some detail below.

Motivation: is a force or reason that propels you to act. When needs cross certain levels of
intensity they become our motives for action to satisfy the need. For example consider you had
breakfast at 8:00 am. You start feeling hungry by 1:00 pm, cross your hunger bearing threshold
and motivate you to search for, acquire & consume food to satisfy your hunger. The needs can
either be ‘biogenic’ or ‘sociogenic’. The ‘biogenic’ (physiological/ tangible) needs arise due our
biological existence. These are shared by all living beings and include hunger, thirst etcetera.
The ‘sociogenic’ needs arise due to our social existence (and are generally also called intangible/
psychological needs). These are common for human beings (described/defined as social beings)
and not generally considered important for animals, and include need for self-esteem, self-
actualisation etc. Marketers generally are more concerned with Sociogenic/ psychological/
intangible needs and position their product to satisfy these needs apart from the physiological
needs (if the products satisfy only the physiological need they will be considered as commodities
and will compete on price. For example if all cars only transported you from one place to the
other, they will be considered as plain commodities. So the cars differentiate themselves by
providing safety, style, status etcetera apart from transportation. Thus studying the motive/
motivation of consumers for purchasing a product becomes important. Studying consumer
motivational generally is done using some of the best known theories of motivation. The
commonly used theories to study motivation include Freud’s theory, Maslow’s need hierarchy
and Herzberg’s two factor theory. The theories treat the subject matter differently but the results
often are comparable across the theory.
Freud’s Theory: Assumes that motivations are largely unconscious and customers cannot
understand their own motive. When asked the reason for a purchase the customer may state a
motive that is in his conscious realm. However, the real motive may be something different and
situated in his subconscious mind. Experts use techniques like ‘laddering’ or ‘projective
techniques’ or ‘depth interview’ to uncover the customer’s real motives. Marketers need to move
away from stated instrumental motives (functional/ tangible) for a purchase to the unstated
terminal motive (intangible). For example the stated (instrumental) motive for buying a new cell
phone may be its higher functionality & features. However, the unstated (terminal motive) might
be the status a new, feature rich, technology advanced and premium cell phone brings.
According Freud customers understand what is happening in their ego & superego (conscious
and preconscious mind; less of preconscious and more of conscious mind) but are clueless of
what happens in the Id (subconscious mind). It is up to the marketers to understand the
subconscious mind so that they can successfully create and deliver customer value.

Maslow’s Theory: has been one of the most enduring and time tested theories of human need and
motivation. It proposes that human need can be categorised in to different types and the same can
be hieratically ordered. People graduate from lower level needs to higher level needs and this
progression is hierarchical. At the lowest level are physiological needs (Biogenic) like food &
water. Unless a person satisfies the physiological need he cannot progress to the next level of
safety needs that includes security & protection. Some of the safety needs are
biogenic/physiological (for example physical security or protection from harsh climatic
conditions) and some sociogenic/ psychological (for example need for financial security like
pension scheme on retirement). Next is the social needs that cater to our sense of belongingness
and love acceptance by other group members and this is psychological/ sociogenic in nature.
This then is followed by the esteem needs (dealing with status & recognition) and self-
actualisation needs (need for self-development and realisation of a higher purpose). Consumers
logically progress through the hierarchy of lower needs to higher needs according to Maslow.
For example a hungry man is worried about the availability of food than about its cleanliness
(safety) or how others consider the food (social acceptance) or status of the food (self-esteem) or
the healthfulness (self-actualisation). Marketers can target a product at any of the motivation
levels. For example a 5 rupee pen may be catering only to the physical needs of writing (you get
them in most conference where they are more a formality as most people may not use. A
Reynold’s pen, of about 10 rupees also gives you safety (in that it is sure to write under most
conditions without fail) apart from the physical benefit of writing. A customizable pen (name or
design engraved), from Parker, may help you express your love and regards. A high end pen
from Mont Blanc, Cross etcetera may help you improve your esteem and gain some social
acceptance. A limited edition writer series like Mont Blanc-Leo Tolstoy may be a sign of self-
actualization for an upcoming writer.
Herzberg’s Theory: The two factor theory breaks the motives/ needs of a person into different
continuum. One the Hygiene factors (dissatisfiers) and the other the motivating factors
(satisfiers). According to Herzberg a customer is motivated to act only when there are motivating
factors and not when only hygiene factors are present. Alternatively a customer is de-motivated
or dissatisfied when hygiene factors are absent (even when motivating factors are present). For
example let’s take the case of a camera. A customer considers the ability of the camera to take
good/ acceptable pictures to be a hygiene factor (dissatisfier) and extend warranty/ a Carl-Zeiss
lens a motivating factor (satisfier). When the customers is shopping for a camera let us say he
came across 3 options of A, B & C. Camera A takes good photos but had no warranty. The
customers are not demotivated with the brand. Camera B gave poor quality photos but had
warranty; here the customer is dissatisfied with the brand (as the hygiene factor is absent).
Camera C took good photos and had warranty and the customer is motivated to buy the brand as
both the hygiene and motivating factors (dissatisfier & satisfier) were present and would choose
brand C. So it becomes important for marketers to clearly understand the hygiene & motivating
factors (dissatisfiers & satisfiers) so that they can create and deliver the right customer value.

The 3 theories of motivations, Freud’s- Maslow’s- Herzberg’s, thought different in their
treatment of needs/motives have a lot in common. For example let us consider the case of a
customer buying a new high value 4G cellphone after getting promoted and discarding his old
2G phone. The initial inquiries with him revealed the reason for purchase as need for newer
features & functions to keep up with various technological advancements (like 4G network,
social media needs, new apps etc.). However a word association (or a laddering or depth
interview) revealed that he bought the new phone to keep up with his new found status and
connect to his new colleagues’ active on social media. Let us examine or try to explain his
motives use the three different theories.
Purchase Stated Need Actual Need
New 4G cell phone, a Need for increased functions Need to express new
premium priced brand and to keep up with position/status and need to
technological advancements. connect with new colleagues.
Freud’s Instrumental Motive (from Terminal Motive (from Id)

ego/superego)
Maslow’s Physiological/ Safety need Social/ esteem need

(Physical need to (Psychological need to belong
communicate and transact) to a group & express the
status)
Herzberg’s Dissatisfier (hygiene factor- A Satisfier (Motivating factor-

new phone should have the the new phone should give
latest technical capabilities) recognition& status)
Perception: is how a person views a thing. It is the process by which we select, organise &
interpret information (and other inputs) to create a meaningful picture of the world. Our
perception is important as it influences our behaviour. Perception in marketing is the reality and
creating favourable perception about a product or brand is important. To understand the
importance of perception on behaviour let us consider a sales person’s style. Let us consider that
a sales person talks very fluently and fast with his customers. Some of the customers may
consider this a sign of competence and may consider buying from him favourably. Yet others
may consider him very aggressive and thus prevent/stall his efforts to sell them. Thus it becomes
Imperative for the sales person to understand customer perception and act accordingly. When a
marketer tries to promote his products as economical, customer (some, at least) many consider it
poor in quality. When the price is premium the effect may be opposite and some may consider it
snobbish. It thus becomes important for a marketer to understand customer perception and act
accordingly. A good marketing will create favorable perception about the product/ brand
promoting customers to use them.

However, perception is individual and differs widely between people. The difference can be
attributed 3 perceptual processes of selective attention, selective distortion and selective
retention.
Selective Attention: is the propensity to be attentive to certain stimuli and not others. Selective
attention is a trick used by brain to filter out unwanted messages. An average person receives
thousands of messages a day and is practically impossible for brain to process all these. Thus
brain devices selectively attending to some stimuli and not others. It is generally accepted that
 People notice more stimuli related to current needs- for example at noon there are more
chances of noticing an eatery or food ad. Similarly an ad for an Air conditioner may be
more noted in summer than winter.
 People are more likely to notice stimuli they anticipate for example customers expect to
see footwear products in a footwear shop and not electronics items like mobiles for sale
or on display.
 People notice stimuli that are deviant or larger- for example a blue shoe among a row of
white shoes will get noticed more. Similarly a $ 100 off (on a 2000 $) product may be
noticed more than 5% off on the same product.
Selective Distortion: is the tendency to interpret he stimuli to fit our beliefs or experiences.
Selective distortion works in favor of the established brands. For example people may evaluate a
chopper bike from Harley Davidson more favorably to one from Yamaha. However, when it
comes to a racer the vice-versa holds true.
Selective Retention: is the tendency to retain only certain information (that generally confirms
with our beliefs) and not others. This necessitates marketers to continuous communicate and
reinforce brand messages among its customers. For example a customer may retain only the
good points of a pain medication (like Disprin and immediate relief) and not the bad ones like ill
effects of aspirin consumption on the liver.
Subliminal Perception: is the perception of low threshold messages by the subconscious brain.
These messages do not have the threshold to cross the conscious brain but are actively noted by
the subconscious brains. Marketers have been accused of planting subliminal messages to affect
the customer’s choice. Sensory ones like smell, color, sound etc. can be effectively used in
subliminal messaging.

Learning & Emotions: Learning is relatively permanent change in behavior. Most of the learning
is believed to be through experience. Learning happens through an inter-play of stimuli, drive,
cues, responses and reinforcements. For example an advertisement for a new flavor of chewing
gum may act as a stimulus. This stimulus creates a drive (a stimulus impelling action). Drives
when supported by right cues (cues are smaller stimuli that decides when and where a person
will act) ends up in responses. In the chewing gum case, the stimulus was the advertisement that
created a drive (the person may have seen the advertisement and identified with the message
creating a drive in him to buy the new chewing gum and use it). However, the cue may be a
point- of- purchase (PoP) display. He acts only when cue prompts him to act and here it is the
PoP display which he saw when he went to buy cigarettes. As it is common among smokers to
consume gum/ mouth freshener after smoking, the PoP display acts as cue to him. He responds
by buying and consuming the gum and may find it good. This experience acts as a reinforcement
(+ve) and the customer ‘generalizes’ this learning. Next time when the same company introduces
a new product the customer may consider it good by extending his learning experience from the
chewing gum to the new product. This is how established brand are able to grow their brand and
portfolio easier than new entrants. Generalization (tendency to ignore the differences in stimuli)
is a principle widely used in marketing for product and brand extensions. For example the
success with Dove soap has led to certain generalization among the consumer about the brand
and has helped Uni Lever introduce newer products like shampoo, moisturizer, conditioner etc.
The opposite of generalization is ‘discrimination’ and is the ability to understand the differences
among similar stimuli. Marketers use ‘discrimination’ to create product differentiation and
positioning. For example Close-Up; among all the ads for toothpastes the brand Close-Up is able
to create and communicate the difference of the brand being a ‘Fresh- Breath’ brand. Challengers
of market leaders (market leaders are generally the largest brand in the category and challengers
are the next biggest) generally use customer’s ‘discrimination’ ability to differentiate themselves
from the market leader. A good marketer can effectively use the appropriate stimuli (for eg: a
good advertisement) to create a drive and use appropriate cues (for example a trial offer) to bring
out appropriate customer response like product trial (it should be noted that some authors do not
differentiate between stimuli and cues and treat them same). The trial when rewarding becomes a
positive reinforcement (else they become negative reinforcement and customers stop buying the
product).

Emotions are instinctive or intuitive feeling as distinguished from reasoning and knowledge.
Marketers widely use emotions to influence customers (can be positive like love, confidence etc
or can be negative like fear, anger etc). Emotionally associating brands with its customers help
make a common identity thus helping them choose easily. The emotional connect also makes the
customers less susceptible to competitor’s communication. For example coke evokes happiness
and makes the brand resistant to attacks by competitors like Pepsi. Marketers use communication
not only to impact learning (logical or rational) but also to create emotions (non-logical or non-
rational appeals). A successful brand/ product marketing will influence consumer learning and
emotions positively.
Memory: is something remembered from the past. It is the process by which a person stores and
retrieves information. Memory is generally considered to be the two types- short term and long
term. Short term memory is relatively temporary and limited and the long term memory
permanent and vast. The objective of any marketer is to influence the long term memory by
creating appropriate brand associations like thoughts, perceptions, images etc. However
customer brains generally tend to resist this due to reasons like cognitive/ information overload,
product characteristics (for example variety seeking buying behavior or convenience goods). A
marketer should ensure that the marketing program helps encoding of the brand/ product in the
consumers long term memory. However, this may be easier said than done as all information
initially are stored in the short term memory and later transferred in to the long term memory.
Thus marketers will have to repeat their stimulus over a long period of time to be a part of the
customer’s long term memory.
The key psychological process in CB can be summerised as per the model given below

Consumer Buying Decision Process:
A stimuli (marketing or otherwise) when influenced by the consumer characteristics and

consumer psychological triggers the buying decision process in the consumer/ customer. The
commonly studied consumer buying decision process is a 5 stage process and generally studies
the all customer experience in learning, choosing, using and disposing of products and services
for personal consumption. The buying decision process generally answers the W& H question
like what the consumers buy, why he buys, who uses etc. However, it should be noted that
customers may not go through all stages always. The stages they go through depends up on the
type of the product (shopping goods or convenience good), the novelty of the product, the cost of
the product, technical features, the importance of the product to the customers, his previous
experience and learning etcetera. While studying consumer buying behavior, it may not be
possible always to clearly identify these 5 stages even when they are present.
However, all buying decision process starts with recognition of the problem. A problem is
recognized by the consumer through internal or external stimuli or a combination of both. An
internal stimulus might be something like hunger, thirst, feeling warm or cold etc. An external
stimulus can come from the marketer – for example an advertising or other source like a friend
pointing out a need to change your car. A problem is nothing but a need (felt state of deprivation)
and needs to be solved by acquiring appropriate goods and services to satisfy the need. For
example an ‘year-end- offer’ advertisement for televisions may spark an interest to acquire a new
television (you may recognize that your current television lacks a lot of features and offers poor
viewing and audio experience all of which can be solved by acquiring a, feature rich television).
Successful marketers develop strategies to promote consumer interest regarding their products
and services by giving the information to them and helping them identify their problems that
need to be solved through consumption of goods and services. The need identification/ problem
recognition is followed by a search for information on the various products and brands that can
solve the customer’s problem or satisfy their needs. The information search depends on various
factors (like value of the product, novelty of product, product type etc) and may take two forms-
Heightened attention or Active information search. A heightened attention is (a form of selective
attention) one where a person becomes receptive to information to a specific product category or
brand. In active search, the customer actively gathers information from various sources and
actively compares them. The commonly available information sources are
 Personal sources like friends and family
 Commercial sources like advertising, websites, magazines etc
 Public sources like social media, rating agency etc
 Experiential sources like product trial, sampling etc.

each of the sources have different characteristics in terms of reach, appeal, exposure, credibility,
etcetera and may vary with the type of product. Marketers should use the most appropriate

media to convey the relevant information to the target audience/ customers in a timely and
economical way.
It is imperative to understand the search dynamics when

a consumer is making a purchase decision. For every
product category there is a total set of brands available
(like the population. For example if you are trying to
buy laptops there are a total of about 30 brands).
However, out of this total set, customer may be aware of
only about 10 brands and this constitutes the customer’s
‘Awareness set’. However, the customer may not
consider all the brands (that he is aware of) while
purchasing the product (For example though I am aware
of Apple i-Phone but it is not generally a part of my
consideration set while buying a phone). The products/
brands that are included in his ‘buy probability list’
makes his ‘consideration set’. After comparing all the
features (of products/ brands in the consideration set) customer creates a ‘choice set’ from which
he makes the final choice or decision. So while searching for product/services customers pass
through a hierarchy that starts with total set, then the awareness set, consideration set, choice set
and the final choice. This
movement will be based on a set
of attributes that may include
price, brand, nationality &
product features etcetera. For
example while buying a shoe a
person may first consider style
(for formal shoes) like oxford
pattern, monk strap, loafer, as the
first choice criteria. The second
choice criteria may be price
(premium or economical) then may be the material (leather/ synthetic). A marketer should
understand the customer evaluation criteria and its hierarchy to develop appropriate
communication so that the product/ brand is a part of the successive sets involved in customer
search dynamics.
Evaluation of the alternatives: Customers’ evaluation of products is a complex process

involving conscious and unconscious mind. Consumers evaluate products based on the products/
brands ability to satisfy their needs. To satisfy the needs, every product needs to provide
benefits/attributes. Customers evaluate products based on these attributes/ benefits. These
attributes/ benefits become the KSF (Key Success Factors) for the product and become critical

for product success [In consumer behavior studies this is done through Customer Value Analysis
(CVA). CVA is a study of what attributes/ benefits customers seek from a product while
purchasing or using it. Marketers use this information to create customer value through
developing appropriate marketing strategy (STP) and Marketing Program (4Ps)]. Based on
customer’s evaluation of the KSFs (various attributes/ benefits) they are seeking from the
product) customers from Beliefs and attitudes about the product; which in turn affect their
behavior (Belief is a thought a person holds towards a product and attitude is his favourable/
unfavourable evaluations, emotions and intensions towards the product. For example people
believe that OPPO provides the best mobile camera/ selfie experience and people who prefer
good camera phones have a very positive attitude towards OPPO). However, this customer
product evaluation and attitudinal formation are not very consistent and widely differ. There are
commonly two models of product evaluation and attitude formation widely studied in CB -
compensatory models and non-compensatory models (‘Product Evaluation’ is also called
‘attribute- evaluation procedure’).
Compensatory Model of attribute- evaluation process generally looks at a holistic evaluation (of
products by customers) based on the attributes/ KSF. Here the customer selects the product
where the total attribute scores are highest. For example if you are going to buy toilet soap and
you look for 3 attributes in soap- Fragrance, Foam and Moisturizing. Under ‘Expectancy-Value
Model’ (proposed by Fishbein, this model is the most commonly studied compensatory model)
you will select a brand that gives you the highest total score. For example you have brands A, B
and C in your consideration set; your evaluation may be as following (all 3 attributes are rated on
a 0-10 scale).
Attribute Foam Fragrance Moisturizing Total
Brand A 6/10 6/10 8/10 20/30
Brand B 7/10 9/10 7/10 23/30
Brand C 5/10 8/10 8/10 21/30
Here the obvious choice is Brand ‘B’. Under compensatory model of attribute evaluation, like
expectancy value model, low score in one attribute may be compensated by a higher score on
another attribute. For example in case of ‘Brand-B’ a low score on ‘Moisturizing’ is
compensated by higher scores on ‘Foam’ and ‘Fragrance’.
Another slight variation is possible when customer assign different weightages to each of the
attribute. For example in the above case customer may assign a weightage of 10% for Foam,
20% for Fragrance and 70% for Moisturizing (this may be the case in winter. However, in

summer he may assign 20% to Moisturizing and 50% to Fragrance) totaling to 100%. Then the
scores in the above case will change to
Attribute Foam (10% Fragrance (20% Moisturizing Total

weight) weight) (70% weight)
Brand A .6 1.2 5.6 7.4/10
Brand B .7 1.8 4.9 7.4/10
Brand C .5 1.6 5.6 7.7/10
As the weightages for each attribute changes the customer choice changes from Brand ‘B’ to ‘C’.
Knowing the customer attribute-evaluation helps the marketer to position or reposition his
offerings (change/ create position to match the customer’s attribute evaluation criteria. For
example in the above case Brand ‘B’ can add more moisture to their soap and promote it as a
high moisturizing soap), design new products (with more moisturizer in the above case or better
communicate (For example to say that there is enough moisturizer in Brand ‘B’; in the above
case).
Non-compensatory models of attribute- evaluation work slightly differently. Here poor

performance in one attribute is ‘NOT’ compensated by good performance in another attribute.
The customers make rule of thumb (heuristics) to evaluate the choices and make a purchase
decision. Generally 3 models of non- compensatory attribute- evaluation is commonly studied
and includes
 Conjunctive Heuristics: Where customer keeps a minimum cut off criteria for all
attributes considered. For example in the above case if the customer decides minimum
score should be 7/10 all attributes; Brands ‘A’ and ‘C’ automatically gets eliminated as
they have at least 1 criteria where they are scoring less than 7/10 in customer’s
evaluation.
 Lexicographic Heuristics: The customer chooses brand based on the most important
attribute. In the above case the most important attribute is moisturizing (70% weightage)
and based on this the customer may select Brand ‘A’ or ‘C’.
 Elimination-by-aspect Heuristics: Customer compares brands based on most important
attributes and then progressively eliminates non-confirming brands. For example in the
above case let us assume minimum expected score on each attribute is 7/10. Most
important attribute is Moisturizing and all brands clear comparison in this attribute. The
next critical parameter is Fragrance and Brand ‘A’ is eliminated in this round. In the last
round of comparison the attribute is Foam and brands remaining are B and C; and ‘C’
gets eliminated as it does not cross the minimum standard of 7/10.

Once the customer evaluates the alternatives he/she forms their purchase decision.
Purchase Decision: It is formed after attribute evaluation and

the customer generally decides on the brand/product to be
purchased. This actually is his purchase intention. If there are
no external influences purchase intentions are converted in to
purchase decision. However, many a times the re-intervening
factors between the purchase intention and purchase decision.
The purchase intention may be affected by the attitude of
significant others like friends and family. They may influence
the customer to change his decision even at this advanced stage.
For example in the above case children might influence the
customer to buy brand ‘A’; through his evaluation resulted in
purchase intention of brand ‘B’. More the influential the person
higher will be the chances that customer’s purchase intention
will be different from purchase decision. Another factor may be
unanticipated situational factors. For example though the
customer intended to buy soap brand ‘A’ he may end up buying
brand ‘B’ or ‘C’ due to non-availability of ‘A’ (an unanticipated situation). The purchase
decision will include product/ brand choice, Dealer Choice, Amount of the product purchased,
time of purchase, and method of payment etcetera. The purchase decision takes longer when the
product under consideration is complex in nature (like a shopping good- For example a car or a
computer) or there is perceived risks associated with the purchase (like financial risk, social risk,
functional risk, physical risk or psychological risk).
Post Purchase Behavior: The post purchase behavior depends on the product experience. If the
customer expectation is exceeded by the product then the customer is delighted/ ecstatic. If the
performance meets customer expectation there is a resultant customer satisfaction. Satisfied and
ecstatic customers generally are positive brand ambassadors. They talk favourably about the
product/ brand/ company and influence their friends and family to buy the product. However, if
the customer is not satisfied with the product (customer dissatisfaction) he or she may turn to
brand disparagement. The customer goes about talking bad about the product/ brand/ company
and dissuades prospective customers especially among his friends and relatives. Some customers
may also vent their publicly (like through social media posts) costing future damages to the
brand. Thus it becomes imperative that marketers put their best effort to meet the customer’s
expectations regarding their products and services. Customers also dispose of the products/
packaging after use. The marketers should promote right use and disposal so that customers
derive the best performance from the product /services. For example toothbrush like Oral B has
colour indicators in bristles that tell customer went to change their brush. Water purifiers have
filter indicator that tells the customer when to replace the filter, so that customers get a continual
supply of clean drinking water. Disposal of used products (durable like TV phones etc.) is also

important. Improper disposal main course accident or pollute environment bringing bad
publicity to the brand. Nokia help customer dispose-off used phones by collecting them back and
recycling them (they also plant a tree for every returned phone) thereby significantly improving
the brand image. While studying post purchase behaviour a marketer has to primarily look at
1. What is the post purchase satisfaction?
2. What is post purchase action and taken by customer (like recommendation to others)
3. How do they use the products, post purchase and how it is disposed off once the utility is
over?
Customer buying roles: The customer

buying is not a very simple process;
especially when it is shopping goods or
specialty goods (durable). Many a time
the buyer decision process involves
multiple roles. Thus rose may have
multiple players or players may have
multiple roles in the buying process.
The commonly identified roles in
buying processes are
Initiator: Initiative is the person who

starts the buying Decision Process.
They commonly recognise the need
state and initiate the process of acquiring goods/ services to satisfy the need. For example the
home maker/ wife maybe the initiative for buying a new stove. She may understand the problems
given by the current gas stove she regularly uses and may suggest purchase of new gas stove.
Influencer: Is/ are people who influence the decider and buyer while making the purchase
decisions. The influencer may hold ‘authority’ over the decider/ buyer (like a boss telling his
subordinate or organisational buying) or ‘expert power’ (power due to knowledge for example a
doctor/ dietician telling his patients on what to eat) or ‘referent power’ (a celebrity influencing a
buyer on fashion). The influencer may be directly or indirectly influencing the buyer and decider.
When the person is planning to buy a car, he may be influenced by his friends, mechanics,
family, driver or a celebrity who endorses the brand.
Decider: is the ultimate approver of the buying decision. The decisions like What to buy, when
to buy and where to buy etcetera is the decider’s prerogative. The decider may take his own
independent decisions based on his evaluation of the information gathered or maybe just an
endorser expert’s opinions. For example when buying a new gas stove the wife maybe the
decider. When it is a new car, the decider may be the head of the family.

Buyer: is the person who formerly acquires the product or services for use. The person does the
formalities to acquire the goods/ services for final use. While buying a new gas stove the
housewife may be the decider of what to buy. However it may be the husband who formally go
and buys the product.
User: is the person who uses the products or services. For example in the above example the user
is the Housewife or the servant maid (mostly). The User experience is important as it influences
the post purchase behaviour and decides whether the product may be bought again. A marketer
has to clearly understand the different buying roles so that they can influence them through
appropriate communication process. The buying roles may be played by different person (for
shopping or specialty goods) or maybe all rolled into one person (convenient goods). In
consumer buying behaviour the roles may not be very clearly delineated however in industrial
buying behaviour the roles are very clearly identifiable.
Consumer buying behaviour types:

Consumer behaviour studies how consumer evaluate choose use and dispose of goods and
services to satisfy the needs and wants. Though the buying behaviour may differ due to many
affecting factors like type of good/ services personal and psychological characteristics of the
buyers, resource requirements, and frequency of purchase etcetera- consumer buying behaviour
can be classified into four types according to Assael. The classification of consumer buying
behaviour is based on two important factors.
1. The customer involvement: in the buying process. A customer may exhibit high involvement
where he may invest lot of resources (in terms of time, money, knowledge etc.) in acquiring the
G/S (this is mainly done when the products are of shopping or specialty goods category). For yet
other products (like convenient goods) the customer may have very low involvement in terms of
resource investment in making the buying decision.
2. Brand difference: is yet another factor used in classifying consumer buying behaviour. The
brand difference may be very high (in terms of features, benefit, images etc.) or very low (for
example a commoditized product like salt).
Based on these two factors the consumer buying behaviour can be classified into four types.
1. Complex buying
behaviour: is exhibited when
a customer is highly involved
in the purchase process and
purses significantly difference
between brands. The product
is generally infrequently
purchased, visible to others,
costly and high in perceived

risk (financially, reputational, physical etc.). The customer has clean attributes based on which
he evaluates compares brand and forms an attitude towards the product brand. Marketers of these
categories of products should have a clear understanding of the customer’s evaluation and choice
process and should assist customer at each stage. Marketer should also ensure that their brands/
products are well differentiated and positioned in comparison to the competitive brand. Complex
buying behaviour products example would include automobiles, home electronics and gadgets,
investment etc.
2. Dissonance reducing buying behaviour: is the result of high customer involvement in the
buying process when the brand has little or no difference between them. The purchases are costly
and infrequent and the customer gets deeply involved in purchase. However the attributes on
which the products are evaluated is not be very clear and there is no difference among the
brands. After purchase the customer may start noticing the differences in the products or may she
better features in other products. The task of the market is to constantly communicate with the
customer and provide him with information that will help him justifying tis purchase decisions.
The marketer should also make emotional connection between the brand and the customer.
Common products under the category include furnishing, Jewelry, clothing etc. A customer who
buys new Jewelry may feel good about it for a few days. However, he may notice a new design
of Jewelry and start feeling unhappy about his purchase. In such situations customer relationship
management activities, apart from continuous communications can be helpful in reducing the
dissonance.
3. Variety seeking buying behaviour: is exhibited when customers have low investment in
the purchase of the product category but the brand has significant difference. The customer seeks
a lot of variety in the categories (for example biscuits) and keep changing/ trying new products
even when he is satisfied with current brand. The customer generally evaluates the product after
consumption (unlike Complex buying behaviour or dissonance reduce buying behaviour
products). As the customer tend to seek a lot of variety the marketing objective is to provide
economics scope (provide wide varieties. For example Britannia has many types of biscuits and
multiple variant under each type) and to ensure ‘point-of-sales’ promotion so that the customer is
reminder at the point of choice [(customer generally makes impulsive decision to buy the product
and does not pre decide on the Purchase (Especially the brand. Sometimes they may decide on
the product like example may decide to buy biscuit/ chips but not which ones)].
4. Habitual buying behaviour: products are characterized by some customer investment and
very less difference between the brands. For example salt- customer buy salt out of habit and do
not involve in evaluating brand. The generally buy familiar brand (name, logo, colour etc.) Or
brands recommended by the retailer. They do not evaluate the products post usage and are
passive to most information regarding the product category. Hence marketer has to ensure high
level of brand awareness (especially at point of sales) and use promotion (like sales promotion
and trade Promotion) to push the products across to the customer. Some customers may appear to
be brand loyal; however, it is out of sheer habit and not any specific loyalty as such. The

marketing communication should concentrate more on creation of awareness about brand visual
symbol, names etc.
The basic consumer behaviour can be predicted based on which of the four quadrant of
marketer’s product belongs to. A summary of the consumer’s behaviour for each products/
Consumer behavior category is summarized in the tables below
Complex buying Dissonance Variety seeking Habitual buying

behaviour reducing buying buying behaviour
behaviour behaviour
example car furnishings cosmetics commodities
Consumer Passes through all Passes through all need – buying & Need - buying
decision process 5 stages 5 stages use - evaluation
Frequency of infrequent infrequent frequent Frequent

purchase
Cost Costly Costly Not costly Not costly
Decision making Many people Usually family Individual Individual

unit
Product visibility High Medium High Low

Industrial buying behavior:
Also called organizational buying behavior, it is the process by which a company/
organization establishes a need for purchasing products and choose among competing brands and
suppliers. There are some significant differences between CB and IB and the same may be
summarized as below: -
 IB is for non-personal consumption. The IB results in purchase of goods and services for
business consumption and it is not final. The G/ S brought are used as inputs for other
products or are used for running of business.
 IB is geographically concentrated. Manufacturing and other business organizations many
a time are characterized by geographical concentration (the business units are closely
situated so that they can transact easier with others). For example, car manufacturing in
India is concentrated in Chennai, Pune, Gurgaon and Sanand. Similarly knitting industry
is concentrated in Tripura and Ludhiana.
 Large volume of purchase is another characteristic of IB process. Industrial customers
generally buy in large quantities and buy infrequently, unlike consumers.
 Rational decision making: - IB is characterized by rational decision making (most of the
consumer buying is emotional in nature). Customers systematically evaluate the cost-
benefit of all products/ brands offered and choose that one which maximizes their
return/benefits.
 Formal decision making: - IB is characterized by formal decision making; where a group
of technically qualified people come together to make an informed decision. They
evaluate the product on various parameters (like cost, performance, maintenance, contract
team etc.) before making a purchase. The decision making is also formal with prescribed
procedure for the purchase.
 Buying center: It is a formal decision making unit in industrial purchase composed of
specialist. Each member has his own area of expertise and evaluates the product from
their angle. For example, if a new company is buying new generator the DMU/ Buying
center may contain electrical engineer, maintenance engineer, production manager,
finance manager and the purchase manager. Each of the members will evaluate their
product from their angle. For example, the finance manager may look at the cost,
purchase manager at the contracting terms and condition, electrical engineer at the
technical specifications etc.
 Distinct/ observable buying stages are seen IB. The stage starts with problem
identification and passes through various stages leading to purchase, use of product and
performance review. A brief representation of the organizational buying process is
summarized in the figures below. The IB process is also longer (8 steps instead of 5 steps
as in CB).
Industrial Buying Behaviour:

The steps in IBB and what happens at each of these steps are mentioned below: -

1) Problem recognition: it
is when someone in the
organization identifies a
problem that can be
solved by buying x using
a new product/ service.
2) General need
description: involves
description of the solution
in general terms like type
of product, quantity, price
etc.
3) Product specification:
based on the general need
description the buying
center experts develop a detailed technical description of the product specifying all important
parameters to be included in the product.
4) Supplier search: once the product is specified the buyer searches for probable suppliers, who
can deliver products according to the specifications developed/ specified by the buyer.
5) Acquisition and analysis of proposal: once the supplier is identified a request for proposal
(RFP) is sent to them and the proposal is acquired. The proposal (quotation/ bids are similar to
proposals) are the evaluated-both technically and commercially.
6) Supplier selection: is done based on the proposal analysis and the supplier with highest rating
is generally selected (sometimes 2/3 supplier are selected). The evaluation process may give due
weights to the commercial and technical aspects of the supplier proposal.
7) Selection of order routine: once the selection of suppliers is done an order routine is
developed. The order routine will specify/ document the complete purchase process right from
the ordering process, to delivering formalities, post sales service formalities, payment formalities
etc.
8) Performance reviews: is the last stage where the company reviews the performance of the G/S
and document the same. The review is used for future decision where purchasing similar product
purchase or re-buying of the same product.
It has to be noted that when there when there is a regular purchase of certain types of product-
like raw material the IB process may not be strictly followed or some of the stages may be
forgone.

Buying Center Roles:
The buying center is a formal collection of experts and is essentially a Decision Making Unit.
However, like CBB, there are different roles that can be identified in the buying center. The roles
include initiator, influencer,
gatekeepers, deciders, purchaser Initiator Influencers Gatekeepers
and users. ‘Gatekeepers’ is an
additional role and consist of Decider Purchaser Users
people who control access to the
rest of the members of buying
center. For example, a receptionist
may control the access of the sales
person to the different members of
the buying centers. Sometime an external expert (who has been called to advice the buying
center due to their lack of technical expertise) may act as a gatekeeper to the information being
shared with buying center (the expert only may be able to pass on the information or convince
the rest of the buying center members. any direct information from the company may be
discarded by the buying center members due to their lack of expertise).
Initiator Initially perceives a problem and initiates the buying process to solve it.
Influencer Affects the purchasing decision by providing technical information or other

relevant (internal or external) information.
Gatekeeper Controls the information to be reviewed by members of the buying group. (For
example, buyer may screen advertising material and even salespeople.)
Decider Actually makes the buying decision, whether or not they have formal authority to
do so. Could be the owner, an engineer or even the buyer.
Buyer Has formal authority to select and purchase products or services and the
responsibility to implement and follow all procurement procedures.
User Actually use the product in question. Can be inconsequential or major players in
the process.
A brief description of the role is given in the table. The CBB and IBB are significantly different
from each other on various parameters. A brief summary of the difference between the two is
summarized below.

Differences Between IBB & CBB
IBB/ OBB CBB
Functional involvement/ Organisational objectives Family involvement/ Personal objectives
Rational decisions/ task motive Emotional decisions/ Social or psychological motive
Technical expertise Trend/ style expertise
Large professional DMU: called buying Centre small/ personal DMU
Professionally related Socially related
Distinct/ observable stages Undistinguishable stages
Large volume & value, geographically concentrated Smaller volume & value, geographically spread
Direct, two-way & personalised communication Indirect, one-way & common communication
Going Global
Globalization is an ultimate truth awaiting many business organizations due to increased
globalization of business activity. Globalization offers not only opportunity but also threat, many
times. The global business environment may differ significantly (both in terms of macro & micro
environment factors) and may need significant changes in the way organizations do business in
their domestic markets. This change may need significant investment in terms of resources like
money, technology and managerial expertise. This means heightened business risk and returns.
For going global one of the key functions an organization has to perform is International
Marketing.
International Marketing is the application of marketing principles in more than one country;
characterized by significant changes in the business environment. A global firm is one that
operates in more than one country and capturing advantages (like in production, R&D, financial
advantages etc.) not available to domestic firms. While many times go global, they may be
varying reasons for doing so. Some of the most common reasons for globalization of business are
 Small domestic market: Many organizations globalize due to the limited size of their
domestic market. For example, Swiss companies like ABB, Roche, Swatch, Swiss-Re
and many others have been restricted by a very small domestic market pushing them to
globalize for growth.
 For Growth: Some marketers/ business may belong to large countries. However, the
domestic market may saturate necessitating the brand/business to go global. For example,

the Chinese mobile manufacturers have all expanded in to other marketers for growth as
the domestic market saturated.
 Due to Competition: Sometimes organizations face intense competition in the domestic
market which prompts them to expand in to international market. The Chinese consumer
electronics giant Haier was such a case. Haier faced intense competition in its domestic
market and was constantly accumulating losses. As a survival tactic the decided to
expand in to U.S. that was a larger market and where competition was far less intense.
Today Haier is the largest consumer electronics firm in America and has significantly
improved its financial position due to international expansion.
 Strategic reasons: like resources may be another reason for expansion. For example,
most of the oil companies have expanded in to Arabian Peninsula due to free availability
of oil reserves in comparison to other parts of the world.
 Tax/Financial reasons: also contribute to international expansion. Many firms migrate to
countries that offer tax breaks of some kind or the other. Destinations like Mauritius,
Singapore, Caribbean, Dubai etc. attract foreign companies due to the tax breaks offered.
 Customer Migration: Can be another reason for globalization. When your major
customer expands internationally, the organization has no options but to expand. For
example, Samlip (maker of automobile headlights) expanded in to India due to its major
customer (Hyundai) expanding in to India.
 Risk reduction: A common reason for globalization is to reduce the risk associated with
operating in one market. When you have presence in multiple markets any downward
pressure in one market may be made up by opportunities in another. For example, J&J
has seen reducing business in US & Europe but has been able to withstand the same due
to growth in Asian markets like India and China.
 Counter attacking the competition can be another reason for going global. For example,
when American & European software and pharmaceutical giants expanded big time into
India; Indian companies (from software & pharma industry) responded by expanding
their American & European operations.
 Visionary Managers are another reason for globalisation of firms. For example, when
Ratan Tata took over chairmanship of the Tata firms, they were mostly Indian. However,
in about two decades he has pushed the organisation to become global and today Tata is
more a global organisation than Indian. The same is true for Birla group under the
leadership of Shri. Kumaramangalam Birla.
Major International Marketing Decisions

Globalisation of business, though an imperative takes systematic planning and dedicated efforts.
Internationalisation of business and marketing starts with the analysis of global marketing
environment. Once the environment is understood the next logical decision is whether to go
global and if yes which markets to enter. Once markets are selected the entry modes have to be
decided and a marketing program for each market is developed. All this has to be supported by
appropriate marketing organisation that will make internationalisation a smooth effort. It should
however be noted that these decisions may not be a linear process, and may many times involve
simultaneous efforts. A detailed description of activities at each stage in the international
marketing decision is discussed below
 Looking at Marketing
Environment: Every business
has its existence in context to
an environment and it
becomes imperative to
understand the marketing
environment to achieve
marketing success.
International business
environment may be
substantially different from
the domestic business
environment, necessitating
changes in the marketing plan (both marketing strategy and marketing program). The
difference may be due to the macro or micro environment. For example, the legal
environment may be very different. In countries like Israel & Pakistan advertising of
cigarette products are freely allowed. However, in US & Europe the communication for
tobacco products are self-regulated and in India it is completely banned. Culture is
another Macro factor that may affect marketing. In Europe & American continent all
forms of meat are consumed, Arabian Peninsula & North Africa is predominantly Islamic
and do not consume pork. In Indian subcontinent beef is absolutely abhorred. The
Chinese & East Asian countries prefer pork to other forms of meat. McDonald has
developed special products for many of these markets like veg based big Mac for India,
egg-based burger for Scandinavia, fish-based dish for Japan, beet root sauce in New
Zealand etc. There may also be changes in micro environment. For example, in the
distribution system Retailing is dominated by organised format in US (85%) and in
countries like India it is highly unorganised (>90% is unorganised in India) necessitating
changes in the distribution.
 Deciding whether to go global? Once the business environment is analysed and fully
understood, the next step is to decide whether the organisation should go global at all?
This decision depends on various factors like what are the risks and whether the
organisation can absorb the risk? There may be many types of risk like political risk,
currently risk, legal risk etc. the company has to ascertain whether it can absorb these
risks or not. Once they decide on taking the risk the next step is to assess whether there
will be resources to support the internationalisation. The resources may be not just money

but also other resources like time, managerial capabilities, technological capabilities etc.
In case the organisation has the resources, it should be looked in to whether the
organisation can adapt to the changes required/ demanded by the international market.
They should also decide on their ability to adapt the marketing plan for the international
market.
 Deciding which markets to enter? Once the international landscape is thoroughly studied,
capabilities assessed and decision taken to go global, the organisation should choose the
precise markets for its expansion. It is generally seen that most organisations start their
expansion by getting in to a few markets and then growing over a period of time to
become truly global. The choice of initial markets depends on various factors like market
attractiveness, competitive pressure, geographic distance, psychographic distance and the
environmental stability. Market attractiveness is measured in terms of size of the market
and the growth trends. The competitive situation should look in to the number of
competitors, their market positions, pricing, margins etc. Markets with lesser competition
may be easy to tackle but lesser developed (More players will promote category
penetration and increase consumption of category). The geographic distance is another
important factor for choice of markets. Nearer geographies promote easier movement of
critical resources like men, material, facilities etc. Another factor to be considered is the
psychographic distance. Foreign markets may be psychologically very different from
your domestic markets. For example, an American company may find customers & other
stakeholders very different in India or Japan in terms of attitude, perception, behaviour
etc. So it becomes imperative to understand the psychographics of the target markets and
ascertain whether the company can adapt to it. Business environment sustainability is
another important factor that will have to be considered before internationalisation.
Markets with high uncertainty in the business environment are risky even when they are
attractive. Once an overall assessment of possible markets for entry is done the
organisation should choose most attractive markets and then proceed to the lesser
attractive markets over a period of time. According to study of university of Uppasala, it
has been found that; generally, internationalisation starts with markets that are
geographically & psychographically closer to the domestic market and expand- over a
period of time- to geographically& psychographically divergent markets. For example, an
Indian company may initially prefer expanding in SAARC (Nepal, Bangladesh, Srilanka,
Bhutan etc) before going in to markets like US &Europe that are very different.
 Deciding on how to enter the new market: The mode of entry in to international market is
important as it decides the resource commitment (money, time, effort…), the risk
involved, control factors and the returns. The easiest of the entry is where a company
exports indirectly. Here the organisation chooses an exporter, in the domestic country, to
whom they supply the good and they send it across to the foreign destination. Most
Chinese goods manufactures of low value product does indirect export to countries like
India. They select an agent in china who exports goods to India & sells it to prospective

customers; resource requirements and risk involved in indirect export is minimal. Direct
export is one where the firm ties up with an agent in the foreign country and exports it
through them. They have a permanent agreement with the agent in the international
market and relation is relatively permanent. For example, a rubber producer based in
India can directly export to U.S. through an agent based there. The agent is the
representative of the Indian rubber producer in U.S. A slightly more resource
commitment is required for licensing/Franchising (Licensing is done for products &
franchising is done for services). Here the company chooses a foreign partner, provides
him with necessary technical & management expertise to conduct business in the partners
country (on behalf of the licensor or franchisor). In India Luxor is the licensee for parker
(Licensor) and Jubilant food works is the franchisee for Domino’s Pizza (Franchisor).
Licensees & Franchisees conduct the business on behalf of their partner in the target
country and are strictly guided by the licensor/ franchisor. Generally, the resource
commitment for Licensing/ Franchising is more. The biggest resource requirement is the
managerial expertise & the technology that is to be shared with the licensee/ franchisee.
Revenue is generally generated as a royalty, which generally is calculated as a percent of
sales. Joint Venture (JV) is yet another mode of entering the foreign markets. Classical
examples of successful joint ventures in India include Hero Honda (split in 2012),
Maruthi–Suzuki, IFB-Bosch (split later) etc. JV involves both the partners sharing the
resources required to start the business.
 The control of the JV is
based on the shareholding pattern
and the legal agreement. The
partners share risks & returns on a
proportionate basis (share holding
pattern). The partners can bring in
their expertise and create vast
synergies. For example, in Hero
Honda, Honda brought in the
technology and money and Hero
the local market knowledge &
facilities. Their association was so
synergistic that the company went
on to become the largest producers of the two wheelers in the world. Success of Maruthi-
Suzuki India Ltd is no less inspiring and more enduring. Direct investment is another
form of expanding in to foreign markets. Direct Investment can be in a green field
project; for example, Ford India Ltd. Ford, U.S. invested to start a car project from the
scratch in India (at Maramalai Nagar near Chennai). The risks are high and so are the
returns. Same hold true for Hyundai which invested in starting a green field project in
India as a part of their international expansion. A company may also buy in to a foreign

market. For example, coco- cola expanded to India by buying out Parle (the beverages
unit that made Thums up, Gold spot and Limca). This saved Coco Cola the efforts
associated with setting up a new project and offered an already existent market. However,
the price they had to pay was significantly higher in this case. The choice of entry mode
is dependent on various factors that may include the size of the market, competitors,
resource requirements, business environment (PEST), risks and returns. A careful
evaluation of alternative entry modes and choice of the most appropriate one is most
important for the success of international expansion.
Deciding on the Marketing Program:

Once the entry is decided the next decision is the marketing program. [However, sometimes the
whole marketing plan may have to be adopted where both marketing strategy and program are
changed. For example the marketing strategy and program for Honda two wheelers will be
different in India and US. In India their strategy may be to target the middle and lower class
(large in numbers) that use bikes for transportation and position Honda bikes as an economic
transportation solution. However in US they may choose more affluent segment which can afford
a costlier bike and position their product as something that satisfies their adventure and pleasure
needs (as opposed to transportation needs in India)]. The marketing program will differ
correspondingly. In India they will have smaller products (100-150 cc), priced affordably (50k-
75k for example), distributed widely (showrooms in every town) and promoted widely (to reach
the vast target in every corner of the country). However, in US the products are larger and
technically more complex (1000cc-racers/ city bikes and tourers), priced premium, exclusively
distributed and promoted selectively (to bike enthusiasts only). In most cases the pricing and
distribution have their restriction. Pricing is legally affected by the tax structures and other
government control. The distribution involves third parties and the infrastructure set up by them
on which companies may not have high control. So companies access available distribution
channels rather than developing a new distribution set up from scratch. This leaves the marketer
with freedom only to
adopt ‘product’ and
‘promotion’. Thus
international marketing
program decision
involves adaptation of
‘product’ and ‘price’
based on the market
chosen for expansion.
This offers 5 choices
described as below.

Straight extension: is one where neither ‘product’
nor the ‘promotion’ is adapted. The strategy of
straight extension is widely used by technology and
luxury product manufacturers. For example Apple
markets the same product (mobiles, laptops,
desktops etc.) across all markets. I-phone X is same
across the world and the same communication is
generally used across the world (media may change
like in India they may advertise in TOI and in US
they may use New York Times) that conveys the
same message.
A better example may be the luxury watch maker

‘Rolex’. Rolex sells same products, like Oyster
Perpetual or Yacht Master, across the world and they
also have the same communication in all their
markets (the Roger Federer Ads). They even keep
their prices same (adjusted for taxes and levies) and
use an exclusive distribution (owned stores and
specialty stores like jewelers). Straight extension is an easy marketing strategy and most ideal
when your customers are homogeneous across the world (for example all IT engineers or doctors
behave similarly across the world while consuming professionally related products giving rise an
opportunity for using straight extension. When a marketer can resort to inter market
segmentation they can think of straight extension of marketing programs).
Communication Adaptation: happens when the products remain same but the communication
is changed to some extent. This
is commonly used for consumer
products, where the product is
same throughout but
communication changes in
individual market. The
necessity to adapt
communication emanates from
the socio-cultural differences.
For example beer ads in US

carry a message of friendship
and company, in Australia the message is more towards naughtiness and boorishness, in Japan
the beer commercials take a cultural angle as beer is a part of Japanese cultural traditions.
However, in India the ads for beers (only surrogate ads are allowed) generally carry a message of
masculinity. Sometimes the communication adaptation looks at only changing the execution and

not the message. For example look at the ads of Sylvykrin and Drakkar Noir, both speak about
attractiveness. However, the Arabian ads are characterized by restraint (where the Lady’s face is
covered by her hair for Sylvykrin and the girl’s hand is only touching the man’s hand in case of
Drakkar Noir) against the European/American ads that are more open/explicit (for sylvykrin the
whole face with beautiful hair is shown and for Drakkar Noir the lady is grabbing the hand of the
man). This is a clear case of communication execution being adapted due to the difference in the
cultural setting of the target markets.
Product Adaptation: happens when the marketer retains the communication, however changes
the product. The concept of product adaptation is being less used now-a-days due to a lot of
standardization. For example let us look at Sony TVs. The communication for Sony-Bravia is
uniform across the markets. However the products may be slightly changed depending on
various factors like consumer buying power (less technically advanced and economical products
for developing markets and feature laden-state of the art premium products for developed
markets) or technical specification [(for example US operates in 110V and Indian electrical
system has 230V domestic supplies. Indian products use round pins in power sockets and flat
pins are prevalent in US. Sometimes even the broadcasting formats may change
(PAL/MAL/SECAM)] necessitating product adaptation but no need for change in the
communication.
Dual Adaptation: is one where both the product

and promotions are changed. This is done when
there is a strong socio-cultural influence on
consumption of the product category and the
needs (for the product/ brand) differ widely in
the target markets. For example Lux promotes its
soaps in India using local film stars. However, in
China Lux is a hair care brand (promotes creams,
conditioners, shampoos) and uses foreign models like Catherine Zeta Jones. Dual adaptation is
widely seen in consumer goods category involving variety seeking buying behavior. It is not so
much seen in consumer products like durables (shopping goods). Mondalez has done a lot of
dual adaptation for its brands like Diary Milk
chocolates. For example Diary Milk chocolates in
India are altered to withstand higher temperature
(up to 45 degree Celsius) as there is no proper cold
chain for distributing the product. So heat stabilisers
are added to withstand higher temperatures making
the chocolates harder. The promotional message in
India is also altered to suit the local culture and the
product is associated with sweet celebrations

(Indians generally celebrate with sweets).
Product Invention: is done when a new

product/brand is developed for the new market.
This is done when the existing product portfolio is
unsuitable for the new market but there is a huge
potential to be tapped in the new market. For
example HUL created a new low priced detergent
for India called ‘Wheel’ as its existing products
(Surf, Rin and Sunlight) could not exploit the vast
market for a low priced detergent existent in rural India. Similarly Mc Donald’s developed a
vegetarian version of Big Mac called Mc Maharaja specifically for India as socio-cultural
restrictions would not have allowed sale of Big Mac in India.
Once the marketing program is decided the company has to set up suitable organization and
control. Some international organisations have a TNC set up (transnational corporation) where
they have no marketing adaptation at local level and all business strategies are centrally
controlled. For example are organisations like Apple and P&G. However, many organisations
have a MNC (Multinational Corporation) setup where there is significant adaptation of the
marketing mix for best efficiency and effectiveness in the different markets. For example
organisations like HUL or Mc Donald’s is regionally controlled with every region have a
different business strategy (and so a different marketing strategy too). They function as SBU’s
and has a lot of freedom and is loosely controlled by the corporate headquarters.
Segmentation, Targeting & Positioning (STP)

Business & marketing objectives are achieved through a set of planned activities called strategies
(different form the word strategic). Marketing objectives are derived from larger business
objective and may include increasing sales of current products, introduction of new products,
expanding in to newer markets or newer customer etcetera. Like any objective, the achievement
of marketing objective also depends upon the organisation’s ability to develop suitable strategies
called marketing strategies. Marketing strategies, also commonly referred to as STP, outlines a
company’s intention of value delivery. The marketing strategy outlines the customers chosen to
serve, by the marketers, and the proposed value being offered to these customers. The marketing
strategy/STP is based on thorough understanding of the consumer behaviour, consumer needs
and the competitive landscape. A good STP (henceforth the word STP will be used in lieu of the
word ‘marketing strategy’), ensures a sustainable competitive advantage in the marketplace. It
ensures superior value delivery in comparison to the competitors (for the chosen customers) and
ensures customer delight. Customer delight forms the fundamental basis for heightened customer
lifetime value.
STP is critical for marketing success and provides the business with many advantages. Some of
the advantages of a good STP are as follows

• It helps in identify the right customers to serve (one’s for whom the company can deliver
maximum value) based on the organisational capabilities and core competencies. For example
when the car market is divided based on the various benefits sought by customers (like economy,
luxury, safety etc) it can be found that a car manufacturer like Volvo is most suited to provide
‘safety’. Volvo has developed the technical competency to make safe cars and can do it better
than any of their competitors. When it comes to luxury this Competency is with car makers like
Mercedes. Honda & Toyota are more known for their perfectly functional and economical cars.
Thus STP helps marketers choose the right customers based on their core competencies (or
perceived core competencies). However, it does not exclude marketers from developing new
products/brands or core competencies to cater to new segment provided they have the right
resources. For example Honda has developed Accura & Toyota-Lexus to cater to the luxury
segments.
• Management is all about efficient & effective utilisation of resources and focus is
important for successful management. STP allows organization to maintain customer focus
through utilisation of resources and competencies there by creating customer delight and creating
entry barriers to competition. For example Rolls Royce has concentrated its efforts on luxury car
segment for decades helping them gain unmatched competencies in the segment (in terms of
image, technology, customer understanding, customization capabilities etc) and kept customers
happy and competition away. The same holds tone for brand like Harley Davidson (in cruiser
bikes), Dove (moisturizing soap), Gillette (shaving products) etcetera.
• A well thought out marketing strategy is important for creation of the right marketing
program. The success of the marketing strategy depends on the implementation through
appropriate marketing programs (4Ps). Development of a good Marketing program/mix is
contingent to a clear marketing strategy. IKEA is extremely clear in its marketing strategy of
‘providing functional, economical, do-it-yourself furniture’. They have been able to successfully
implement the strategy through appropriate programs; that has made them the undisputed and
unchallenged player in their category.
• A good STP is also the basis for story branding. It becomes impossible/ difficult to brand
a product that has not been distinctly positioned in comparison to its competitors. For example it
is easy for people to remember the Aspirin brand ‘Disprin’. This is because Disprin dissolves in
30 seconds (differentiation) and thus provides faster relief (positioning). The position of ‘quick
relief’ has been conveyed effectively by Disprin among all aspirin brands; making it highly
successful and preventing competition from claiming so.
• STP and its constant review (it should be noted that STP is not a onetime effort, as
customer needs change necessitating changes in STP. For example ‘deodorant Soaps’ were a
relevant need a few decades back. However, with separate deodorants available today the
deodorant soaps are a dying category – unless they successfully change their marketing strategy),
help marketers understand newer marketing opportunities. For example Maruthi – Suzuki was

famous for its small & economic cars that were affordable to large number of Indian households.
However, over a period of time Indians have become more affluent and started buying/
demanding larger and pricier cars. Maruthi Suzuki has been successful in re-inventing their
marketing strategy and has successfully created offerings in the mid-segment for its customers.
As a marketer STP helps you in constant re-discovering of the customer value to be delivered.
STP involves profiling & dividing customers based on their needs & wants, selecting one or
more of these segments (divisions) to serve & developing value proposition that is attractive to
the chosen customers. A detailed STP process begins with the defining of the organisations
market or industry (For example, ‘Personal transportation’ market). Then the company has to
gain market insights in to the types of products, customers, technologies etc (for example for
transportation people may use, cars, two-wheelers or public transport. Under each of these
categories there are many sellers providing various kinds of products and benefits). Based on the
knowledge of consumer behaviour marketer can segment the market in to distinct segments with
markedly differing needs and thus seeking different value offering. For example in Personal
Transportation there are people who prefer two wheelers and others four wheelers. Once the
segments are created the marketer can further define the customers/segment profile in terms of
what kind of products do they buy, where, when, how many etcetera. Then the marketer
evaluates the attractiveness of the segment by calculating the size of the market, growth,
profitability etc. Once segments are profiled and the attractiveness established; the marketer
selects the segments to serve. This is based on the segment attractiveness and the company’s
capabilities & competencies. Once the market segments are selected, the next logical step is to
create an offering and develop a positioning strategy for the product/ value offering. On deciding
the positioning a suitable marketing mix (4Ps, to
support the positioning) is developed and
implemented. This is then periodically reviewed
and necessary changes incorporated timely to
ensure superiority of the marketing strategy. It
should be noted that STP process is not a one-time
affair and needs constant review and
reformulation. This is because of the change in
consumer needs due to changes in the marketing
environment. For example look at the example of
STP for a brand like Bodyshop (in the figure).
Let us look at this with an example of brand like “Manyavar” from Vedant fashions. “Manyavar”
was started in 1999 with a small store in Kolkata (in 150 square feet) and in a short time has
expanded in to 180 cities in India & abroad with 380+ stores in about 4.5 lakh square feet. This
has been possible due to a good STP (Marketing Strategy) that offered distinct competitive
advantages. When entering in to ready to wear business in 1999 they saw an opportunity in the
segment which was fast growing and provided immerse opportunity. However, there were many

players in the segment with some evocative names (like Arrow, Zodiac, LP, Van Heusen….) that
were well entrenched in the customer mind. When looking at the customer segments (need based
segmentation) it was found that the current players concentrated only on western formal & casual
wear. This revealed a need-gap where customers had no options for buying ‘ready-to-wear
Ethnic’ clothing that still had to be stitched/made to order locally. Vedant fashion chose this
segment, seeking ‘ready-to-wear Ethnic’ fashion, to cater to. They created a value proposition
that positioned their ‘ready-to-wear’ brand as a “celebration wear brand for men” (Ethnic clothes
were predominantly used during celebrations such as marriage). They developed a suitable
marketing program to implement the STP and were rewarded with success. Today they are
considered the ultimate name in Ethnic India wear across the world. The growing acceptance of
Indian ethnic wear across the world has helped them grow. Since their introduction they have
also expanded and repositioned themselves as ‘celebration wear for men’s & women’; a slight
departure/ progress from their initial origins. As noted earlier STP (marketing strategy) is not a
rigid thing and constantly earlier over a period of time. ‘Dove’ was introduced as a beauty soap
in the 1950s. However, over a period of time it has evolved in to a ‘moisturising soap’ for real
beauty (the change was probably necessitated due to the heavy competition in the ‘beauty’
segment with long entrenched players like LUX, Camey, Ivory etcetera). Thus it is imperative
that the marketer constantly reviews their marketing strategies and modify them to suit evolving
consumer needs & demands and staying
relevant to the consumers. Some brands that
have failed this test and are vanishing (or
already vanished) out of consumer radar
include Sony – in personal music, Vimal in
ready to wear, Philips in Home
entertainment, Kodak in photography
etcetera. A more detailed process of the
STP process can be as in the figure.
Now let us look at the STP process in slight

detail.
SEGMENTATION: Companies may not be able to connect with a large, broad or diverse market.
They may have only a limited amount of resources; adequate to cater to a small portion of the
market. The selection of this small group of customers involves segmentation. Segmentation is
the act of dividing a whole market in to smaller groups with similar needs and wants. Segments
are homogenous within and heterogeneous in between. Segmentation of consumer markets needs
deep understanding of the consumer’s behaviour and knowledge of what makes these
consumer’s needs and wants different and unique. There are 4 basis for segmentation of markets
that uses descriptive characteristics of the consumer, consumer’s behaviour, a combination of
these variables and an ‘across the world criteria'. The different bases of market segmentation is
as under

 Customer characteristics: uses measurable characteristics of consumers to segment the
market. The commonly used characteristics of this type of segmentation will include
• Geographic segmentation
• Demographic segmentation and
• Psychographic segmentation
 Consumer behavior- uses behavioral considerations like benefit sought (for example
shoes for Sports, official wear, casual wear and medical use etc.), usage occasions, usage
rate customer loyalty etc.
 Multivariate segmentation- uses multiple criteria to segment the market. The market is
first segmented based on one criterion and then using another and so on. For example
when marketing footwear the first criteria maybe gender (male and female) then age
(adult and kids) then demographics parameter like income (rich, middle class, poor) etc.
 Inter market segmentation- is using a single criteria across the world for segmenting the
market. For example Littman the stethoscope manufacturer will segment based on
education a (demographic character)
across the world. They will
differentiate between people with
medical or paramedical education and
other education (their customers be
medical or paramedical professionals).
Let us look at the segmentation in detail and

understand its appreciation as practiced by
marketers.
Geographical segmentation: Involved dividing market based on geographical units like

countries, regions, towns, neighborhoods etc.
Geographical segmentation is very easy to
implement and is ideal for products whose
needs are significantly impacted by factors
like culture, climate and community
influence. For example food and snacks
manufacturers can segment India into 4 zones
and into 56 socio cultural region and find significant similarity in food habits within the zone or
region. For example south and east of India is predominantly rice eating and other two regions
wheat eating. Within South states like Kerala predominantly use coconut oil the will be
groundnut or Sunflower oil in other states. Another common difference in needs and wants are
visible when the market is divided into the rural and urban. Rural needs are very different as they
have resource constraints and live in a very different environment in comparison to their urban
counterparts. For example while buying furniture rural customers may look at price as the most
important factor where as an urban customer may look at the space utility. The clothing needs of

customers living in high range will be different from customers living in planes and shores. The
usage geographic segmentation alone may not be very practically practiced. However, when
combined with other demographic variable it may prove useful.
Demographic segmentation: Demographics deal with statistical data related to population. It

generally deals with study of various population parameters like gender, age, income, education,
occupation, race religion etc. Demographics is very easy to identify and apply and can provide
powerful insights into the habits of the consumers. The type of demographics used segment the
market depends on the product category. For
example while segmenting markets for cars use of
income maybe a better criteria than gender (there is
generally no big difference between the car usage
of a man and women however, a rich person may
prefer buying a luxury car in comparison to a
middle or lower income customer, who may prefer
more economical version of car). However when
segmenting the market for personal care and hygiene items it may be practical to segment the
market based on gender and not on income (for example the hygiene needs differ between
women and men and not so much based on their income levels). Other demographic parameters
like age, education, employment also have significant influence on the various product markets.
The fashion requirements of kid will differ from youth, which will be different from adults,
which further differs from senior citizen.
Psychographic segmentation: Uses consumer’s psychology and personal traits to divide

consumers into distinct groups with differentiated needs. One of the most widely used
psychographic segmentation is VALS (value and lifestyles)
of SBI (strategic business insights). SBI continuously
updates the VALS through early surveys of more than
80000 people in US. VALS uses two criteria (it is actually a
multivariate segmentation); Consumer motivation and
consumer resources. Consumer resources are indicated generally by education and income.
People high in resources tend to be more open to new ideas and product trials and those with low
resources are more conservative in nature. The consumer motivation is of three types; ideals,
achievement and self-expression. People with ideal motives are guided by knowledge and ideals.
They are people who are motivated by ideals like equity, sustainability etc. LOHAS (lifestyle of
health and sustainability) is a classic example of ideals. Achievement motivated people are
highly success oriented and prefer brands and products that expresses their success and
sophistication. Self-expressive people need constant social connection, interaction and variety
and use their consumption to signal the same. VALS though very widely used may need adaption
to local settings when used in non-American contexts. Many researchers have developed
products/market/region specific psychology segmentations that are more contextual.

Psychographic segmentation is very
suitable to point out or understand the
differences in behavior with in the same
demographics. For example all rich people
(upper class or section A) may not buy
luxury cars. Some may buy economic or
efficient cars to show their social concern
for traffic congestion pollution etc. Even
when buying luxury cars some may prefer power and performance where as others may look at
style and status. Psychographic segmentation is more complicated to implement than
demographic or geographic segmentation.
Behavioral segmentation: Segmentation based on the consumer characteristics is more useful

for predicting behavior but does not consider the actual behavior for consumers. When a product
is up and currently available in the market; behavioral segmentation is an ideal criterion to be
applied. The behavioral segmentation divides consumers based on their knowledge of, use of,
attitude towards or response towards a product. Some of the
most commonly used behavioral segmentation variables
include needs or benefits sought, decision roles (influencer,
initiator, decider, purchaser, user etc.) and uses and usage
related variables like occasion, user status, usage rate buyer
readiness state, loyalty status and attitude towards the
product. Let us look at some examples.
 Needs and benefits sought: by the users can be a good basis for segmentation. For
example while buying a footwear a customer may seek one of these benefits that include
sport performance, formal usage like official wear, casual usage, medical benefits like
pressure protection or a combination of these. As a marketer it becomes imperative to
understand these benefits so as to develop and design the appropriate value. While buying
a watch; a customer may seek stylishness, precision, sports function, ruggedness,
aesthetics, status or a combination of these.
 Decision roles: we saw in consumer behavior that a product purchase can involve various
people with different roles like initiator (who identifies the needs and starts the purchase
process), an influencer (who advises the purchaser), the user (one who actually will use
and evaluate the product), the decider (who made the actual decision) and the purchaser
(who makes actual purchase). Knowing these decision roles can help a marketer to
develop appropriate communication strategies (messages and media) to influence the
DMU members.
 User & usage related variables: are good indicators of consumer behavior and thus
market segmentation. For example occasion of usage for a product can differ thus
changing the usage character. For example chocolate consumption during normal course

of the year may differ from that of occasions like Diwali. Cadbury has Single use packs
for round the year Consumptions. However during Diwali they have larger packs of
decorated assorted sweets/chocolates that may not be personally consumed but may be
used for gifting purpose. Travel needs of a person may change based on the occasion like
for official or family purpose.
 User status: may be used to segment the market and can be used for development of the
marketing program. For example a customer may be segmented as current user, ex-user
or non-user. The message tactics (promotion) for all of these customers can be very
different. Message may reassure a user, motivate an ex-user to return or reason a non-user
to start usage.
 Usage rate: is another segmentation variable that gives us actionable information. There
may be heavy medium or light users for a product category and this can affect our
marketing programs like product (larger pack for heavy and smaller part for lite users),
promotion (reward for every user and incentive for light users) etc. For example when it
comes to tobacco or liquor consumption heavy uses constitute 80% of the sales and
continuous marketing programs are ensured to retain them (also use of CRM activities
are done to ensure retention of heavy and loyal users).
 Buyer readiness stage: consumers passed through a series of decline stage before buying
regularly (loyal customers) this may start from ‘awareness of the product’ and pass
through ‘trial’, ‘occasional usage’,
‘regular usage’ and ‘loyal usage’.
Customers may drop-out at any
stage. Market segmentation using
customer/buyer readiness stage can
give us a good picture of our
marketing funnel and effectiveness
of the marketing program. For
example look at the marketing
funnel of Brand A & B. 95% of
customers for the product category are aware of Brand A and B as has an awareness of 97
% . Brand A is able to current convert 65% of these people to try their product and for B
this conversion is 76%. As this goes along the funnel it can be found that Brand A has
only 6% loyal users and Brand B has 15%. The differences in the marketing effectiveness
of the two companies are very evident. Though both companies start with the same
awareness level among its possible customers, brand B has a better conversion process
(effective promotion) there by creating significantly more loyal customers than brand A.
 Loyalty status: is another possible segmentation criterion and can yield valuable
information to develop suitable marketing program. Customers may be hard-core loyal
(dedicated users of the brand), split loyal (looking at more than one brand), shifting loyal
(who are switching to another brand), and switchers (non- loyal using many brands at the

same time). All these customer folk, due to their different loyalty status, will need
different marketing program.
 Attitude of the customers is another possible segmentation criterion. Customer’s attitudes
can range from enthusiastic, to positive, to neutral, to negative to hostile. Marketers will
have to see the possibility of changing customer’s attitudes to enthusiastic or positive
about the product (or at least neutral). The attitudinal change will need marketing efforts
in terms of the 4P’s and can significantly be different for the customers with different
attitude. For example, company may use messages that reinforce the behaviour of an
enthusiastic customer and may take him/make him a brand evangelist. For a neutral
customer the messages may be to ‘assure’ about product benefits (also guarantee) and
convert the attitude in to positive/enthusiastic. For a hostile/negative customer, the
message will have to be further different.
Multi-variate segmentation: In practice all the markets use some kind of multi-variate
segmentation of their market. This involves using more than one variable to segment. For
examples car makers may target customers based on SEC (Socio- Economic class); which in
urban India ranges from A1, A2, B1, B2, C, D, E1 and E2. The ‘A’ group is upper class, ‘B1’
and ‘B2’ upper middle, ‘C’ is a middle class, ‘D’ is
lower middle and ‘E’ the economically weaker section.
In ‘rural’ the segments are R to R4. SEC in India is
based on the education and the employment parameter
of the customer (both demographic variables) in urban
areas and in rural areas it is based on the education and
type of dwelling (permanent structure to temporary
structure). Another example of multi-variate
segmentation is footwear. The footwear market initially
segmented on gender (Males and Female footwear-As
you enter a Bata show room you will find men’s range
on the right and women’s on the left), the by age (Kids
and Adults), further by benefit (Sports, formal, Casual,
wear…) and still further by economical income (high,
medium and low priced). Here the marketer has used 4 Segmentation variables gender, age and
income (all demographic) and benefit sought (behavioural variable). Multi- variate segmentation
gives extremely actionable customer groups whose ‘needs’ are very similar.
Inter- Market segmentation: Involves dividing the customer groups across the global markets
using similar criteria. Inter market segmentation is ideal when the organisation has single
marketing plan across the globe. This is possible when the organisation has a ‘Trans National’
orientation and for certain product categories like engineering, IT, Luxury etcetera. For example,
the drawing equipment manufacturer like ‘Rotring’ looks at the engineers across the world as
same (They all use drawing equipment and tools). For Cisco all network engineers are relevant,

all have the same needs and can be catered to with the same marketing program. Luxury
manufactures like Rolls Royce, Cartier, Rolex etc may look at dollar millionaires across the
world, irrespective of their nationality. Inter- Market segmentation is more difficult than the
others as finding a uniform segmentation criterion across the world maybe difficult and not
always possible. However, if successfully done, it can reveal great deal about commonality in
customer characteristics across the world there by affording a common marketing plan across the
world. This will improve marketing efficiency and reduce marketing costs. Some of the
companies that use inter- market segmentation include Apple, Microsoft, Benz, Ferrari, Cartier,
Littman etcetera.
Criteria for effective segmentation: The effectiveness of the segmentation is based on its ability
to meet certain criteria. The criteria to be considered while measuring the effectiveness of
segmentation are
 Distinctiveness: Each segment, that is formed, should be distinct in its characteristics and
thus in their customer needs. For example, when segmenting mobile phones based on
benefits/ feature sought, the segments will be distinct. We will be able to identify
segments like smartphones users and feature phone users who can be catered to with
distinct marketing programs. However, segmenting for mobile phones based on gender
may not yield such distinctiveness. It is immaterial whether a customer is male or female,
they may look at the same features.
 Measurability: is another criterion for effective segmentation. Each segment should be
clearly measurable in terms of size, numbers, profitability, needs etc. When the segments
are not measurable in terms of its characteristics the segmentation should be considered
ineffective. For example, segmenting garment industry based on gender will yield
measurable results as the market for male and female clothing can be clearly ascertained
in terms of the size, needs etc. However, segmenting garment market based on the
‘colour preference’ may not yield such measurability (though some trends may be
known).
 Profitability/ Sustainability: A good segmentation exercise should yield segments that are
profitable. Segmentation should not divide the market into too many smaller units that are
not profitable to cater to. It is practical to segment the hockey stick market in India based
on professional levels (school kids- smaller sticks, college kids-large economic sticks,
professionals- large advanced and costly sticks) but not based on orientation (left or right-
handed players). This is because it may not be practical to develop left handed hockey
sticks as the numbers maybe too small (not substantial) and not profitable for a separate
marketing program.
 Actionable: A good segmentation will yield actionable segments that can be catered with
common marketing program. For example, segmenting the oral- care (tooth paste) market
based on benefit sought will yield distinct segments like whitening, fresh-breath,
sensitive- teeth, ayurvedic, cavity- protection etc. All these segments can be catered by

creating appropriate marketing programs. However segmenting toothpaste market based
on the ‘colour’ of the toothpaste may not yield any actionable segments with distinct
needs.
 Accessible: Segmentation should yield customer groups that can be effectively reached
and served. Groups of customers like Bedouins in dessert, Gypsies in Greece etc are
substantial and may have distinct needs. However, it is often difficult to formulate
programs to attract / reach these customers as physical and psychological access to them
is poor.
 Administrable: The segments obtained, after the segmentation process, should easily be
administrable in nature and should not need any special skill or technical requirements.
The segmentation criteria should be implementable for ordinary sales person of the
organisation and should not need skills that are possessed only by few people in the
market research or other specialised department of the organisation.
Levels of segmentation:
The possible levels of segmentation can vary widely from mass marketing (where there are no
segments; all customers are considered to be the same) at one end to customisation (every
customer is considered as a separate segment) at the other end. The levels of segmentation
depend on many factors; one of them being the type of product. For eg products that are
commodities (like cement, steel, petrol, diesel) etc may use undifferentiated/mass marketing as
the commodity has little differentiation and all customers look at the same product benefit.
However when it comes to products like specialised industrial machinery or luxury or fashion the
segmentation will shift to the opposite direction where there may be individual marketing with
each customer being considered different from the other and the product/service being
customised to their individual needs. Another factor that influences the levels of segmentation is
the profitability of the segment. When there are too many fine segments and not all being very
profitable, the marketer may merge some of the segment to produce fewer segments that are
more profitable. Another factor is the competitive practices. It will become imperative for the
marketer to confirm/differ from the competitor in his marketing strategy and thus his
segmentation techniques. Business objectives are yet another factor that affects segmentation; is
the business looking to improve its scope in terms of market coverage or is it looking to
specialise in a single area? There are some business that look to restrict their scope and
concentrate on certain areas; affecting the way they segment the markets. For example Roll
Royce concentrates on the luxury segment only and has developed capability to customise their
products for every customer of theirs. PLC may be another factor that affects the levels of
segmentation. Any product at the maturity stage may be facing commoditisation and looking at
lesser segments than when it was at the introductory or growth stage.

TARGETING:
Targeting is the process of selecting appropriate segments (customers segments) to serve.
Targeting for an organisation can be very tricky issue and that has to be done with care. Some of
the factors that need to be considered while targeting are:
Segment attractiveness: The attractiveness of the segmentation can be a function of the many
factors. Size of the market segment is one of them. The larger the segment the larger will be the
volumes bringing in economies of scale and increased efficiency. This in turn will help the
organisation to profitably cater to the segment. Another factor that will decide the segment
attractiveness is the growth rate. As the growth rate increases so do the attractiveness. Sometimes
small segments that are not profitable today may turn out to be very profitable and large later.
For example, the smart phone segment in 2008 (at the time of its introduction) was very small /
miniscule in comparison to feature phone markets in about 4 years (A trend missed by Nokia but
caught by Apple & Samsung; they successfully transited from features phones to smart phones).
Another factor that affects the segment attractiveness is the segment rivalry/ Competition. Any
segment with large numbers of competitors will find immense rivalry in the segment leading to
reduced profitability. Segment rivalry is also one of the 5 forces in Porter’s model that will
influence the overall attractiveness of the industry apart from the segment. Segment
attractiveness also may be affected by substitute products available. For example, the
attractiveness of the cotton garments segment is dependent on the availability and the prices of
the other garments made of synthetic fibers (polyester, nylon, spandex, viscose etcetera) and
natural fibers like silk, jute and linen, etcetera. There may be other extraneous market factors that
affect the segment attractiveness. For example, government control can be one. In India certain
categories of medicines are fully price controlled by the government making the segment far less
attractive in terms of profitability. It becomes imperative from the marketer’s point of view to
fully assess the segment/s attractiveness in terms of size, growth, policy, competition, etcetera
before choosing the segments of the customers to carter to.
Another factor that affects targeting is the capability of the organisation. It is the organisation
capable in terms of technical & financial resources to develop a differentiated offering for all its
targets. The more the capabilities of the organisation higher will be their targeting (i.e. the
number of targets they choose) for example HUL targets a wide variety of customers in the body
wash/toilet soap category. They have beauty soap, moisturising soap, germ killing soap,
ayurvedic soap, baby soap, glycerin soaps, deodorant soaps, and traditional/natural soaps among
its offering; where as a competitor like Wipro has only beauty soaps and ayurvedic soaps
however Wipro has beauty soaps for various segments (economically different segments
indicated by different price points like Santoor, Yardley, and Enchanteur)
Types of Targeting: We saw the levels of segmentation; however when targeting the organisation
has generally 4 possible options; whose is decided by the organisational capabilities, types of
products, competition, market condition etc. They targeting options are as below.

1) Full market coverage: Is one where the company decides to cater to all customers in the
market. For example for a company like Gillette; if they have a market with 100 customers; they
decide to cater to all the 100 customers. However this can be done in two different forms.
 Undifferentiated/ Mass Marketing: Where the company has one single offering for all
customers. This is possible for certain kinds of products like commodities. For example a
cement manufacturer makes the same product for all cement users irrespective of whether
they use it for building a house, dam or factory. The technical grades are specified and
customer chooses the product based on his required grade. Another better example is
vaccination given to kids like polio vaccine. The vaccine is same across all the markets as
all the kids have same requirement due to their similar body constitution.
 Differentiated Marketing: Is one where the marketer caters to all customers in the market
but will give different products for each segment. A good example is one mentioned
previously- HUL in the body wash/ toilet soap category where they have many different
offering (variants like moisturising soap, beauty soap, ayurvedic soap, deodorant soap,
glycerin soap…); all together catering to the total market.
Mass/Undifferentiated Marketing offers economics of scale, whereas differentiated marketing

offers economies of scope and the choice depends on the type of the product and organisational
capabilities.
2) Multiple Segment Specialisation: is a form of targeting where the marketer

concentrates/ caters to some of the segments but not full market. Here the marketer tries to
leverage his knowledge of certain product category or to leverage their knowledge of certain
market. This specialisation can take one of the two forms
 Product specialisation: is one where the marketer uses his specialised knowledge of a
product to cater to different segment with the same product. For eg Car-Zeiss is as
specialist in lens technology. They develop specialised & customised lenses for many
industries that include photography (mobile/cameras), binoculars, microscope etc. They
only provide lens (their only product) of different types & shape and nothing more.
Another example of product specialisation is Hummer from GM (withdrawn from
production currently). Hummer produces or specialises in SUV’s that they provide to
their different customers like Defense forces & civilians after due customisation for each.
 Market Specialisation: is one where the marketer uses in depth knowledge of certain
customers to develop products for them. For eg Volkswagen concentrates on personal
vehicles (sedans, Hatchbacks, SUV’s and vans) but all for personal transportation. Unlike
a Benz or Volvo they do not make vehicles for other than personal transportation needs
like cargo transportation or specialty vehicles like Defense vehicles.

The choice of multiple segment specialisation again is based on the company objectives and
resource availability with the organisation. Multiple segment specialisation helps an organisation
to develop competencies that can act as entry barriers to competitors.
3) Niching or Single Segment concentration: is one where the marketer caters to the value
needs of only one segment in the total market. The marketer concentrates his capabilities in
creating one product (may be with variants) to one type of customer’s (segment). Niching offers
ability to develop extreme specialisation in terms of the product and customer knowledge and
this provides a competitive advantage that stalls competition. The specialisation also affords
higher pricing freedom and increase in profitability. Nichers, when successful often turns out to
be legends in their field, for example in luxury cars an unchallenged name is Rolls Royce. They
have an extremely keen understanding of their customer’s requirements, works closely with their
customers and develops legendary products for them (that includes names like silver ghost,
phantom, silver seraph etc). Rolls Royce does not cater to any other needs of their customers
(personal transportation needs). Rolex is yet another example of niching where they cater only to
the requirements of the luxury watch segment. They have a slew of finely made products for the
fans of luxury horology.
4) Individual Marketing: is one where the marketer looks at every customer in the
segment as a separate one and develops highly customised value offering for their customers.
Individual marketing today has become possible due to improvements in information technology
and 3D printing. Individual Marketing also helps in value co creation (where customer is a part
of creating the 4p’s) and promotes brand involvement and loyalty. Generally seen in industrial
marketing (for eg ship or aircraft building) it was restricted, in consumer goods, to luxury item
like designer clothing and jewellery. However, individual marketing today is percolating in
lower value consumer goods. One of the earliest Practitioners of individual marketing was Lego
Toys. You had the option of creating your model in ‘lego.com’ and the company would
manufacture customised blocks to build the customer designed model. With improvement in
technology, it is possible that there will be an increase in individual marketing efforts assisted by
technology like digital communication to analytics to 3D printing.
To understand the concept of targeting

fully, let us look at the music industry.
There are different markets in the
industry that include personal music,
home entertainment & professional
music. There are also various products
like the recorders and players, amplifiers
and speakers (not an exhaustive list of
the markets or products). We can
examine the different players and their

product offering to understand their targeting strategies. The same is explained in the figure
above.
Issues in targeting: Though every organisation has to choose appropriate targets to deliver &
exchange value; there are certain dos & don’ts in targeting. A marketer should have a basic
understanding of the various issues and should appropriately address them while developing
marketing strategy (part of which is ‘targeting’). Some of the issues to be considered are:
 Not targeting vulnerable groups. A marketer should not target vulnerable groups to sell
their products. For example targeting kids below a certain age may not be appreciated by
the law or society. Manufacturers of junk food like chips and burger may find it easy to
convince kids in to buying these products. However, kids are not intellectually prepared
to understand the harmful effects of such products and may become victims of their
harmful effects like obesity. There are legal provisions in many countries that prevents
such targeting of vulnerable groups.
 Stereotyping of targets is another don’t in the targeting process. For example,
stereotyping customers based on race, economic status (like poor people cannot afford
high priced products), sex orientation (like LGBT community) should be strictly avoided.
 Selling harmful products to chosen segments is another factor that the marketer should
avoid. For example, selling of unwholesome products (like liquor and tobacco) to
children & youth below certain age has to be strictly avoided. Another example will be
selling medicines directly to patients without proper prescription from a qualified medical
practitioner which is to be strictly avoided.
 Targeting also should ensure that the organizations and their customer’s purposes are
met. The organisation should be able to make use of strengths and create customer value.
They should be able to make profitable relation with the chosen customer in a sustainable
manner. For the customers the targeting should provide the value through satisfying their
special needs, in comparison to customers of another segment.
Market targeting has to be carefully done by the marketer so as to serve their
organisational objectives and to ensure that customer derives superior value.
BRAND POSITIONING:
Brand positioning or simply ‘positioning’ is the last of the activity in developing a superior
marketing strategy that offers competitive advantage. The act of ‘positioning’ is based
fundamentally on ‘differentiation’ of the product. ‘Differentiation’ is more physical and
‘positioning’ a mental process and they are two sides of a coin- incapable of independent
existence (however, we will only study differentiation as a part of marketing program-while
studying the product). Positioning is “the art of designing a company's offering to occupy a
distinct image in the minds of the customers”. As the definition explains it is a mental process of
creating a specific image in the minds of the customer regarding the company's product / brand.
For example if I tell you the match the following

1. Moov - Cold
2. Vicks - Headache
3. Amruntanjan - Backache
Most of you (who have seen the ads and use these kinds of product) will match them clearly as
follows.
1. Moov - Bachache
2. Vicks - Cold
3. Amrunthanjan - Headache
This is because the companies, that market these brands, have over a period of years
communicated to us that these pain balms are good for the specific purposes. We do not exactly
know the technical differences of each of these products (differentiation). We may not even be
able to exactly identify the product if the brand is not shown to us (for example, if we are blind
folded and Moov is applied for headache we may still get the same relief as Amruthanjan!).
Another example is the difference between the Colas. Most of us are able to identify the fact that
Coke stands for happiness, thumbs up for adventure/ thunder and Pepsi for youth (I suppose so).
However most of us are not able to exactly identify the brand in blind taste test (taste test were
they are made to drink the cola without identify the brand) unless we are cola aficionados/ Hard-
core Cola drinkers. This is because the cola brands have been successful in communicating their
position to us.
According to Kotler and Keller positioning is “the act of designing a companies offering and
image to occupy a distinctive position in the minds of the customers”. Alries and Jack Tront, in
their book 22 immutable laws of differentiation and positioning, define positioning as
‘differentiating your offer in the minds of customer.’ Position is a complex set of perceptions,
feelings and Impressions about the brand. Customers may pay similar price for a Volvo and Benz
car. The cars also may share the same
Technology, design and even suppliers (of
Parts, designs and materials). However the
brands are perceived very differently by the
customers. While Volvo is associated with
‘safety’ Benz is ‘luxury’ and indicates the
position of the brands.
Positioning process: Brand positioning,

through an art, has identifiable systematic
process behind it. Practically the process of
positioning differs widely based on the
practitioner and every marketing manager
has their own methods of developing suitable

position. However, the positioning activity starts with understanding of the customers &
competitors. Then the marketer has to understand fully well his own offering – the
commonalities & differences with the competitors. This should be followed by mapping of the
consumers perception of all the market offerings and understand positioning gaps (if there are no
gaps I market position smart marketers create new positions by creating new product category.
For example when Hyundai came to India they created a new category called as ‘tall boy design’
for small cars) and unmet consumer needs. This has to be followed by development of suitable
value proposition. Then the marketer has to develop suitable brand positioning statement &
brand elements and implement the same through appropriate marketing program. The positioning
effort is not a onetime affaire and is continuing activity that may sometimes involve changes in
the brand position based on market development.
However, we will study positioning as a 5 step process that starts with Know you targets well,
Choose the competitive frame of reference, Know your USP, Identify & choose potential PoP &
PoD, Develop the brand Mantra & Communicate the brand position. Let us look at the process in
detail.
1. Knowing the customers well. The marketer has to have a thorough understanding of the
consumer behavior and consumer motives. They will have to understand thoroughly well
all the needs being satisfied by the product or service. For example Dominos understood
well that while ordering food one of the customer need was convenience and assurity.
Dominos positioned themselves as a brand providing assured 30 minutes delivery and the
convenience of having pizza in the comforts of your home. Dell is another brand that
understood the customer need or desire to tailor make their computers to suit their needs.
They facilitated this by removing middleman or channel, communicating directly with
customers, making computers to order (and not to stock and like IBM or HP) and
delivered the computers directly to customers; making Dell affordable and customisable
in comparison to the competitors.
2. Choosing competitive frame of reference is the next step in positioning. While looking
at value, we studied that value is comparative necessitating every marketer to choose a
competitive reference point. When there are no competitive references, customers find it
difficult to comprehend the product or service and the value it offers. For example when
Maggi was introduced in the early 1980’s, the concept of noodles was extremely new.
Most Indian’s had not heard of noodles and the existing snacks in the market was not
directly comparable. It took Maggi decades to convince the customers about the concept
of noodles and the convenience it offers as a quick snack. However the later entrants had
it easy and they had Maggi as a competitive reference point. The same issue was faced by
Kellogg's as cold breakfast was unheard of in India when they introduced breakfast
cereals (no comparable products). It again took them lot of efforts to convince the
customer about the healthfulness and convenience offered by Kellogg's as a breakfast
option.

While choosing competitive frame of reference, there can be three types of competitors.
1. Direct competitors: are those that belong to the same product category and satisfy the same
needs. For example coke is a direct competitor of Pepsi and 7up that of Mountain Dew.
2. Indirect competitors: are products that belong to different product category but satisfy the
same need category. For example, Coke vs 7up. Coke is a cola and 7up is a lemonade, but both
provides refreshments and a customer who consumes one will not be able to consume the other,
for refreshment. Another example of indirect competition can be movies and television channels;
both satisfy the entertainment needs of the customer though are different products.
3. Potential competitors: are products that belong to different category and satisfy very
dissimilar needs but are competing for a key common resource from the customers like his
money or time. Potential competitors may not be easily visible to the marketers but may affect
their prospects. For example IPL is potential competitor to the movies as people will have less
chances of watching movies when they watch more of IPL during the season. A marketer has to
develop suitable business strategies to tackle indirect competitors. For example, movie halls can
screen IPL in theatres there by attracting IPL fans by providing large screen watching and better
ambience.
Marketers generally choose direct competitors as a frame of reference. For example coke vs
Pepsi, 7up vs Mountain Dew, Surf vs Tide etc. However, there are also instances of choosing
indirect competitive frame of reference for example 7up was introduced as the ‘Uncola’, Air
Deccan competed more with 2nd A/C train travel than with other airlines. A better way to
handling indirect competition is to expand the product line. For example Coco Cola has Coke,
7up, Kinley, Minute maid…, all different products but satisfying the need for refreshment/thirst.
3. Know your USP: Once the competitors are chosen the company has to know their USP
or unique selling proposition. The unique selling proposition is the benefit the marketer’s
product offers to customers, but it is not offered by the competitors. For example
‘Disprin’ provides quick relief that no other aspirins provide. Fogg provides only
perfume and no gas unlike other competitors. It should be noted that the USP is as
perceived by the customers and may not be for real. For example ‘MOOV’ considers
themselves as a specialist in back pain and customers believe the same. However it is not
that only MOOV provides relief from back pain.
4. Identify & Chose potential PoP& PoD: PoP stands for points-of-parity. These are
features that are shared by all the brands in the category and give a comparative reference
to the customers. For example all tooth paste comes in tubes, are in paste form/ colloidal
and uses a brush for application. PoDs, on the other hand, are attributes/ benefits
consumers attribute to a brand but not its competitors. For example among toothpastes,
Colgate is cavity preventing, Close-up is mouth freshening, Sensodyne is sensitivity
preventing etc.

5. Develop the brand Mantra & Communicate the position: The brand mantra is a crisp
articulation of the core brand position. It should talk about what the brand will do for its
customers. For example the brand Mantra for Nike can be “Authentic performance”.
Brand Mantra is an internal communication tool that tells the employees what their focus
should be. Here, in case of Nike, it is clear that the employees should strive towards
improving the athletic performance of its customers through creation of appropriate
products and services. All efforts of the organization should result in increased athletic
performance of the customers and any activity that does not promote this should be
discarded.
Communication of the brand position is generally done through the advertisement and
activities of the organization. It is not enough that organization talk but also should follow it with
appropriate walk. The communication of the position is done through the brand slogan; ‘Just do
it’, in case of Nike. Nike also does a lot of activity that supports its communication campaign;
like community creation, apps, advisory, event participations etc.
Let us examine some of these activities in the positioning process slightly in detail. We also
examine the Brand positioning as practices by ‘Starbucks’.
Competitor Analysis: Competitor analysis helps a marketer to better understand its competitors,
how they are perceived by customers (their PoPs & PoDs) and where do gaps exist in the current
market scenario, 2 tools can be put to good use while doing competitor analysis. They are CVA
(Customer Value Analysis) and perceptual mapping let us look at them separately.
CVA or Customer Value Analysis: is nothing but a customer rating of various competitors or
KSF (Key Success Factors). KSF is nothing but the key attributes customers look for while
evaluating and purchasing a product. For example KSF for a mobile/ smart phone may be brand
awareness, processor speed, camera, Mobile-OS and price. The KSF for a product category
depends on the target customer segment. For example while buying a computer (laptop) a
programmer may look at the processor speed, OS, price and availability. However When the
buyer is a hardcore gamer the KSF may change to Graphics, RAM, Compatibility with other
gaming accessories and the Audio effects. Similarly while buying car, a small car customer may
look for totally different factors (for product evaluation) in comparison to a luxury car customer,
so it is imperative to understand your customers well and what KSF do they use to evaluate the
different product options.
For example Let us look at a

product like Home invertors,
used for a power back up. A
survey of the customers
revealed that they evaluate
the products based on 5

factors that include customer awareness of the brand, perceived product quality, product
availability, technical assistance and selling staff (In this case we assume that customer give
equal weightages to all 5 features and the same is rated on a 4 point scale of excellent, good, fair
and poor. For more on this, look at the topic of product evaluation & choice in CB chapter).
There are three brands A, B & C and customer’s rating of the brands are collected (table 10.2).
(This is generally a large survey, where from the scores are collected & aggregated to know the
average rating). It is clear that Brand A score 2 Es, 2 Ps and 1G. Brand B scores 2 Es & 3Gs &
Brand C scores 1G, 3F & 1P. It is obvious that Brand B has the best scores (Overall scores-
Assuming that customers will use a compensating model of product evaluation) and should be
the overall choice. Ay new product being introduced will be evaluated in comparison to brand B
– the current golden standard. However when looking at the individual KSF it is clear that
“Technical Assistance” is the one feature where a new brand can concentrate. There is no brand
that has ‘Excellent’ technical assistance. So a new brand can position itself as “the product with
leadership in technical assistance”. They can develop a service network that will ensure unfailing
& quick technical assistance as the key differentiator to support their position ( Brands like
Eureka Forbes owe their success to the excellent technical support provided for their products
like water purifier; that needs regular technical support for its maintenance).
Perceptual Maps: They are visual representation of the consumer perception and preferences.
Perceptual maps are created generally on 2/3 parameters. These parameters are relevant to the
customer choice and are in a way KSF. Using statistical technique like clustering, perceptual
maps can be constructed with more than 3 parameters. Perceptual maps reveal ‘strategic groups’
that use similar marketing strategies and programs to deliver value. Perceptual maps help in
understanding your competitors better and also reveal gaps in positioning with in the industry.
Let us look at the following example of car segment. Here the map is constructed using two
variables of styling (sporty or conservative) and price (premium and affordable). It can be clearly
seen that there are 4 strategic groups (one’s that use the some marketing strategy& program to
deliver customer value).
Strategic group Brands
Premium – conservative Rolls Royce, Bentley &

Benz
Affordable- Ford, Toyota, Suzuki,

conservative Tata
Premium - sporty Lamborghini, Porsche,

BMW, Audi, Lexus

Affordable-sporty Honda &Nissan
(Please note that only a few brands are considered for this exercise). From the perceptual map
the 4 strategic groups are evident and so are the competitors with in those strategic groups. For
example for Benz the direct competitors are Rolls Royce & Bentley. It is also evident that the
strategic group with least competition is affordable Sporty segment with only 2 competitors. Let
us look at competitive comparison of the soap & body wash segment using perceptual maps.
Parameters used are
• Benefit offered: Beauty, Natural - Ayurveda, Moisturizing, Deodorant, Disinfectant and

Mildness (glycerin/ transparent)
• Price charged: premium ( >50Rs/ 100gm), mid-priced (30-50Rs/100 gm) & economical
(<30RS/100 gm)
(The brands used for this study are restricted to those in the perceptual map and very widely
available in India).
Benefit Beauty Ayurveda Moisturizing Deodorant Disinfectant Glycerin

/ Natural
Price
Premium Yardley Moti Brut Pears
Park Avenue Fiama D’

Wills
Mid-priced Lux Medimix Dove Liril Lifebuoy Emami
Vivel Chandrika Nivia Rexona Savlon
Camey Cinthol Dettol
Soundarya Axe
Economical Santoor Patanjali

Godrej No.1
No competitors
Less Competition
High/ Heavy competition

The perceptual map has been created using about 25 brands. The strategic groups and
gaps in the current markets are very clearly visible and will be useful for a marketer trying to
introduce a new product. Every marketer should do a thorough competitor analysis based on
sound consumer understanding, so that a sustainable marketing strategy can be developed. A
lack of customer and competitor understanding will result in a very weak marketing strategy that
will lead to a mediocre marketing programme and result in failure or mediocrity of marketing
success.
PoPs and PoDs: we saw that right PoPs and PoDs have to be selected by the marketer. This is
very important as the PoPs and PoDs set up the context for comprehending the value proposition.
The PoPs gives the customers the comparative framework. PoPs tell the customers the category
membership of the product. For example, a statement ‘washes whitest’ tells you the exact PoP
and PoD. The PoP ‘washes’ indicates that the product is a detergent and ‘whitest’ indicates the
PoD - the product gives the whitest washing. A statement like ‘from the house of Raymond’s’
indicate the product category to be fashion/ grooming and the benefit to be quality/ prestige
offered by the brand. A marketer has to select the appropriate PoP and PoD to set the value
context. They should give the customer the frame of reference for comparison (value is
comparative and the PoP tell the category to which the product belongs for comparative purpose)
and offer a reason for purchase of the brand in comparison to its competitors (a superior or
distinct value offered by the brand).
PoP is generally of 3 types; category, competitive and correlational.
Category PoP is the characteristics shared by all the brands in the category. For
example, all detergents wash clothes. Competitive PoP is those characteristics developed by the
marketer to negate competitors PoDs. For example, when Nokia introduced phones with camera
all competitors started incorporating the same. Correlational PoPs are negative associations due
to PoD of the brand. For example, one of the PoD of the brand Yamaha, in motorcycle category,
is performance. However, the correlational PoP is ‘low mileage’ due to its PoD. i.e., when a bike
offers ‘performance’ it will not offer ‘mileage’.
Let us look at this with the example of credit cards Visa/Master and Amex. Visa and Master
offer wide acceptance thus attract more customers. Amex on the other hand is more exclusive
and has lower acceptance. However, over a period of time, Master and Visa has introduced
exclusive range to compete with Amex called Gold/Platinum range that has a higher prestige. On
the other hand, Amex has increased its point of sales activity by installing more sellers/ machine
making its acceptance increase dramatically. In this case
Category PoP - all 3 cards give credit
Competitive PoP - Visa/Master – Gold and Platinum cards
- Amex – wider PoS acceptance.

Correlational PoP
- Visa/Master - cheaper due to larger volumes.
- Amex – costly due to exclusivity
PoDs, as seen earlier, are characterised by associations that are exclusive to the
brand (at least perceived so by the customer) and not seen with its direct competitors. For
example, the PoDs of Energizer is that its lasts longer, Nike is technical/design superiority,
Apple is design excellence, Yamaha is performance etc.
It should be noted that multiple PoPs and PoDs may be selected in some cases.
For example, for a QSR (quick service restaurant) the PoPs may be convenience and value
(customers expect all QSRs to offer these two characteristics) and the PoDs may be quality,
image, variety, history etc (as chosen by the marketer to highlight their superior value in
comparison to their competitors). However, when the product/service category reaches its
maturity stage, all brands will look similar with highly standardised product and all of them
offering the same benefits.
Characteristics of a good PoP: Though it is easy to choose a PoP, to announce the category
membership and to set the comparative context, a good PoD needs some distinct characteristics
as discussed below.
• Relevance: The PoD should be relevant to the target consumers. For example, economic
toothpaste may be relevant to a price sensitive customer. However, pink/blue/green/red coloured
toothpaste may not be relevant to the customer as all the toothpaste will clean irrespective of its
colour. So, it becomes important that the marketer understands the customer well and choose the
right PoD. For a luxury car manufacturer ‘economical’ price may not be relevant PoDs at all.
• Distinctive: The PoD should be distinctive from that of its competitors. For example,
when Titan made ‘Edge’, it was promoted as the world’s thinnest watch, at less than 3 mm
thickness and this was significantly thinner than competing brands. However, when Sony
introduced world’s thinnest camera, its thinness was not so distinct. It wasn’t distinctly different
from competing brands (other brands were very close in their thinness to Sony. For example, if
Sony was 9mm thick-Nikon was 10 mm thick). Thinness for a camera was not a very relevant
PoD.
• Feasible: The PoD should be feasible and the marketer should be able to deliver it. For
example, when Dominos claims 30-minute delivery on orders as a PoD, it should be feasible to
offer the same. Dominos has developed systems that help it makes its PoD feasible. Tata-Nano
was the classic case of infeasible PoD. They promoted the car as a 1 lakh rupee car. However,
when they developed and delivered the car, the cheapest version was about 1.5 lakh that was
significantly higher than 1 lakh. Here it was not feasible to deliver a 1 lakh car as promised.

• Believable: The PoD claimed by the marketer should be believable in nature. For
example, claiming that hair oil will regrow hair on a bald pate is just not believable. From
previous experience, it is clear that hair oils cannot regrow hair on a bald pate. Most of the magic
cures, claimed by the marketers are just not believable.
• Communicable: The PoD claimed by marketer should be easily and convincingly

communicable. For example, Lifebuoy was successful in communicating its PoD of Triclosan by
claiming ‘Lifebuoy-contains Triclosan that kills 90% of the germs’. Maruti was able to
communicate well its PoD of serviceability and mileage well through its pragmatically designed
communication programme.
• Sustainable: A PoD should be sustainable. If the competitive advantage/ PoD is copied

easily, then it is lost. So, when the marketer chooses PoDs, it should be sustainable. i.e., not
something easily copied by the competitors. One of the biggest secrets of Apple’s success is its
sustainable PoD / competitive advantage of design excellence. They have evolved their designs
so fast that competitors have not been capable of copying that easily (however, others are fast
catching up in smartphones. Apple still has a ‘design’ edge in categories like tablets, desktops
and laptops).
• Emotional connection: The PoD should also have an emotional connect. This is
important because the physical features can be easily connected but not the emotional
connection. For example, Apple promotes itself as ‘thinking-different’ from its competitors,
which connects emotionally to its customers. The competitors may copy/emulate its design but
they cannot copy the emotional connect of think different. Similarly, the designs of Harley
Davidson may be copied by the other bike manufacturers, but not the emotional connect formed
by the brand through its HoGs.
Developing Brand Mantras:
While studying the positioning process, it was mentioned about the need to develop brand
mantras. Brand mantra is an articulation of the brand essence expressed in a very crisp form.
Brand mantras convey what the brand promises to its customers. Brand mantras can provide a
source of focus to the marketer by clearly conveying what is right and wrong, what is possible
and not possible while marketing.
For example, the brand mantra of McD can be ‘food, fun and folks’. It very clearly focusses the
energy of the organisation in creating great food and providing fun for the whole family. Nike
has a brand mantra of authentic athletic performance. All their activities, be it developing newer
products, improving current products, introducing newer services like training support,
marketing activities like community formation etc aims to improve the athletic performance of
the brand. It should be noted that the brand mantra is for the internal stakeholders and for the
external stakeholders an appropriate brand slogan should be developed. For example, the brand
slogan of McD is ‘I’m lovin it’, very clearly indicates that customers will love the McD

experience of good fun, food and family atmosphere. For Nike the slogan is ‘Just do it’,
something that tells the customers to wear Nike and effortlessly go ahead with their athletic
performance. It is extremely important to develop appropriate brand mantra and brand slogan for
successful market performance.
Communicating the position:
The last of the step, in the positioning process is to communicate clearly the intended position.
The intended position should be very clear and tell customers what the brand stands for and does
not stand for. It is clear that Benz provides luxury, Volvo - safety, Apple - design, etcetera. They
are clear in what they are good at. However, they also have to convey what they are not, directly
or indirectly. Benz is not high performance, Volvo is not ultimate luxury and Apple is not the
most affordable. The communication plan should clearly show the PoPs and PoDs. This can be
done through –
 Announcing category benefits like "writes the smoothest" where it is clear that the
product is a writing investment and the uniqueness is its smoothness.
 Product descriptor is another way of clearly communicating the PoPs and PoDs. For
example, "first 5G phone" clearly indicates that the product is a phone and its uniqueness
is its technology (5G vs current 4G phones) and it's leadership (first in category).
 Use of examplar is another is another form of clearly communicating the PoPs and PoDs.
For example, "from the house of Cartier" clearly indicates that the product is a
fashion/lifestyle product and the uniqueness is its exclusivity and design that are
unmatched along with the luxury. The communication of the brand position is not
restricted to talk (marketing communication) but also should be through the 'actions and
properties/physical evidence'. When McD promises to create food and fun for the family,
their restaurant should indicate fun through their appearance - bright, vibrant colors, well
lit, simple, etc. Not only the physical evidence, but the employees should indicate fun.
Disney ensures that all of its employees spend at least one day a year, irrespective of their
functional specialisation, in customer interfacing roles; where they will have to ensure
that the guests are entertained fully. This role may vary from a small one like collecting
ticket at a ride to wearing a Disney character costume to entertain the guests, especially
the kids.
A well thought out positioning, based on thorough understanding of customers, competitors and
the USP of own products/services, will provide sustainable competitive advantage resulting in
customer delight. Delighted customers sustain a mutually beneficial and emotional relation with
the brand. When the marketing strategy is superior to that of relevant competitors, the results are
visible in terms of increasing market share, mind share and heart share (emotional attachment).
Regular measurement of brand awareness/recall, brand association and retail sales will help the
marketer track its success in terms of the marketing strategy.

There is also alternative approach to brand positioning used by certain brands. There are two
main alternative approaches and they include 'branding by narratives' and 'cultural branding'.
Narrative branding involves telling brand stories relevant to the customer. It generally tells
narratives about how the journey turns out between the customer and the brand. It narrates the
various touch points and influences the brand has on the customer. Nike is a brand that uses
narrative well through its eventful journey with successful athletes and sports persons like
Michael Jordan. Cultural branding on the other hand uses brands as a cultural source. Culture is
commonly shared values and beliefs of a group of people expressed through properties and
behavior. Brands become a part of the culture and helps express the values and beliefs. Dove -
beauty taps into womanhood and mother-daughter relations as a source of cultural association.
Brand positioning – Starbucks: To look at how brand positioning is done, let us look at the
case of Starbucks. The positioning has started with segmentation and targeting. Starbucks has
chosen the 'discerning coffee drinker' as their target. A discerning coffee drinker is one who is
looking for good, authentic coffee combined with good consumption experience. While studying
the target and competition, they understood that the current competition, including local cafes,
QSR's and convenience shops did not offer good coffee and consumption experience as desired
by the coffee drinking customers. This highlighted a consumer need gap for better coffee and
consumption experience. This understanding of ‘customer need-gap’ prompted Starbucks to

position themselves as the one providing “rich, rewarding coffee experience”. Their PoPs were
responsible, locally involved and faithfully priced in line with their competitors. Their PoDs
were rewarding and relaxing moments offered at Starbucks; Rich sensory consumption
experience, convenient and friendly service, varied and exotic coffee drinks and fresh high
quality coffee. None of which were offered by the competitors. They communicated this through

their IMC program. However, they also communicated the same through ‘Properties’ and
‘Behaviour’. They developed substantiations (Reasons to believe) in the value offered through
integrated systems, well trained baristas, highly standardized products and systems and care for
internal stakeholders (So that they are kept happy to provide a good experience to customers).
They also developed properties in terms of the siren logo, earthy colours, and comfortable
interiors supported by value systems of care, thoughtfulness and being contemporary.
Starbucks was successful in their brand positioning and delivering of the proposed value
preposition through systematic process of understanding customers and competitors, finding and
choosing appropriate need gaps, positioning itself to deliver value to satisfy these need gaps &
developing an integrated program to deliver superior value. The success of the overall Marketing
plan (Marketing Strategy + Marketing Program) is resulted in a superior market performance
indicated by high brand awareness and recall, positive brand association and superior sales
performance and competition.

MODULE – 3
The Marketing Program also called as the Marketing Mix or the four P’s is critical in the
successful implementation of the Marketing Strategy. Module 3 deals with the Product and Price
portion of the program and Module 4 with Place and Promotion.

Product: Product in the marketing parlance is, any offering to the market/customers that can
satisfy a need or want an may include physical goods, services, experiences, persons, places and
organizations, information and ideas (Please refer to the scope of marketing). However, in the
common parlance, product is generally referred to as physical goods offered to customers. In
practice Products are a mix of tangible and intangible elements and products as pure tangible and
intangible is rare. To study this concept let us examine the product-service continuum.
P-S Continuum: This is a continuum represented by pure products (tangible value offerings)
at one end and pure services (intangible value offerings) at the other end. All value offering are a
mixture of these two and placed somewhere in this continuum between the two ends. Along the
continuum the value offerings differ in their composition. Let us look at the continuum from one
end to the other with appropriate examples starting from pure products; commodities like Salt,
Cement, and Coal etc. Pure products come with no services at all. Once the value exchange is
done the transaction is closed and there is no more interaction between the buyer and seller
regarding the items sold.
Next come the product dominated value offering where the value is mostly derived from tangible
product offered. However the customer may seek some important services that are needed once
in a while for the smooth running of the product. Consumer durables like Television,
Refrigerators, and Water purifiers etc. are good example for product dominated offering. The
customer may seek installation services while buying the product and also may seek repair
services, when product develops snags. The marketer has to ensure provision of these support
services for ensuring customer delight and maintaining customer relations.
In the middle of the P-S

continuum are value
offerings of equal
proportion of tangible and
intangible elements. These
products have an equal
component of physical
products and services and
are evaluated by customers
based on both components.
Restaurants are a classic example of these kinds of vale offerings. Customers evaluate a
restaurant based both on the food offered and accompanying services provided. In such cases it
becomes imperative for the marketer to adequately ensure that tangible and intangible elements
meet the customer expectations. The service dominated offerings are products that are dominated
by the service element in their evaluation. For example, a service like health club is more
evaluated on the services it offers than any physical component. However, the physical
component is also a part of the evaluation process, albeit a minor component of the same. The

other end of the continuum Consists of pure services like legal services. Here the value offering
is fully judged based on the intangible element; here the legal advice. Customers generally are
oblivious/ inconsiderate of the tangible element and it plays no role in customer evaluation of the
value offering.
It is imperative that marketers understand the exact position of their products in the
continuum because it affects the characteristics of the products, its evaluation by the customer
and the marketing efforts involved in the same. Pure products are easy to evaluate (due to
physicality) unlike pure services. Pure products are high in search qualities, in that customer can
pick and compare the products before choosing. However, services are high in credence
qualities. Customers pick services by the credibility of the services. For example while choosing
dresses we compare products based on physical parameters whereas while choosing a doctor we
look at his credence like degrees/ specialization, experiences and reviews. Pure products
generally are highly standardized whereas the pure services are highly customized according to
the buyer.
Pure products Mixture Pure service
Tangible Some tangible elements Intangible
Easy to evaluate Moderate difficulty in evaluation Difficult to evaluate
High in search qualities High in experience qualities High in credence qualities
Transactional dealing Mixture Relational dealing
Highly standardised Some adaptation Highly customised
For example cement/ petrol sold is same across all customers buying them. However legal/
medical services are customized to each individual buyer. Pure products a generally have
transactional dealing whereas pure services have a relational dealing. For example you may fill
gas from any station based on your fuel requirement. However you go to generally good hospital/
legal firm for your requirements and maintain a long term relationship with them. This helps the
service provider to understand you better and provide customized solutions.
Product classification: product/ value offered by firms, to satisfy the needs or wants of the
customers, can be classified on various parameters. These classifications are important as the
basic marketing plan (marketing strategy and marketing program) differs with the classification
of the product. There are three main criteria for classifying any value offering and their
Durability, Tangibility and Use. Let us look into each of the classification in detail.
Durability: Products can be basically classified into two based on durability. Durables are
products that withstand many uses and generally last for a long time once brought. Examples for

durables are automobiles, clothes, kitchen equipments etc. These products are not exhausted on
use, though they have wear and tear and are replaced only after long periods of use.
 Durables like fridges are called “white goods” as they used come in white color, which
has changed since the last decades of the twentieth century. A new class of kitchen
durables, called “brown goods”, are today widely available and include low value
durables like cookers, gas stove etc. They are more widely used in comparison to white
goods and are of lower value.
 Non-durables are good that are exhausted in one or many consumption and needs to be
re-brought. Most of the consumer goods are of the non-durables category. For example
products like soaps, shampoo, biscuits, chips, etc. are non-durables in nature. All FMCG
products belong to the non-durable category and forms the largest product category in
terms of sale.
Tangibility: It is based on tangibility value offering are classified in to
 Products: They are tangible value offering that are made to stock. They are in high
experience quality as customers can feel, compare and evaluate them in terms of the
physical characteristics. Products are centrally manufactured and distributed wide and far.
Examples include all durables and non-durables goods consumed like soap, cars, cell
phones etc.
 Services: They are intangible offering that satisfy a customer’s needs. Customers do not
get any tangible offering while buying or availing service but can experience them. As
the services have no physical existence, they are difficult to compare and customers buy
them based on the credence. Examples of consumer’s services are beauty services,
education, legal service, health care etc. Services are also widely consumed by industrial
users. Services assume high significance due to the fact that service consumption increase
and overtakes goods consumption as customer affluence increases. Maturity of a nation’s
economy is indicated by the contribution of service sector to the economy.
Use: Based on the use market offering can be classified again into two; industrial and consumer
goods. This classification is based on the end use and not based on the type of product. The same
product can be both industrial and consumer goods. For example when a person buys a book to
write notes, the notebook can be classified as a consumer good. However, when the notebook is
brought by a company to keep their accounts the same will be considered industrial goods.
 Consumer goods: - They are products that are consumed for personal/ family non-
business purpose. For example tea / sugar brought at home.
 Industrial goods: - these are consumptions for non-personal, business purpose. Here the
goods are used to further produce goods or for running of the business. For example Tea
and sugar bought by a restaurant is not consumed by the restaurant but to produce tea,
that is further sold to their consumers. Paper brought for account keeping is an industrial

good in that it helps the business in maintain regular operation through proper book
keeping.
Consumer goods are further classified into 4 types and industrial goods into 3 types and that is
examined in detail below: -
Industrial goods: It can be basically classified into 3 types further.
 Capital items: - These are generally high value items and are used to convert the inputs
into the output. Capital items generally include plant, machinery and building. There are
identified by their appearance in the fixed asset side of the balance sheet. They are
durables and generally bought infrequently and used for long. They are constantly
depreciated on a yearly basis. Examples will include building, machinery like generators,
engineering heavy equipment etc.
 Materials and parts: materials (Raw material) & parts are the inputs and get converted
into the output. They appear as the part of the current assets and their consumption is
dependent on the production levels. As the production or output increases the
consumption of materials and parts increase correspondingly. Materials are items that are
a part of the final product but lost their individual identity. For example steel used for car
making is no more having any individual identity of its own. However parts are slightly
different. Parts, though part of the final product, retain their individual identity. They are
usually not further processed by the buyer and just fitted into the final product. For
Example tyre bought by a car manufacturer can be considered as parts. Tyre are directly
fitted into the car, without any further processing and retain some of their identity. Maruti
cars may come with MRF or Apollo tyre and the tyre will have their individual identity
retained to some extent. Dell computers may come with Intel processor that is considered
a part of the computer but with individual identity.
 Supplies and Services: They are items that are used to maintain smooth conduct of the
business. They are not the part of final product. Along with materials and Parts, supplies
appear as the part of the current Asset in the balance sheet. Supplies may include a vast
variety of items like paper used to document the functions, to Lubricating oil used to
lubricate the machinery, to light bulbs used to light the office. The services may include
accounting services used to finalize accounts, legal services, cleaning and housekeeping,
Consultation services etc.
The consumer behavior and the buying Centre significantly changes based on the industrial
product class, calling for different marketing plan. For examples capital items are less
frequently bought, may include large buying center, a very long and stringent product
evaluation and long period to make the purchase decision. While buying supplies like paper
or lubricating oil the behavior maybe just opposite of what is exhibited for a capital item. It
also should be noted that the same product may belong to different category for two different

organizations. For example printing paper maybe a supply for a manufacturing organization
but Raw material for a publisher.
Consumer goods: consumer goods can be basically classified into four types as follows
 Convenience goods: are consumer items

where the involvement of consumer is low.
Products under the variety seeking and
habitual buying behavior are examples of
convenience good. Consumer does not invest
high resources (in terms of effort and money)
in acquiring these goods. They buy either to
experience variety or just out of habit.
Examples of convenience goods include toiletries, personal care items, Food items,
Staples, commodities like salt etc.
 Shopping goods: are characterized by high involvement of customer in the buying
decision process. The products are usually of high value and infrequently brought.
However, the differences between the brands are low or customers are incapable of
comprehending the difference. All products under the dissonance reducing buying
behaviour belong to this category. Customers invest a lot of efforts in choosing and
buying the product but soon start doubting their choices, usually on seeing alternatives
that had not been considered by them, and becomes dissatisfied. Marketers should make
an emotional connect with customers and constantly communicate to reassure the
customers. Examples of these types of goods include home furnishing, jewelry etcetera.
 Specialty goods: are those where there is a significant difference between brands in terms
of features and imagery customers invest a lot of efforts in buying these goods, they are
infrequently purchased and are higher value. Consumer behaviour of the complex buying
behaviour category typically represents these products. Classical example include
automotive, electronics etcetera.
 Unsought goods: a category of goods which are needed by customers but they show no
willingness to buy; unless pushed by the marketers. Marketers spent a lot of efforts in
creating consumer awareness/ education. They also use negative messages to create fear
in customers. For example most dog bite victims do not bother about vaccination. The
vaccination makers generally create fear psychosis by promoting the fact that “rabies is
100% fatal”. Insurance is another commonly unsought good. Marketers invest a lot to
educate customers on the benefit and the need of insurance also on the dangers of not
having adequate insurance coverage.
Understanding the consumer goods category is critical for the marketer as it will determine the
consumer behaviour and reveal the appropriate marketing plan. These categories also sometimes,
have sub-types which further affect the consumer behaviour. For example convenience goods

may be staples (food items), impulse goods (chocolates, personal care...) or emergency goods
(medicines/umbrellas…). The shopping goods further have homogenous goods (those that are
similar in feature but different in price eg: electronic items) or heterogeneous goods where the
goods and accompanying services are different between the various brands (for example
automotive). A brief recap of differences in consumer behaviour and resultant changes in the
marketing program are given in the table below for the different categories of consumer goods.
Marketing Convenience Shopping goods Specialty goods Unsought goods

consideration goods
Consumer buying Frequent purchase, Less frequently Strong brand Little product
behavior little shopping purchased, high preference, high awareness, little
effort, little involvement & involvement, high interest
comparison, low effort, brand brand loyalty, low
involvement comparison price sensitivity
Price Low Higher High varies
Promotion Mass promotion & Advertising by the Highly targeted Aggressive

advertisements, producer and promotional efforts advertising and
POS. personal selling by promotion by the
retailer producer / reseller
distribution Mass distribution Selective, fewer exclusive Varies

to maximize reach outlets
& visibility.
Product Soap, chocolate, Clothes, jewelry, Car, home…. Insurance,

deodorant… furnishing.. vaccination…
Sub-types Staples, impulse Homogenous & Nil Nil

goods & heterogeneous
emergency goods
Levels of product:
Is a hierarchy of value offered by a product (with the lowest level offering least value and the
highest level offering the maximum value) that includes all the tangible and intangible values
offered by the product. All products have 5 levels (according to Philip Kotler) that include core
benefit, basic product, expected product, augmented product and potential product. Let us look at
the levels individually.

 Core benefit: is the primary reason for a customer to buy the product. This Level
indicates the generic benefit offered/ need satisfied by the product. For example the core
benefit offered by a car is transportation and the core benefit of a phone is
communication. In other words a car satisfies the transportation need and the phone
satisfies the communication of its customers. All products or services offering the same
benefit/satisfying the same need will be competitors to each other; if not direct at least
indirect.
 Basic product: sometimes also called as generic product is an engineering translation of
the core benefit. For a car a basic product will include chassis, engine and transmission;
that is technically enough to transport someone. For a phone is an antenna, power source
and speakers that constitute a basic product. However, customers don’t generally settle
for a basic product.
 Expected product: is what customers consider while purchasing a product. This is the
basic minimum they will settle for while buying a product. For example while purchasing
a car today customers expect some styling, branding, features like air bags, music
systems, air conditioner etc. It is important to understand the expected product as the
information will be useful in designing the value offering. Any value offering below the
expected product will not be a part of the consideration set of the buyers. For example a
smart phone buyer today expect 3G, touch screen, cameras, a brand name, some basic
aesthetics etcetera while purchasing a smart phone. Any brand without these features will
not be considered at all by the customers while choosing a smart phone. All features in
the expected product level usually make the PoP; in that all brands participating in the
category are expected to have these features to be a part of the product category.
 Augmented product: is a product that is augmented/ added with functions and featured
to exceed customer expectation. Customers are generally motivated to buy a particular
brand in a product category based on the augmentation. Augmentation can be either
physical feature/ function (eg: Carl Zeiss lens for a phone/camera) or services like
extended warranty. Most of the competition happens at the augmentation level where the
augmentation adds to the customer value and results in favorable evaluation of the
product.
It should be noted that the customer expectation in the under developed/developing markets
may be lower than customer expectation in developed market. For example car buyers in
India still does not expect power steering or air bags as standard features in cars. However, in
developed markets products compete at the potential product level. Car makers can use these
features to augment their marketing offering in developing and under developed markets. It
also should be noted that today’s augmentation is tomorrow’s expectation. For example
‘cameras’ in phones were an augmentation in the first decade of the 21st century and is an
expectation today. Any features in the augmented or potential product level can be PoD and
add additional customer value in comparison to the competitors.

 Potential product: is a product that encompasses all possible transformations and
augmentations that product may undergo in the near future. For example, auto driving/
auto pilot cars today are potential products. For smartphones the augmentation may
include features like automatic ability to post pictures to social media and manage these
postings.
A small amount of competitions among brand happens at the potential product level. Brand like
tesla today have brought in cars that are at the potential product levels like ones that are auto
driving/ auto pilotable. The importance of the product level for marketers is multi-pronged. A
good understanding of the product level will help the marketer
 Understand the competitors (direct and indirect) from the core benefit.
 It will help design value offerings as the customers clearly understand.
 It will help the marketers understand the PoDs needed to establish category membership.
 It helps in identifying the potential PoDs that can be used to differentiate position the
product and gain competitive advantage.
 It can help in product development/improvement by incorporating futuristic features in
them.
Differentiation: differentiation is that art of making product distinct from that of your
competitors. We studied the concept positioning, which is the act of creating a distinct image
about the company’s product in the mind of consumers/ customers. The fundamental basis of
brand positioning is ‘differentiation’. Unless the product is different, from the competitors, it
cannot be positioned differently in comparison to competitors. Hence, while developing market
offering it should be kept in mind that the offering needs to be ‘differentiated from its
competitors so that a distinct ‘brand position’ can be created.
For example, many of us take Aspirin as a home remedy for headaches. There are many brands
of aspirins, one among them being ‘Disprin’ from Reckit Benkizer. The brand ‘Disprin’ is
differentiated, from the competitors, in terms of formulation so that the product dissolves within
30 seconds. As the product dissolves in 30 seconds, the body can absorb it faster and thus give
‘quicker’ relief. Unless ‘Disprin’ dissolves faster (fast dissolving in 30 seconds – a difference in
comparison to other aspirin brand) it cannot be positioned as ‘aspirin that offers quick relief’.
This differentiation and positioning is very relevant to the customers as anybody with head ache
would like to have a quick relief. This also can be looked at from the FAB (features, advantages
and benefits). The ‘Feature’ of Disprin is that it dissolves in 30 seconds (that other aspirins do
not claim to have) the ‘Advantage’ is that the body is able to Absorb the medicine quickly and
the customer ‘Benefit’ is quick relief with Disprin (a benefit anyone with headache would like to
have). This makes ‘Disprin’ to deliver more customer value in comparison to other aspirins,
making it the most widely used aspirin brand in India. Similarly, Vicks action 500 is
differentiated through special ingredients (nasal decongestant) that allow it to be positioned as
the ‘cold medicine’; where it can relieve headache and nose block associated within common
cold in one go. Product differentiation is imperative for successful brand positioning and
marketers should have a very clear idea on how to differentiate their product, from that of the
competitors, so that it can be distinctly positioned (for eg: Disprin –fast relief from headache;
Vicks action 500 - relief from cold). Marketer has many options to differentiate the products that
of their competitors and this include product, service, design and image based differentiation.
Each of them is looked at in detail below.
Product differentiation: Involves differentiating the products based on certain physical features,
in comparison to the competitors. There are many ways of differentiating a product physically
they are
 Product form: The differentiation happens in the size, shape or structure of the product.
Classical examples that can be looked at include Disprin, Dettol-sanitizer, Godrej-Ezee
etc… Disprin was physically different from other aspirins in that it dissolved in 30
seconds (thus positioned as the fast acting aspirin). Dettol-Sanitizer was different in its
composition that made it possible to use the product without water (it was positioned as
all situation sanitizer). Godrej-Ezee, the first liquid detergent in India, had a different
form (all competitors were cakes or powder-this PoD has since been negated with other
brands introducing liquid detergents).This helped them to position Godrej-Ezee as a mild
detergent suitable for silk and woolen clothes. Odomos, was the first mosquito repellent
cream available and all other competitors were coils or vaporisers.
 Features: products can be differentiated by adding features that competitors lack (it may
be eventually lost when competitors acquire competitive PoPs). Nokia had the first cell
phone with camera (now every phone has). Volvo has safety as a feature and uses it as a
differentiator for brand positioning. Features also can be used to differentiate sub brands
or models. For example cars came in different variants for same brand all having
different set of features. For eg: Suzuki-Swift is available in LXi, VX, LX, VX etc.
Company should ensure that the features will be valued by customers and will be willing
to pay for it before using it as a source of difference. The company cost also should be
kept in mind as a cost higher than the customer willingness to pay (for the additional
feature) will result in losses.
 Customisation: Ability to customise a product based on the individual customer need can
be good source of differentiation. One of the greatest reasons for success of toys like
Lego & Barbie is the freedom of customising the product according the user tastes &
preferences. Rolls Royce derives competitive advantages and customer satisfaction
through product customisation. However, due to the change in technological environment
(like 3D printing), it is possible today to mass customise physical offering and this
strategy is being adopted by more and more players reducing its value as differentiator.
 Style: It is a distinctive appearance that is unique. Use of style as differentiator is
common. BMW uses its kidney style grills to visually differentiate its products. Harley

Davidson has a very distinct style for its bikes that make them different from its
competitors.
 Performance Quality: is another source of differentiation. Marketers generally use
superior performance as a differentiator. For example Bose speakers offer superior audio
performance. Clever marketers may also use lower performance of the product as a
differentiator. For example a detergent that is a milder may claim to be safer for the
clothes and the user.
 Conformance Quality: Differentiation of the product is possible through its conformance
quality. Conformance quality is the ability of the product to meet its specified
performance standards. Conformance quality is important when customers cannot exactly
measure the performance of the product and is widely used by technical products;
especially by industrial products. For example electrical gears made by Havel’s or L&T
can claim higher conformance quality in comparison to their Chinese competitors and
this can be a source of competitive advantage.
 Durability: is a measure of the operating life of the product under various conditions.
Durability can be a source of differentiation & brand positioning and can offer
competitive advantage. Brands that differentiates & position based on durability include
Energizer, Amaron, Relaxo etc. A look at their marketing communication will clearly
reveal the same to any customer/consumer of these brands.
 Reliability: it is the measure of probability that the product will not fail or malfunction. It
is an indicator of dependability for any product. Reliability can be a ‘differentiator’ and
can be used to position the product. When Philips mixers offer a 7 years warranty on its
motors it is an indicator of its reliability. When Mercedes Benz provides an unconditional
3 lakh mile warranty on its engines, it indicates product reliability and offer competitive
advantage.
 Repairability: it is the ease of fixing a product when it malfunctions. Repairability is
critical to durables as they are used for a long time and there are chances of their
malfunctioning or needing regular maintenance. Repairability of a product can be used to
differentiate a product from its competitors and it can provide competitive advantage.
One of the main reasons for the success of Maruthi car is that it can be serviced/ repaired
even in the remotest corner of the country.
Product based differentiation is a practical method for marketers of physical value offering.
Whenever the value offering is dominated by tangible value (in the product service continuum)
product differentiation is a practical option for the marketer.
Service Differentiation: Involves differentiating the marketer’s value offering based on the
accompanying services. This is possible when the value offering has tangible & intangible
components (product & services components). For example: Consumer durables, quick services
restaurants, automotive etc. There are many service criteria that can be used to differentiating a
value offering. Some of them are

 Ordering Ease: it is one of the service parameters that can be used to differentiate a
market/value offering. For example the whole success of Dell Computers can be
attributed to ordering case. Unlike its competitors, you could order a Dell online (since
then all others have included this services to their offering) and that made a lot of sense
and provided value to the computer buyers. They could sit in the confines and comfort of
their house, browse through the website and look at the products, customise them, order
and receive the products at home. This added a lot of customers value as the customers
saved a lot of time (cost of acquiring the product) wasted in searching for a computer and
could get the product customised to their individual requirement (till then they had to buy
standardised products made to stock). Many e-commerce companies differentiate
themselves through ordering ease. For example policy bazaar makes it easy to order/ buy
an insurance policy, cardekho.com makes buying/ordering a car very easy. You can get
into the web site, compare/ filter cars based on your requirements of different product
features, order for a test drive sitting at home and get it delivered to your porch with all
paper work done.
 Delivery: Can be another service that can be differentiating a value offering. A classic
example of delivery based differentiation is Domino’s Pizza. There are many pizza
brands in the country. However, most customers preferred Domino’s to other brands
because of their delivery. While surveying customers Papa John’s scored higher on taste,
Pizza Hut on restaurant ambience & product choice compared to Dominos. However the
delivery service of Domino’s, that ensured delivery within 30 minutes (or the pizza free),
offered more customer value. Domino’s products were acceptable in taste & quality
(hygiene factors for pizza customers) but motivated customers through its assured
delivery (motivating factors) there by becoming the most preferred brand of pizza in
India. Domino’s assured customers the convenience of having a decent pizza at the
comfort & confines of their homes.
 Installation Services: Can be another form of differentiating value offering, especially for
durable products, when it needs specialised skills. Installations are also important in
delivering product value for industrial products that are of the capital item categories.
Success of household electronics retailers like Chroma & Reliance digital has been their
installation services. When you buy an air conditioner or television from these retailers
they offer free installation. The service person comes with the delivery team, installs the
product and make it user ready. The e-tailers in India like Flipkart & Amazon were
finding difficult to sell high value household appliances that need installation &
preventive service. Currently they are fast tying up with appropriate channel partners to
provide installation services for electronic items bought online. This has not only
improved customer confidence in buying high value electronic products from e-
commerce websites but also the contributions of these products, to the total sale of these
sites, have significantly improved since the introduction of these services.

 Customer Training: Training of customer’s employees to operate vendors equipments
efficiently & effectively can be a good way to differentiate industrial products. Customer
training helps the marketer to promote efficient & effective product utilization, there by
promoting improved value delivery to the users. When well trained, user are able to get
better productivity from these machines and prevent breakdowns leading to improved
satisfaction with purchase .Volvo, while selling trucks and buses, ensure that the drivers
are well trained to derive maximum utility of vehicle & improve vehicle life and reduce
cost of ownership. When Aircraft manufactures sell planes they train pilots and technical
staffs of airline to get best overall performance from the product.
 Customer Consulting: Is another way of differentiating a market value offering.

Consulting involves all data, information, advice, service etc. that a seller offers to the
buyer. IBM one of the leading IT giants, differentiate their offering through end to end
consultation they provide for their customers. This helps the customer better understand
the product and maximize the value they derive out of the product. Depositing and
brokerage services like Religare, India bulls, Angel broking also offer advisory services
to its customers so that they can benefit the maximum from these services. The Advises
and services may or may not be charged for providing additional revenue streams.
 Maintenance & repair: can be a source of differentiation for products that are durable in
nature. This is especially so for industrial products of the capital equipment category.
Rolls Royce provides timely preventive and breakdown maintenance & repair as a
differentiating service for their aircraft engines. They are able to remote monitor the
performance of their aircraft engines and diagnose issues with performance. They are
able to then provide timely services to ensure trouble free use of the aircraft and maintain
business continuity. Otis elevator is another marketer who provides remote maintenance
of its products. This service will ensure reduction in machine downtime and also prevent
accidents and hazards associated with operating these machines.
 Returns: Are another way of differentiating value offerings by a marketer. ‘Free returns’
provide assurance to the customers and reduces their perception of risks associated with
using the product. Insurance is an unsought good and difficult to sell. However, when
IRDA (the insurance regulatory body) introduced a free look period; where in the
customers can return the policy they bought for a full refund, it did wonders for the sale
of insurance policies. Customers were reassured of the fact that they had an option to
return the product if dissatisfied, and they went ahead buying the products (however, not
many returned the policy ever ). One of the biggest reasons for the success of Amazon in
India is his free return policy that provides a re-assurance to the customers that their risks
of buying a product from Amazon is safe.

Design differentiation: Design is the sum totality of features that affect how a product looks,
feels and functions in terms of customer requirement. A great design is a good way of
differentiating the products. Some of the brands that use design differentiation include Bang and
Olufsen in music/ electronics, Steinway in piano, Herman Miller in office furniture, Viking in
customized kitchen etcetera. However, the most ubiquitous example of design differentiation is
Apple. All Apple products are known for minimalist design, distinct looks and user-friendly
interface. There are also companies that use certain sub brands where they adopt design
differentiation. Classical examples include Titan-Edge, Hawkins-Futura, Motorola-Razor
etcetera.
Image based differentiation: is all about creating differences through use of imagery. Here the
marketer has no great scope to differentiate their products based on the other three parameters.
Image based differentiation is most widely used in consumer products as the products are highly
standards and as consumer involvement is low or he is seeking variety and looks at making
effortless decisions and uses product imagery as a product evaluation and choice criteria. for
example most cola drinkers may not exactly understand the difference between Coke , Pepsi &
Thums-up (especially when it is served chilled) and resort to product selection based on imagery.
For example Coke - is about happiness, Thums-up about adventure & Pepsi - youth (or is it?).
What exactly is the difference between Moov, Volini, Amrutanjan & Iodex; they look and smell
different but really don't act different(they all tackle the pain the same way). However, we
choose Amurtanjan when we have headache, use Moov/ Volini for back pain and choose Iodex
for sport injury - just because we have been told so through their advertisement. What is the real
difference between Reid and Taylor and Raymond's? Not many are sure of the difference in
product but we all know that Reid & Taylor bonds with the best (Amitabh & James Bond ) and
Raymond's makes a complete man.
All marketers of products will have to differentiate their market value offering one way or the
other as this is a prerequisite for brand positioning. No brand can capture customers by saying
that our products are similar to someone else. Choosing the right differentiation strategy thus, is
a pre requisite for creating competitive advantage through brand positioning.
Product system: is a group of diverse products, but related items, that function in a compatible
manner. For example cell phone has to be used along with a diverse group of products that
include chargers, earphones, docks etc. A marketer has to ensure that his offering all these
diverse items provided together; even when they may be manufactured by someone else. For
example the docks and earphones for an iPhone may come from another manufacturer like JBL
or Bose. It is imperative that the marketer develops suitable business ecosystem to ensure
availability (and if necessary bundling) of all diverse, but related products, together so that the
customer can use the product hassle free.
Product Mix: product mix is the set of all products and items that a particular seller offers to
the market. Most marketers have a set of offerings for sale in the market. This act of offering not

one product but a set of products has mainly two reasons; one is to maximise their market
opportunity and the other is competitive reason. Let us look at them in detail
Maximisation of opportunity: a product mix helps the marketer to maximise the market
opportunity by giving them a chance to cater to different needs of the customer. Catering to just
one need may not be very feasible economically as it may not provide adequate volume. Hence,
a product mix will help the marketer increase his sales volume by catering to different needs of
the customer. A company like HUL or Patanjali has a slew of products that satisfy different
consumer needs and help the company sell more to each of their customers.
- Product mix often provides economies of scope that is critical in consumer good
category, especially. For example while choosing a body wash/ soap customers may have
different needs. Some customers want deodorant soap, some glycerin, some disinfectant, yet
others moisturising etc. HUL has a personal wash product line of about 10 brands that caters to
these varying needs of customers. It also is reassuring for the customers that HUL can cater to
body wash needs, whatever it is. Even when customer just wants variants, like in case of
chocolates or biscuits; it helps to have a product mix which will maximise the economies of
scope (economies of scale looks at making one thing in large volume thereby attaining low cost
and price leadership. This is ideal for commodities like cement, petrol etc. However, this is not
possible in consumer goods where consumer needs differ and they often seek variety. Under
such circumstances a marketer should resort to economies of scope where they gather larger
volumes of sale by providing variety and choices to the customer in the same category. For
example, a biscuit manufacturer should provide different types of biscuits like glucose, cream,
wafers, arrow root, choco-chips etc. though it may be practical to manufacture one variant in
large quantity. However, market acceptance and thus sales of one variant alone may not produce
adequate volumes).
- Upselling and cross selling is possible when the marketer has a product mix. For example
it will be easy to cross sell Dove body lotion or shampoo to a customer who is currently using
Dove soap and is happy. Another advantage of a product mix is to up-sell. As customers grow in
affluence may seek better and costlier products. It becomes easier for a marketer to up-sell to
these customers as they are already satisfied customer. For example 60% of Maruthi’s sale of
larger car is made to Maruthi customers of small cars. For example someone who buys a Maruthi
A-star and uses it for a few years is happy with Maruthi. Now when he wants to upgrade his car
to larger one (because of improved social & economic status, grown up children etc) another
Maruthi brand like Swift D’zire or Baleno or Brezza becomes his automatic choice (or at least
they are definitely a part of his consideration set for larger cars).
- Increasing share of purse is possible when a marketer has a product mix. For example
when it comes to spending on male shaving needs; a man can buy only shaving creams from
Godrej , blades from Super Max, and after shave from Old Spice. However, he can buy all the
three from Gillette. Thus Gillette can maximise customer share of purse when it comes to the

shaving needs. Please note that share of purse is the amount of money spend on the company’s
brand as ratio of total expenditure in the category. For example if a man spends 300 rupees on
his monthly shavings needs and buy shaving cream from Godrej for rupees 100, after shave from
Old Spice for rupees 100 and blade from Super Max for 100 rupees – Godrej’s share of purse is
100/300 =33.33 % . However, when he buys all the products from Gillette; their share of purse is
100%. A product mix helps a marketer to maximise customer’s share of purse in a given product
category.
- A product mix also helps to develop a better customer relationship. As customers buy
more from the company and interact more with them they tend to develop a better relationship
with the marketer /company. This will help both derive value from the association and will have
a longer relation.
- As better customer relation will lead to longer association and this will lead to higher
customer lifetime value. CLTV (Customer Life Time Value) is the sum of all revenues earned
from the customer over his life time of association with the marketer. A good product mix will
allow the marketer to maximise the Customer Life Time Value of each of their customer. This
will also result in higher customer equity (sum of the lifetime values of all customers) which will
result in higher brand equity and brand valuation.
Competitive advantage: Another great advantage of having a good product mix is the
competitive advantage it provides in the market place.
- A good product mix will help ward off competitors. For example in the body wash
category in India not many competitors would enter easily as the market leader HUL has a
product mix that caters to all types of body wash needs of customers and has not left any gaps to
be exploited. HUL also will have a strong control over the distribution and lower shared cost of
distribution between all its body wash brands; which will not be possible for new entrant. HUL
also will have good trade leverage as the trade channel partners have higher dependency on HUL
due to their large product mix.
- Counter attacking of competitor can be done by expanding the product mix. For example
when HUL introduced Ayurvedic soaps (Medimix is the leader in this category), Medimix
expanded their product mix by introducing clear soaps which counter attacked HUL’s Pears.
Expansion of product mix helps a marketer to counterattack their competitors when needed.
- A large product mix also helps in growth through expansion. As the product mix is
expanded new customers (customer expansion) and markets (market expansion) can be added to
the company’s customer list resulting in organic topline growth.

Understanding product mix:
A product mix is sum total of all products offered by a marketer for sale. It takes some effort to
understand the same. The product mix has to be arranged /de-lineated in order to fully
understand a large product mix. The hierarchical division of the product mix will have to be done
and then ordered in order to understand the product mix better. The product mix can be divided
hierarchically first into
 Product category: It is a group of product lines catering to a similar need. For example
‘personal care’ is a product category, which consists of all product lines that help a
consumer care for his physique.
 Product lines: are a group of similar products satisfying the same needs and has similar
marketing mix. For example personal wash is a product line that helps consumers to wash
and clean their body. Many product lines generally add up to form a product category.
For example the personal care product category may contain product lines that include
body wash, skin care, hair care, oral care etc.
 Product/ Brand: is a product with distinct identity of its own (name, logo tagline…) and
has a distinct position in the minds of consumers. A brand is generally a part of a product
line; for example Lifebuoy is a part of the personal wash product line. A product line may
consist of many brands or sub-brands. However, sometimes brands may be extended in to
other product lines where there is some synergy and the brand associations can be
leveraged. For example the brand Dove is a part of many product lines of HUL (under the
personal care product category) that includes personal wash (soaps), skin care
(moisturisers) and hair care (shampoos and conditioners). Here HUL has ‘Brand
extended’ Dove from the body wash product line to others to leverage Dove’s association
with moisturising.
 Product variants: are the different variations, in terms of size, shape, form etc, which is
available under each product brand. For example Lifebuoy (under the body wash product
line – in personal care product category) is available as cakes, hand wash and sanitisers.
Even under these different forms there are many variant in terms of size and content.
 Product line length: is the number of brands that is available in a product line. For
example the body wash Product line of HUL has about 10 brands that include the brands
like Dove, Lux, Lifebuoy, Hamam, Pears, Breeze, Rexona, Liril, Moti & Ayush. This
represents the length of the product line.
 Product Line Breadth: is the total number of Product Lines offered by a marketer under
its various product categories.
 Product Line Consistency: is how closely the product lines are related to each other. A
consistent product line helps a company to derive business synergy. For example all the
product lines of HUL cater to the personal or Home Care needs of the customer. This
helps HUL to cross sell their products to the same customer. For example, someone who
uses body wash of HUL can also use hair care or oral care from HUL. It helps in sharing
of facility and reducing cost. For example the marketing & distribution network can be
shared as you have the same customer for all the products. This also helps them derive
channel synergy and control as the channel members have a better relation with HUL (as
they sell more of HUL products, in comparison to other consumer companies, and derive
more profits).
However, there are times when companies have an inconsistent product lines & still are very
successful. When the product lines are inconsistent the marketer will have to set up separate
business organisation and cannot leverage any synergy between the product lines. For
example Yamaha is in to two wheelers, Musical instruments & Water transportation/ Sport
products. None of these products are related and cannot expect to share common facilities.
They only can leverage the parental brand value in common.
To understand how to
divide/classify a product mix
let us look at the FMCG
organisation HUL. HUL’s
product mix can be divided in
to mainly 4 categories
(Personal care, Home care,
Food & Consumer goods).
Under each category there
are multiple product lines.
For example under ‘personal
care’ category the product line are
Personal wash, skin cares & cosmetics,
Hair care, Deodorants & Oral care. The
personal wash product line has a length
of 10 (10 different brands mentioned
before). HUL product mix has width of
12 lines (5 lines in personal care
category, 2 in Home care, 4 in food & 1
in consumer goods). The product line is
consistent with all the product lines catering to related needs of the same customer.
Product Mix Decisions: As mentioned product mix is the set of all products offered by a
marketer. When the product mix is large, it sometimes becomes difficult to manage the mix and
this needs systematic efforts. The marketing manager will have to extensively analyse the
product mix to understand & discriminate the products based on their performance and
prospects. Some of the commonly done planning & analysis includes:

 Sales & Profitability Analysis: As there are many product lines in a product mix and
their impact on the top line & bottom line of the organisation may vary. Every product
line should be analysed for the contribution to the top line, bottom line & the
organisational profitability (the top line of a product line is indicated by its sales, the
bottom line by its profits and profitability as a ratio of these two). There may be product
lines that may contribute significantly to all three, any two or only one of the measure.
For example in a comparison of 5 product lines it can be seen that PL-1 contributes to
50% of organisation’s sale, but only 30% to its profits. Whereas PL-3 contributes to 10%
Sales and 20% of the profits. PL-5 has a small impact with contribution to both sales &
Profits being low at 5%.
This detailed knowledge
of the product lines will
help a manager to take
strategic decisions on to
invest/grow, maintain, or
retrench/withdraw his
different product lines.
Every marketing/Product
manager should do a
detailed analysis of the product lines in his product mix for effective business decisions.
Sales & Profitability analysis is done for product lines in a category to understand which
of these are worth being invested in and which are not. It should be noted that this
analysis has to be preferably done on multi-year data as single point data may sometime
mask a trend or give a misleading picture.
 Market profiles & images: The market profile & image analysis is done for the brands
in a product line and is a kind of perceptual map. This Analysis will clearly indicate the
different customer segments available in the market and how manufacturers’ brands in
the product line are positioned according to the customer’s perception of the brands/
product. For example the market profile & image of the ‘paper variants’ from company A
is done to understand the customer perception & the market position. Here the parameters
used are paper
finish quality (low,
medium & high)
and the different
paper weights (in
GSM). Market
profiling is
generally done
using the most
important KSF (key

success factors- consumer evaluation parameters which customer consider important
while evaluating & choosing the products/brands from this category). Generally 2 KSFs
are used as it can be accommodated in a two dimensional space; 3 parameters will need a
3 dimensional space. However, when there are more than 3 parameters ‘clustering’ (using
a statistics package like SPSS) may be used to understand the groups.
From the market profile & images developed for company A (KSF parameters- paper
finish quality & paper weight) it is clear that there are 3 segments in the market viz.
office supplies, general printing & PoP displays. Products of ‘A’ are all in the office
supplies segment with position as ‘extra high GSM papers with low to medium finish
quality’. Their direct competitors include one brand from B and another from X. They
have expansion opportunity through new product introduction in the general printing &
PoP printing segment. This information also can be used to modify the product and
change its positioning (Re-positioning). For example they can improve the paper finish
and re-position themselves as makers of ‘high GSM- high finish papers’.
 Portfolio Analysis: Helps a marketer analyse brands in a product line and take
appropriate strategic direction regarding the brand. The most widely used portfolio
analysis tool is the BCG Matrix (Boston Consulting Group). BCG Matrix is also called
the share growth matrix and is the most widely used planning tool by managers across all
industries. The BCG matrix is simple tool that categorise all the brands into 4 quadrants
based on the share & growth of the brand in the product line (product portfolio). The
brands can have a high or low growth & a high or low share.
(It has to be noted that many authors use the word ‘Market Share’ in BCG matrix. However, it
has to be clearly understood that the share should be calculated based on the sales contribution of
the brand to the total sales of the product line/product portfolio. For example if the product line
of company X has 4 brands with total sale of 1000 cr. The individual contribution of brand 1 is
400cr, 2 is 350cr, 3 is 150cr and brand 4 is 50cr. Here the average sale is 250cr for the brands
and brand 1 & 2 have a sale of more than 250 cr. Hence their market share should be considered
high and the other two brands low. Similarly
the growth also should be similarly calculated.
For example Let us assume, in the above case
of company X, the product line is growing at
an average of 10% and brands 1-6%, 2 @
12%, 3 @ 1% & 4 @ 20%, respectively. The
growth of brand 1 will be considered low (as it
is lesser than the average growth of 10% for
the product line) and rest of the brand’s growth
will be considered high (as it is above the
average growth of the product line).
Based on the growth & MS the brands in the portfolio can be classified as:

 Stars: Brands where the growth & Market share are high.
 Cash Cows: Where brand’s market share is high but the growth is lower than the average
market/product line growth.
 Question Marks: are products that have low market share but high in growth.
 Dogs: are brands that have low growth & low market share.
Strategically a manager has to invest in Stars and grow them further. They should maintain/
sustain the Cash Cows at their current level of performance. Invest in Question Marks & try
to convert them in to stars and divest/kill the Dogs. It can be generally seen that all brands
start as question marks in portfolio, become stars and then transform in to cash cows.
Someday the brands may lose their relevance and become a dog; when usually they are
divested. All brands pass through this normal path of ‘QM to Star to CC to Dog’. However,
in some cases when brand introduction fails the brand transits straight from a QM to a Dog.
A classic recent example, of new product failure, was Doy Care from HUL, the market leader
in personal wash. The new product/ brand picked up in the initial stages (due to the
marketing/distribution might of HUL) but could not sustain its position, became a dog and
was subsequently withdrawn. There are also cases where smart marketers may reverse
certain brand’s performance and its BCG classification. For example ‘Lifebuoy’ was a de-
growing, but large selling, brand in 2000. This would have classified it as a cash cow. HUL
was successful in repositioning
‘Lifebuoy’ as a hand wash brand
and was able to re-grow it fast
(from low growth to high
growth) and convert it in to a
‘star’ again. To understand the
use of BCG matrix (application
of the matrix) look at the
hypothetical sales data given for
the ‘personal wash’ product line
from HUL and individual brand
sales. It can be found that the
brands Dove, Breeze & Pears are question marks characterised by low market share but high
growth. Lifebuoy is a star with high market share & growth. Lux & Hamam are cash cows
with low growth but high market share. Liril & Rexona are dogs with low market share and
low growth. Technically HUL should invest in Lifebuoy, Dove, Breeze, and Pears; sustain
Lux and Hamam and kill /divest Rexona and Liril.
Product line decisions: are mostly those decisions taken regarding a single product line. For
eg: HUL’s decision concerning the ‘Personal Wash’ product lines can all be clubbed into
product line decision. Some of the most common product line decisions are

1. Line stretching: this is an act of increasing the length of the product line by offering more
products / brands in the product line. The line stretching can be of 3 subtypes.
 Down market stretch is when the product line gets added with brands/Products meant
for customers of a lower strata than the current customers. For eg: Gillette had a range
of product in India that included 2/3/5 Blade shaving and was not mass market
(Mostly for middle & upper class customers).They introduced Gillette-Guard a
disposable, Low priced, single blade shaving razor, costing much lesser than their
current offerings, to cater to the mass market. Downward stretch generally helps to
cater to larger sections of customers. However, it may sometimes make your current
customers unhappy. Rolex introducing Tudor is an example of good downward
stretch.
 Up-Market Stretch is when the marketer is trying to introduce product/ brands to cater
to upper segments of customers than those being currently catered to. For example
Maruti introduced a new brand of premium small cars - ZEN during the 1990’s. ZEN
was aimed at more affluent users of cars than the M800 customers. Over a period of
time Maruti Suzuki has added more up market brands to their portfolio.
 Two-way stretch is one where the marketer offers product/ brands aimed at customers
who are higher/ lower in affluence to the current customers. This is nothing but
enacting an up-market & down market stretch together. For example Honda entered
India with its mid segment sedan Honda city that was a huge success. Later they did a
two way stretch by introducing Brio & Amaze at lowered and civic & Accord at the
higher end.
Line stretching helps marketers to increase the customer coverage and achieve higher top &
bottom lines. It also helps in deriving synergies between the brands in the product line.
However, it should be noted that it may have detrimental impact on the product/brand image
with existing customers. For example when Rolls Royce introduced a more affordable model
at 125000$; they had back clash from the richer buyers who reduced their patronage.
2. Line filling: is another product line decision taken by product/ brand managers. Line
filling involves introducing new brand/ product to cover up gaps in a product line. For
example customers of ‘personal wash’ buys soaps based on the benefit offered. There are
about 8-10 benefits sought by customers that include moisturing, deodorant, beauty,
Ayurveda/Naturals , Hygiene, Glycerin/Mild, Baby use et cetera. HUL while doing line
analysis understood that they are missing out on two of the fast growing benefit segment
namely ayurvedic & Baby Soaps. Their current offering had all other variants. Hence
they decided to introduce these two variants to fill the current gap in their product line.
They introduced ‘Ayush’ an ayurvedic soap (earlier they had tried to re-position Hamam
& Rexona with naturals version that wasn’t very successful) and have introduced Dove-
Baby as another line filler. A good product line, without any gaps, will help marketer
garner economies of scope by providing choice to consumers (very important for variety

seeking buying behaviour) thereby improving customers and partner relations, sales and
profits. It will also help garner marketing synergy through sharing of resources.
3. Line modernisation: is another common line decision that managers make. Line
modernisation involves constant improvements of brands and product in the line. For
example, Intel has constantly modernised its desktop chips by adding new features and
variants as customer needs and computational technology kept evolving.
4. Line featuring: is the act of giving special promotional attention to some of the items/
brands in the product line. For example currently Maruti Suzuki is featuring its product
line using the ‘NEXA’ range of sedans and hatch backs. This helps the marketer promote
their complete product line using certain representative brands thereby reducing the
overall marketing costs.
5. Line pruning: is culling off brands that have reached the end of their life cycle. The sales
are lowest in a long period, there are no chances of revival and brands have lost their
relevance to the marketer and the customers. Under such circumstances, the marketer
decides to withdraw these brands that can be called line pruning. For example Maruti
Suzuki has already pruned some of their iconic brands like M-800 and Zen.
Product line decisions are critical as it constantly helps the marketer understand the relevance
of each brand in the product line and mete them out appropriate treatment.
Product packaging: is sometimes called the 5th P and include all the activities of designing
& producing a container for the product. The packaging has to be generally at three levels
and include
• Primary Packaging: A package where the product is actually

put or enclosed. For example for tea, the primary packaging will be
a pouch made up of foil or polymer. The primary packaging is
most important as it ensures the safety of the product. With
advancement in technology primary packaging has also become a
source of visual identity. A primary packaging for perfume may be
a bottle or can.
• Secondary Packaging: comes over the primary packaging and helps improve handling
of product, stacking & display of the product, visibility
in the shelf, labelling of the product etcetera. For
example the secondary packaging for a pouch of tea may
be a carton. When we buy 3 roses brand of tea from
HUL, the primary packaging is a foil pouch which is
inserted into a paper carton which is a secondary pack.
Secondary Pack for a perfume bottle also may be a small
carton. However, there are trends of merging of primary & secondary packaging due to
improvement in packaging & printing technologies.

• Tertiary Packaging: is a packaging mostly for distribution
purpose. This helps Packaging of the individual sales units (SKU or
stock keeping units) in to single unit of large volume. For example
3 Roses tea may have a tertiary pack of corrugated cartons and each
carton may consist of 120 boxes of 3 Roses –250 gm tea. Tertiary
Packaging is more important for the channel partners and helps in
handling & storage of products.
Uses of packaging: Packaging has various uses and when done scientifically & aesthetically
can provide competitive advantages. Some of the uses of packaging are
Protection of the product being sold from various degrading elements like moisture, air,
heat etc. It also helps in prevention of loss ingredients (Especially volatile) like scent,
flavour, colour etc.
Prevention of tampering is another important function of packaging. A good packaging

ensures that the product is protected from illegal commercial interest like pilfering,
adulteration etc. This is very important for product categories like food and medicine where
such tampering can have serious consequences for human life.
Legal requirement: Packaging ensures conformance to law. Law has mandated that all
products be packed in certain way and conformance to the law is essential for marketing the
product.
Promote Brand choice: Good Packaging ensures product choice through attracting the
customers. This is especially important for goods that belong to low customer involvement
category (Habitual & variety seeking buying behaviour). An attractive & distinct packaging
will ensure customers attention and also will act as a brand reminder to the customers.
Promote self-services: Good Packaging ensures Self-service which is very important in

certain retail formats and for low involvement product category. The Packaging helps in easy
location of the product, easy handling & easy checkout for the customers.
As an advertisement: Good Packaging will ensure promotion of the product at the point
of sale (shopper marketing). It helps in customer attraction and act as a customer reminder.
For example Kinder–Joy would not have been such a success but for its very unique
packaging.
Innovation: Packaging can be a source of innovation when using or dispensing product.

For example traditional ketch-up was available in bottles and was very difficult to dispense,
especially for children who were the main consumers. Heinz introduced the ‘squirt’
packaging, that made dispersing of the product easy & fun increasing the brand acceptance
among the main users.

Packaging can provide descriptive & persuasive information to consumers. The
packaging of ‘kitchens of India’ from ITC provides evocative information about the product
& brand. This helps as a differentiator for the brand increasing brand preferences.
Packaging can assist in product storage. For example introduction of zip pouches have
ensured that product storage can be done in the same packing. While buying savouries form
Haldiram’s, customers can store the product in the same pouch (and doesn’t have to store in
another container) after partial consumption, increasing consumer convenience.
Good packaging also aid product consumption. For example tetra packs have ensured
convenient consumption of liquid products like fruit juices. This has helped in product or
brand adoption among customers, who earlier had doubts about buying and consuming the
products.
Packaging is a critical component of a product and can be a differentiator and provider of

strategic advantage when done properly. Many marketers consider packaging as the 5 th P of
marketing (for products). Packaging as a science has grown immensely in the near past and
has become critical to marketing success.
Labelling: is a simple tag or elaborately designed graphics that is a part of the product and
provides varying information about the product being sold; like identity of the marketer,
content in the product, instructions regarding usage etcetera. The labelling is dependent on
the product category and legal regulations and can be quiet elaborate like in case of
Pharmaceutical products. Labelling Technology also has improved immensely in the recent
past making them more attractive and innovative. Some of the functions of labelling include:
 Identify the product or brand or manufacturer or marketer concerned with the value
offering.
 Describe the product and its contents. This may be elaborate in some product classes
like food and drugs and may include every ingredient that is in the product.
 Provide the usage related information like usage occasion, calorific content, storage
instruction etc.
 Promote the product through identifying the brand and attracting the customers.
 Display details like weight, price, manufacturing date, caution, warning, disposal etc.
which are legally mandated.
Labelling today is a part of packaging for most goods. However innovative labelling like
tags, shrink wraps, inserts etc are used widely today to label the product.
Guarantee and warranty: Is the expressed legal responsibility to fulfill the customer
expectation as per specification for a specific period of time under specific conditions.

Guarantee is generally made for the performance parameters. For example the guaranteed
mileage for a vehicle or the guaranteed return on certain kind of Investments.
Warranty generally implies the assurance on the physical product and promises repair or
replacement against any specified defects related to the products. For example 1 year
warranty on a fridge indicates that the manufacturer will repair or replace any defect in the
product during this period (under normal conditions of use). Guarantee and warranty are
normally a legal requirement for products. It reduces the perceived risk of using the product
and promotes trial and adoption of the product among prospective users. For example when
Khaitan fans offers 7 year warranty on its product it is a clear indication to the consumer that
the product is of highest standard and can be bought and used safely and any losses during
the normal course will be made good by the manufacturer.
Guarantee and warranty also can be differentiator giving competitive advantage. For example
Amazon promises guaranteed free Returns. This difference, from its competitors, will prompt
customers to patronize Amazon for their online purchase. Guarantee and warranty also can
be a good source of revenue. For example Dell can offer an extended warranty for a price and
can generate additional revenues. Guarantee and warranty is a source of augmentation and
will help deliver higher customer value and thus competitive advantage. For example when
Benz offers a 300000 mile warranty on its engines it is an indication of product quality and
customer Assurance which prompts the customers to purchase from Benz.
New products
New products are goods and services that differ significantly in their characteristics or
intended users from products previously produced by the firm. New products are generally of
two types:
1. New -to- the world products: are first time products that way neither to non-existent.
These are newer Technology and are not directly comparable to existing products. For
example smartphones where new products when they were introduced in 2008. They were
different from all communication devices that existed then and helped drive convergence of
IT, entertainment and computing. Very few products (less than 1% of all products
introduced) are new-to-the-world. It is very difficult to market new to world products as it
will involve educating the customers on the new concept, its benefits and advantages. New to
the world products sometimes are called ‘Bleeding Edge Technology’ as they need huge
investments to develop and commercialize them with no assurity of success and future
profits. Plasma screens and projection TVs were 2 new-to-world-products that failed to take
off. Other recent examples include Blue ray disc and Laser disc in data storage. However,
when successful, new to the world products offer immense Returns to the developers; for
example smartphones for Apple and Samsung.

2. Modified products: Most new products are some kind of modification of the existing
products. It is easier to market these products as some kind of a reference or comparison is
already available and it becomes easy for the customer to understand the value proposed.
Modified products come in different forms like:
● New product line or brands: These are new products from existing marketers in that the
products are new to the marketer (but not new to the customer or markets). For example
Sony introduced its brand of cameras. This was a new product line to Sony, but not for
market as many other camera brands where already available. Similarly laptop ‘Vaio’ was a
new line of product from Sony, which was primarily a marketer of home entertainment
system. A new brand (in the existing product category or line) is also considered as a new
product for example HUL introduced a new product under the brand name ‘Ayush’ that had
body wash, shampoo, toothpaste, hair oil etc. HUL already had these product categories or
lines under different brand names earlier.
● Improvements and modifications: are another source of new products in the market. For
example Maruti Suzuki introduced and a new Baleno (Hatchback in the market) that was a
modification of earlier Baleno (which was Sedan). Apple has been constantly introducing its
new versions of Smartphones that has been an improvement over the previous model.
● Repositioned products: are another source of new products. Vaseline has successfully
repositioned itself from a petroleum jelly to a skincare brand consisting of a series of
moisturisers. Lifebuoy added many new products (hand wash, sanitizer) when it repositioned
itself from a body wash to a hand wash brand.
● Brand extensions: are good source of new products for example when Dove was
extended into Hair Care, from body wash and skin care new products like shampoo
conditionals hair tonic etc. were introduced.
New products are a source of new revenue in terms of new customers, new markets,
increased share of current customers etc. They add to the growth and expansion of the
organisation when successful. However, they entail substantial investment that may not be
easy and also entail risk of failure.
New Product Development

Sources of New Product: There are many sources of new products for any organisation.
Primarily it can be that the company develops their own new product or acquire new product
from other sources. The decision about the sources of new products depends on the
organisation’s strength. An organisation with research and development as core competence
can develop their own new products. However, this entails resources in terms of money, time
and skill and may take years to acquire. An examination of the sources of new products or
product idea is done below.

Developing own new products: can be done in two ways:
● Internal research and development: where a product idea is converted into a product
by companies on research department. Many products, especially in the technology area, are
inventions of company R&D departments. For example Dolby noise reductions, optical
storages, many Pharmaceutical products, ABS (Antilock Braking System) etc. are created by
R&D department of the company. The amount of expenditure on R&D as a part of revenue is
a good indicator of organisations R&D activities. Many companies, especially in the
knowledge industry, spend about 3 to 7% of their revenues in R&D.
● R&D tie up with Institutions: can be done to develop new products. Here companies
fund new product ideas of Institutions, that they feel can be commercialized, if successful.
There are many Institutions like educational institutions (like IIT) research institutions
(Independent and government organisations) specialised institutions (ISRO) etc. that can be
approached to develop new products. The company funds the research and prototyping of the
products in the research institution and then commercial it. The revenues or profits are shared
by the research Institutions and the funder of the project.
Acquisition of new products: from the original inventor, is an easier method of acquiring new
products but may face competition from other prospective acquirers. Acquisition also can take
many forms. Being an innovator is one of them. For example Facebook acquired Instagram the
photo sharing site instead of developing one. On their own, Instagram was an innovator in the
field of social photo sharing and storage. FB also acquired the messaging innovator ‘Twitter’ that
had brought in messaging innovation. However there can be severe competition in acquiring a
successful innovator, leading to steep acquisition cost; sometimes. There also will be strategic
issues of integrating the acquired company in to the acquiring organisation. Thorough business
compatibility and profitability analysis will have to be done before acquisition or may end up in
fiasco as in case of Infosys acquiring Panaya. However, successful acquisitions can bring in
business synergy and give new business directions like in the case of M&M acquiring Reva – a
leader in the field of electric cars in India. Acquiring patent is another way of getting new
products. Common in the knowledge industry, a firm can acquire the patent to produce and
market an innovative product. Common in the pharmaceutical industry many innovators license
their products to successful marketers. For example, Google acquired Motorola Mobility (Mobile
technologies) for about 12.5 billion US dollars that included the 17000 plus patents that was
useful to Google. Kodak, the bankrupt innovator of digital photography, sold more than 700
patents to companies that included Apple, MS and Google.
Licensing/Franchising: is a way of acquiring new product rights for a territory for a fixed time.
Here the licensor grants permission to the Licensee to market their innovations on preconditions.
For example Luxor has been licensed to market and manufacture ‘Parker’ and ‘Waterman’
brands of pen by the owners in the geographical territory of India. Licensing is done for a fee
that may be one time or on a revenue sharing basis (as % of sales). Franchising is done for

service industry. In India the products and services of the pizza brand ‘Dominos’ is franchised to
Jubilant food works. Varun beverage is the franchisee for PepsiCo in India.
New product development is critical for any business as it offers newer opportunities for
growth. New products are also important in replacing old products that are declining and
going out of customer radar. One of the biggest reason for failure of companies like Nokia
(mobile phones), Sony (personal music), and Onida (in televisions) is their inability to
develop new products. A constant stream of new and improved products are also the
important contributor to success of companies like Apple and Samsung (technology), Gillette
(shaving), Intel (desktop computing), and Wrigley’s (chewing gum).
New Product Development Process: The process of creating a new product is multi-stage
activity with each stage having its own importance. All NPD process starts with a new
product idea or an idea generation. A company may have many new ideas from different
sources. The common sources of idea include customers who can suggest new or improved
products, channel partners, experts in the field like academicians and researchers, industry
specialists, suppliers to the organisation or sometimes competitors themselves (for example
failed products from a competitor can give idea for new/improved product). A company can
also look at internal sources for product ideas. For example sales people may know about
unmet customer needs, Service department may know about customer pain points that can be
removed through new/ improved products. R & D departments can
be a good internal source of new
product ideas and so can be other
employees like those from the
production department.
Once product ideas are generated

the new logical step is to screen
those ideas. All ideas may not be
worth considering or progressing
or the company may lack
resources to do so. In such cases the ideas needs to be screened based on factors like the
resource requirement (has the organisation got these resource capabilities or can they acquire
it?), profit potential of the idea, compatibility with organisational mission/ vision etc. At this
stage all ideas that do not muster a pass are dropped. Only those ideas that are commercially
viable and compatible with the organisational objectives are furthered.
The next logical step is to develop a marketing concept and test the new idea. A new idea
may have multiple possibilities, and all may not be feasible. The concept testing basically
ascertains the viability of the marketing concept with the various stakeholders including
customers. For example, let us assume that you have developed a temperature regulating
fabric – that ensures a uniform temperature when covered with the fabric. Now this idea can

have many applications. The concept testing appraises the practicality of these different ideas
using temperature regulating fabric. For example, we can develop garments for winter use
(so that wearer does not feel cold), or we can use the same concept to develop a range of
summer products (where the user is insulated from the outside heat) or it can be used for
industrial safety purpose (like fire fighters clothing or cloths for industries with high
temperature environment). These concepts should be taken to the customers and experts and
its practical viability ascertained. Based on the results the company may choose one or more
concept for ‘progressing the product idea’ or if found unsuitable may drop the idea all
together. The concept testing should ensure that the new idea and its applications are
evaluated in terms of its believability, communicability, need level and need gap perceived
value, purchase intention, and intended consumer behaviour; with the prospective customer.
The next step is to do a business analysis. The business analysis involves analysing the
probable revenues, the cost and the profits generated by the products when commercialised.
Business analysis should do a sales projection, project the cash flows, estimate the
expenditure and calculate profit projection. The business analysis also should look into the
synergies generated by the product line.
After the business analysis, and when found acceptable, the business idea can be progressed
to the next stage of ‘marketing plan development’. Based on the understanding developed
from the earlier step and market information a suitable marketing strategy is developed. The
market is segmented on a need basis, appropriate segments chosen, and suitable brand
positioning developed. Then a marketing program (4ps) is developed to implement the
envisaged marketing strategy.
After the development of marketing strategy, the final product is developed. The product
development involves converting the customer attributes (CA) into engineering attributes
(EA). This uses a technique called quality function development (QFD); which is a
structured approach to defining customer needs and translating them into specific plans to
produce product that meets those needs. During the product development stage prototypes
are developed and lab testing is done on these prototypes (alpha testing). Once this stage is
cleared the products are tested with the customers (beta testing) and stated for
commercialization, if successful. Any improvements needed are done after these testings,
both alpha and beta testing.
Once product is developed, some of the marketers may do a test-marketing. The test
marketing involves commercialization of the product in a chosen portion of the total market.
For example, any marketer planning to introduce a product Pan India may do test marketing
in a state or few cities. The test marketing helps the marketer understand the effectiveness of
the marketing strategy and program and take corrective actions before complete
commercialization. Test marketing may avoid costly mistakes when full commercialization is
done. However, test marketing may reveal the cards to the competitors, some of whom may

counter or preempt the marketer. Commercialization is the final step when the product is
fully introduced in the market. The product becomes part of marketers product mix and starts
its journey in its product life cycle.
The commercialization generally has to get the timing of introduction right. For example,
introducing an umbrella during October may be foolish as the monsoon has just retreated and
no more rains are expected for next few months. The commercialization also has to decide on
the geographies to enter. Smaller firms generally prefer a phased launch where they start
from one or few markets and slowly expand to achieve a full coverage. Larger organizations
may prefer a one-time launch across all the market. The commercialization decision also will
have to decide whether the marketer will go alone in the market or tie-up with someone. For
example, Apple introduced its product in India through a tie-up with complementary players
like Reliance and Airtel (cell service providers), Ingram and Redington (retailers) and HDFC
and ICICI (bankers).
The NPD process, though indicated in a linear model, may have many
overlapping/simultaneous steps. A product can be dropped at any stage of the process if
found unsuitable. The NPD process involves resource investment (time, money, skills,
material etc.) and can add to loss or profit of the organization depending on its marketing
success.
There are many challenges to new product development today. Product development costs
are one. It has become costlier to develop new products even after use of technology. For
example while developing a drug, use of computers have reduced the development time and
cost in the lab but the clinical trial cost have increased immensely. Another problem is the
hyper competition leading to marketing failures. There is a constant introduction of new
products in every category leading to reduced market viability and frequent marketing
failures. The consumer behaviour is also fast changing leading to fragmented markets that are
commercially unviable may a times. For example the customer requirements for
entertainment has become too fragmented (like TV, Cinema, Live shows, Sports etc.) that the
segments are fast becoming small and unviable.
Shortening of PLC is another trend that has affected NPD. The PLC has become too short for
comforts of new product marketers. They have to succeed in a short time or get replaced by
newer products in the category. For example in the music industry the record players (LP
records) had a life of about 60-70 years, the magnetic tapes about 40-50 years, the
CDS/optical players about 20 years and SSDs (solid state devices) about 10 – 15 years
starting early twentieth century. People are already moving in to cloud based storages and all
customers access their music online. There also have been regulatory constraints in new
product development. Laws are becoming stringent and public scrutiny is fast increasing
these products. The labelling requirements have also changed with the manufacture having to

reveal all ingredients and warnings about the product which is virtually impossible (often
needing additional product information inserts in the secondary packaging).
Any organization that envisages frequent NPs should support the NPD process through
appropriate policies. Organizations like 3M and Google are known for the constant
innovation and NPs. These organizations make the work place and culture open to new ideas
and create policies to make innovation a part of the work. For example these companies
stipulate the employees spending certain portions of their working hours in newer endeavors.
They also reward innovation through recognition and incentives. The management should
support all NP ideas through adequate provision of resources and setup systematic process to
screen and progress NP ideas. For eg: the organization may clearly specify how to progress a
new idea, an employee has, towards commercialisation and in what time frame. Organization
should also encourage its employees to constantly interact with customers and other stake
holders to understand their needs or problems and solve them through newer products and
services
Innovation Adoption Model: was proposed by Rogers and is widely used to study the
diffusion of an innovation among the target customers. The innovation adoption curve is also
commonly referred to as ‘diffusion of innovations curve’. The model is also used to explain
the communication effectiveness among the target groups. The diffusion of any innovation is
a gradual process and all
customers in the target
group does not adopt the
innovation in one go. The
earliest group of people to
use/ adopt a new product is
the ‘innovators’. They are
about 2.5% of the target
market and are characterised by high resource ownership
(both intellectual & material resources), they are very open to ideas and are risk takers (they
willingly take the risks of consuming a new product like physical risk, financial risk &
reputational risk. It is easy to influence these people and often it is just enough to inform
them about the innovation. They also are influential group and can influence others in the
target segment. For example movie stars & models are typical ‘innovators’ when it comes to
fashion. Innovators are followed by ‘early adopters’, who constitute about 13.5% of the
target population. These are opinion leaders and are ready to embrace change and enjoy
being leaders in some way. They just need to be provided the basic information about the
product. They have a significant influence and referent power others in the target. For
example socialites and celebrities can be a good source of ‘early adopters’ for a fashion
product. The next group of adopters will be ‘early majority’ and make up about 34% of the
target population. They adopt the product on evidence of its use by others (the earlier two

groups) and are influenced by success stories of the product usage. Next in line are the ‘late
majority’, who are skeptical of anything new. They get influenced when they see majority of
people using the product. The last group of people to use/ adopt an innovation is the
‘laggards’. They are resources constrained (intellectual and physical), traditional and
conservative. They are skeptical to change and often try products only when they are at the
maturity to decline stage of the PLC. They constitute about 16% of the total market
The main factors that affect innovation adoption are the relative advantage of the innovation
(provided over existing products), complexity of the innovation (complex innovations take
longer to diffuse ), compatibility (with the values, knowledge and experience of the target ),
trial ability of the innovation (without having to buy it), observability (of the innovation & its
benefits in action) and the resource requirements (physical and intellectual resources
required) needed to adopt the innovation (the innovation diffusion model has also a corollary
application in communications where there is a concept of innovation adoption that begins
with product awareness and culminates in product adoption; by the target group ).
PLC (Product Life Cycle)

Every new product introduced in the market has a life cycle. The PLC is different stages,
through which every product goes, from introduction to decline and ultimate withdrawal or
demise of the product. The importance of studying PLC concept emanates from certain basic
assumptions that include
 Products have a limited life

and ultimately get replaced by newer
and better products. However, this is
in contradiction to the concept of the
firm. A firm is an artificial person,
with perpetual succession, and exists
forever. Under such circumstances a
firm will find that its products are
constantly replaced by newer
products. The firm will have to
overcome this loss by introducing newer products. Thus it becomes imperative for a
marketer to constantly bring in newer products, to replace their dying old products. For
eg, Samsung brought in smart phones to replace feature phones that were fast getting
replaced/declining in sales. Any failure to do so (as it happened to Nokia) will lead to
market failures.
 The second assumptions of PLC is that, as the products go through the life cycle stages,
their characteristics change and provide newer challenges, opportunities & problems to
the marketer. A marketer will have to device appropriate marketing plans (that include
marketing strategy and program) to successfully handle these stages. For example, at the

introduction stage of a product the target will mainly consist of innovators and early
adapters who are resource rich. However, as the product grows; less resource rich
customers like early majority, late majority and laggards get added. These people will
need a different marketing plan from the early stage customers. For example, when smart
phones were introduced the early customers were not price sensitive. However, as smart
phone usage increases the later customers have become price sensitive (to some extent) to
smart phones and ‘price’ has become a critical factor in product success.
While studying the PLC, it should be noted that the life cycle should be studied for a product
category. For example smart phones are a distinct category and PLC should be studied for
these categories and not brands in the category. Samsung and Apple wore two brands that
started the smart phone revolution. However, it can never be sure that they will survive the
PLC cycle of smart phones fully. There are also brands like Xiomi and Oppo that come into
existence only when the smart phone markets were at the growth/maturity stage. There may
be brands who may have a life cycle matching a plc (Samsung & apple may produce
smartphone till they are in demand). Gillette is another example where it invented safety
razors and may continue to produce them till they exist. Some other examples where the
brand and product lifecycle match include Wrigley’s in chewing gum, Nokia in mobile
phones (feature phones). However there are many brands that have died at different stages of
PLC. For eg the first personal computer MITS ALTAIR 8800, WAS produced by MITS
(micro instrumentation and telemetry system). Personal computing has grown and has
become ubiquitous; however, MITS has gone out of market long ago. So, it should be kept in
mind that the PLC should be studied for a product category and not brands. Brands may
come and go during any stages of PLC and some brands may successfully transition to newer
product categories that replace the older category (Samsung as mentioned earlier from
feature phones to smart phones).
There is no exact time frame on how long a PLC will be. It differs from the product category
to product category. Any product category that witness significant technological changes will
have shorter PLC. For example “feature phone” where introduced in the 1980s and are
almost getting replaced by smartphones in about 40 years (PLC of appropriately 40 years)
whereas toilet soaps were introduced in the 18th century commercially (during industrial
revolution. However, their existence can be traced back to 2300 BC) and is still growing in
most markets across globe. It also should be noted that the stages in the PLC are not clearly
identifiable though the various products and market characteristics may indicate the
approximate position of the product in its life cycle.
PLC stages and characteristics: as mentioned all products pass through 4 stages during the
life cycle and the stages include introduction, growth, maturity and decline. It should be
noted that some authors further classify some of these stages. For eg: maturity stage may be
divided into growing maturity, stagnant maturity, declining maturity. However, we will look

at the main stages and not the sub classification. Let us examine the product and market
characteristics along the PLC
Sales: The sales of product are low during the introduction stage with the sales increasing
rapidly at the growth stage. At maturity stage the product sales stagnate and start declining at
the decline stage as the product fast getting replaced in the market by the newer one. For eg:
the cell phones were introduced in the 1980 and the sales were low in the first decade. It
started growing in the mid-1990s and went on to peak around 2007/2008. As smartphones
were introduced the sales started declining since 2007/08 and today it is fast being replaced
by smartphones.
Customers: The customers at the introductory stage are innovators and early majority, as the
product grows early adapters join. At Maturity stage most of the target customers will be
using the product, except laggards. At the decline stage the laggards may be adopting the
product and other consumers will be fast switching over to the newer options. For example
the feature phones in India still find new users in the form of rural customers and older
customers (first time users and can be considered as laggards) and others are moving to smart
phones.
Sales Growth: is usually very high and accelerated during the first two stages and can be
indicated as ++. However, the growth plateus during maturity stage, indicated by +/- in sales
terms and at the decline stage the growth is –ve & can be indicated by --.
CDI & BDI: CDI stands for Category Development Index and BDI for Brand Development
Index. CDI is the ratio of the users of the product to total possible users (for example if there
are totally 100 possible users for a product X and currently 20 of these 100 are using the
product the CDI is 20/100 = 0.2 or 20%) and BDI is the ratio of brand users to total users(for
example in the above case of product X, let as assume that there are two brands A&B and 16
people use brand A and 4 people use brand B out of total 20 users of product X. The BDI of
A=16/20 = 0.8 or 80%). At the introductory stage for a product the CDI tend to be low (less
than 20% as only innovators and early majority are using) and BDI high (there are no or less
number of competing brands). As the product enters the growth the CDI increases (around
60%), peaks at maturity (about 85%) and starts declining. The BDI (especially of the market
leader start declining at growth and maturity (as newer competitors enter and take away some
market share) stage and stabilises at maturity stage. For example Cell services in India today
are at maturity stage with high CDI and the 3 major brands have a stable BDI (however, the
same is being disrupted by Jio).
Competition: during the introduction stage is low to nil. When smart phones were
introduced in 2008 there were only 2 players. During the growth & early maturity, as the
markets grow and become attractive, more players enter and competition increases. However,
as the decline starts the weaker players gets weeded out (shake out) and the competition will

have only few players (the markets become less attractive and products get commoditised
leading to falling profitability. This will drive consolidation & shake out). For example in the
cell phone services, today in India, most weak players have gone out & the market is
stabilised with 2-3 players.
Profits: during introduction stage is low or negative as the initial costs are high & economies
are not built up. Profits turn to positive territory during growth & maximises at maturity.
Hence all marketers try to extend the maturity stage of their product where costs are lowest
due to volumes and synergies. As the decline starts and volume reduces and profitability may
start dipping and turns to loss at some time during this stage. As the product becomes loss
making marketers may divest/Harvest the product from their portfolio.
BCG Matrix: position of the product also varies during the PLC (in the marketers portfolio
of products). At the introduction stage, the product is a ‘?’ with high growth and low market
share during growth the product become a ‘star’ and becomes profitable for the company (in
case of failed introduction the product will turn to ‘dog’ & gets divested). The maturity stage
sees the product becoming a ‘cash cow’ generating maximum profits at the lowest cost. As
the product turns to decline it becomes a dog and becomes a candidate, at some time, suitable
for harvesting or divesting.
Product & Brand: during the introductory stage is very basic. It is a MVP (Minimum Viable
Product) and all early users will have to use the same product. As the product grows the
variants and models increases and customers have more choice. Maximum choice is
available at the maturity stage. In the decline stage the unprofitable variants gets culled and
the product choice gets reduced again for the customers. The product line is longest/ with
maximum variants & brands (or at least sub-brands) at the maturity stage as decline starts,
product pruning is done. The brand also sometimes gets extended into other categories at the
maturity stage, to leverage the brand associations. For example Apple has been extending the
‘i’ brand into different categories, as ‘i’ pod matured the brand was extended into smart
phones and then into tablets, TVs etc. So even when the category – Digital Music players -
die, Apple is able to leverage the brand & its intangibles with another product category.
Pricing: is another marketing factor that varies with PLC. At the introduction stage prices
are high due to capital investment (to develop & manufacture the product) & low volume.
The pricing is done on cost plus basis to reduce the losses. There are no competitors for price
comparison and early stage customers are not very price sensitive (early models of Sony flat
TV cost 4000 USD for 32 inch sets!). As the growth is attained and volumes increase the
prices fall due to lower cost. There is also competition entering and some customers at least
are price sensitive (early majority customers). The price is based on the differentiation of the
product and value delivered in comparison to the competitors. At the maturity stage the
product gets commoditised and price becomes a competitive factor. Large volumes also
allow economies of scale leading to price war and shake out of the weak players. We are

seeing this phenomenon currently in the cell phone services in India. The pricing tactic used
is either penetration pricing (a low price to maximise product usage) or competition based
pricing (especially for commodities with monopolistic market structures). As the product
declines and competition goes out some players may resort to stealth price increases. Also
the costs are increasing due to lower volumes necessitating small increase in price.
Distribution: during the introductory stage is highly selective and designed to reach the
innovators and early majority. As the product grows, newer channels are introduced to access
the newer customers. Multi-channel marketing is done during maturity stage with
maximising the distribution reach to cater to maximum possible customers. At the decline
stage there is channel pruning and only profitable channels are maintained.
For example when we look at personal wash category of HUL, new product like Ayush has
restricted distribution availability, which is higher for stars and cash cows like Lux, Dove,
Lifebuoy, Pears etc. De-growing/ Declining like Hamam & Rexona have highly restricted
availability with Hamam being made available in small retail format with higher availability
in rural areas.
Promotional: objectives & tools also change widely. At the introductory stage the marketer
tries to establish the category need among the prospective customer. They explain &
demonstrate the Functions/ features, Advantages & Benefits (FAB) to the customers. There is
no too much thrust on promoting the brand as on promoting the product concept; as there is
no competition. As the product grow there is entry of new competitors & marketer try to
improve various elements of brand equity like awareness, recall, comprehension, associations
and creates brand preferences among customers. At the maturity stage the marketer tries to
improve the brand involvement and interaction. A constant effort is made to involve
customers with the brand through various activities like co-creation. At the decline stage
marketer tries to maintain top of the mind awareness among the customers. The customer
knows all about the brand and just has to remind about the existence of the product/ brand.
The promotional mix used also changes during PLC. In the introductory stage long
‘advertisement’ is used to explain the product. Product demonstrations and trials are
introduced through ‘promotional’ activities and suitable ‘events’. At growth stage the ads
becomes less informative and more emotional promoting brand preference. The sales
promotion also changes to induce increased/regular consumption of the brand. At the
maturity stage the ads are shortest, more frequent & reminds about the brand. The
promotional activities aims to induce brand involvement like contests (for eg: Maggi had a
‘share your Maggi moment’ that may be used as Maggi ads. Lay’s had a Create your flavour
campaign). At the decline stage the marketer uses minimum advertisements, just adequate to
maintain a top of mind recall and stop all promotions to reduce cost & maintain probability.

It is imperative that a marketer identifies the PLC stage and uses appropriate maturity
plan. Any marketing plan that is not in sync with the PLC is definite to meet the failure and
result in financial losses.
Types of PLC: The shape of the PLC is always debated and can present in different forms.
The classic bell curve is usually only indicative in nature. However, the actual PLC can take
many shapes and some of them being.
 Scallop pattern is one where there is a maturity & Stagnation followed by growth
again and the pattern repeating over a long time. Example of scallop pattern can be
found in the market demand for ‘small cars’ that had 3 scallops. First after the WW-
II, then after oil shocks and currently again due to environmental concern & space
constraints.
 Cycle-recycled pattern where there is growth, decline followed by another cycle of
growth-maturity decline. Styles in fashion world have a cycle-recycle pattern. For eg.
‘Skirts’ were in fashion during 1980s, they declined and now are again making a
comeback.

 Growth-Slump-Maturity
pattern is one where there is a
growth, followed by a
decline & then stabilisation.
Home appliances generally
shows a growth-Slump-
Maturity pattern with sales
initially picking up, then
falling down as most people have bought and then stabilising through replacement
sales.
 Fashion & Fads a two types where there is a single cycle in the product’s life. In fads
the PLC is Shorter and sharper with a steep growth and decline (for example mink
trousers during the early decade of 21st century). A marketer should understand the
patterns of PLC to successfully manage the marketing plan. Any mistake may result
in mis-matching the marketing plan to the PLC resulting in marketing failure .For
example All India Radio (AIR); a premier player did not concentrate in FM radios
and went rural during the period Doordarshan as television in general was growing
and replacing radio as a source of entertainment. However, FM today has made a
comeback and is dominated by private players (who have exploited the second
opportunity) with AIR nowhere in sight (They failed to understand the cycle–recycle
pattern).
SERVICES
A service is any act of performance, that one party can offer another, that is essentially
intangible and does not result in the ownership of anything, to satisfy a need or want. Its
production may be or may not be tied to a physical product. A service also can be defined as
a valuable action, deed or effort performed to satisfy a need or to fulfil a demand. Service is
an intangible offering of value that can satisfy a customer’s need. The GATS (General
Agreement on Trade in Services), under WTO, Classifies services under 12 categories/sector
and into 160 sub sectors under these 12 sectors. Services assume great significance to any
economy due to many reasons.
 It is a key indicator of economic affluence of the society. As the GDP and per capital
income grows the consumption of services (and thus demand for them) significantly
increases.
 It is a major contributor to any economy. Services are indicated by the tertiary sector
in the economy. An economy is generally considered developed when the tertiary
sector grows and dominate the GDP. In India the tertiary sector contribution to the
GDP is about 60%. It is also one of the largest employers in the economy.
 Services, when accompanying products, can be a key differentiator. It can be a part of
the augmented product and can be a key differentiator in marketing of the product.

However services are different in four characteristics, in comparison to products. The key
Differences/characteristics of the services are.
Service Characteristics:
Intangibility: Services are
intangible as they have no physical
existence. They cannot
be@compared physically by
costumers or physical features
measured for evaluation. As they
are intangible, customers choose
services based on their credence
quality that is based on the
credentials of the service provider.
For example we choose a
consultant doctor or teacher based on their credentials like educational qualification,
experience and feedback from others. Service providers need to overcome this intangibility
in various ways. Some of the ways of overcoming intangibility are (by creating physical
evidence)
 Ambience/ place: the service provider has to create the right ambience or place of
delivering the service has to be appropriately designed. For example a restaurant
should ensure providing a great ambience that may be measured in terms of the
lighting, temperature, Sound/music, smell, decor, cleanliness etcetera.
 Staff: they should have well trained staffs who looks professional in their chosen area.
For example hospital staff should be well dressed (in appropriate dresses, with right
logos and carry equipments like stethoscope), well trained and professional; giving
the customer a feeling of being in a professional hospital.
 Equipment: The service provider should make evident the use of appropriate
equipment to provide tangibility to the services. For example a medical diagnosis lab
should carry equipments like syringes, sample collection vials, microscope, analysers
etc.
 Communication Material: Appropriate communication materials should be at the
service delivering point to make the service tangible. For example a tour operator
should have brochures, pamphlets, posters, video etc of his tour services. A hospital
should have poster, anatomy models etc.
 Symbols and Services: Also should be appropriately used to give tangibility. For
example a hospital should have large sign boards, department marketing like casualty,
lab etcetera to give a physical feeling/tangibility of health care services they provide.
 Price: The service should charge appropriate prices so that the customer is convinced
of the service he had availed even though it is intangible.

Inseparability: Is another character of services. Services cannot be separated from the
provider and user, unlike physical products. For example while delivering service like hair
styling, the hair stylist and the customer has to come together. The stylist cannot deliver the
service without the customer. Some of the services may be automated and made 24 hours;
However, there still has tube interaction between the service provider and the seeker (for
example I may use net banking, but still will have to interact with the bank to avail services).
The inseparability and the resultant interaction between the service provider and seeker
create problem and opportunity for the service provider can be handled by ‘triple–
marketing’.
The service provider should ensure proper

external marketing where they
communicate successfully about the service
and the service levels to the customers.
They should at the same time ensure
internal marketing where the service
delivering personnel are convinced and
motivated to deliver the promised service.
The last of the marketing to be ensured is
the ‘interactive – marketing’ where the
customer is reinforced with the marketing message while interacting to avail the service. For
example if a bank promises car loan in 5 days to the customer, the bank should convince its
employees in the importance of delivering/ providing loan in 5 days and should ensure the
same when the customer interact with bank employees to avail the loan.
Variability: Services, unlike physical goods, show variability each time they are provided.
For example every time a haircut is availed, the customer may have slightly different levels
of satisfaction/ feeling even when the hair stylist and the salon are the same. High degree of
variability in services makes it unreliable and reduces the customer patronage. Successful
services have to be highly standardised and predictable. The main reason of retailers and
QSRs like McD, Dominos and Walmart etc are due to their high standardisation of the
services provided. Variability can be reduced by
 Standardisation: of the service performance process can reduce the variability. For
example a QSR has a standard process on how to deliver services to a customer
broken down to the smallest details. McD has standard procedures even to scoop and
fill the French fries for delivering.
 Standardised hiring and training: Service provider should ensure highly standardised
hiring and training process. Well trained employees deliver customer services thereby
increasing customer’s satisfaction. Hotel chains like Marriot ensure that they do not

induct employees unless they clear their rigorous training process. This ensures that
the services provided by the employees are standard.
 Maintaining high employee satisfaction: is important in service industry. Satisfied
employees serve their customers better and deliver high customer satisfaction. This
necessitates that service providers ensure that their employees, especially their
employees interacting with customers to deliver the service (for example cashier in a
bank), are kept motivated.
 Monitoring customer satisfaction: service providers should constantly ensure
monitoring of customer satisfaction. When the satisfaction levels reduce the reasons
should be investigated and the corrective action initiated.
Perishability: Services are perishable, in that they cannot be stored. They have to be created
and consumed at the same time, unlike products that can be made to stock. This creates
problems of capacity during high and low demand and service providers need to handle the
same with case. Some of the strategies that can be adopted to handle the capacity issues are
 Demand side: From the demand side capacity can be adjusted through
Differential pricing: Pricing can be adjusted in a way to reduce or increase demand. For
example an entertainment park or theatre or pub can increase the price during the high
demand period (say weekends) and give discounts during the low demand period (Say week
days). This will ensure that lessening of demand during weekend (Higher price – price
elasticity) and increasing of demand during week days (low price).
Complementary services: can be provided to boost demand during off peak demand. For
example hotels in tourist destinations can provide additional services during off peak season.
For example hotels in Goa can give free food and beverages during off season from March –
September to increase customers.
Reservation system: is another good way to manage demand. Service provider can fix the
capacity and provide service based on a reservation system. For example specialist doctors
see patient only with appointments and limit the daily patients ensuring good demand
management.
 Supply side: The perishability also can be handled from the supply side to handle the
service demand variation. Some of the strategies can be
Part time employees: can be hired to increase service delivering capacity during peak
demand. Sometimes volunteers are recruited during peak hours. For example police
department may have volunteers/ part time employees to control the peak hour traffic.

Increased consumer participation: can be solicited during peak demand. For example during
the peak banking hours consumers are directed to use the self service facilities like ATM/
Passbook printers etc, that will free the employees to deliver other critical services.
Peak hour routines: can be developed during high demand to de-bottle neck the critical
resources. For example when there is a patient rush in hospitals de-bottle necking can be
done to provide more consultations. Doctors are the most critical resources in a hospital and
are freed from routines like BP measuring and record writing (which will be done by nursing
assistant) when there is heavy patient rush so that doctor’s time is used only to provide
consultation to patients.
Use of shared services: can be done to manage demand. For example a restaurant chain can
use a centralised kitchen so that there is better peak hour capacity handling at the restaurants
(as they have only the finishing touches to add to the food being served).
Service providers: can also automate the services so that peak hour demand is not over
burdening. For example banks use ATMs/net banking etcetera. 24/7 services provision also
can be maintained/ provided to manage/ improve the service supply. For example retailers
can open their websites so that customers can order/buy at any time.
Service providers also can ensure facilities are scalable and future expansion possible to
handle the increasing demand. A service provider may use one or many of these techniques
to handle demand fluctuation and overcome the problem of service perishability.
Services Marketing Mix:

Services cannot fully deliver value using traditional marketing mix of 4 ps they need
additional 3Ps to ensure the maximisation of value delivery ( apart from the product, price,
promotion & place) and the additional 3Ps are.
 Physical evidence: All service providers should provide adequate physical evidence
for the services they provide. For example a hospital should look like a hospital in
terms of its ambience, Structure etcetera. This helps in overcoming the intangibility
and providing higher customer value through customer assurance of the services
 People: is another critical component of the services marketing mix. Well trained and
motivated people ensure highly standardised and empathetic services. They also
ensure proper interactive marketing during service delivery thereby increasing
customer satisfaction. People are the most important marketing mix in service
industries like transportation (Airline) and hospitality. The primary difference
between two airlines like Indigo and Indian airlines is the people; they all use the
same aircraft, provide food from same source, uses same airports and airport facilities
etcetera. However, the people, all including flight and non- flight staff, differ
significantly resulting in differing customer experience and customer satisfaction.

 Process: Is another of the service marketing mix. Service provider should have a
highly standardised and clearly defined service process for service delivery. This will
reduce the service variability and assures customers of standardised services.
Standardised service process also reduces the subjectivity of the people providing
services. Successful service organisation have highly standardised process, well
implemented by trained people, Increasing customer satisfaction and patronage. QSR
chains like MCD and dominoes are an epitome of standardised process in service
industry.
Service Quality: Quality is an ability to conform to standard or to meet Customer

expectation. Quality is an important factor in customer satisfaction and creating long-term
customer relation. Only satisfied customers will return to the marketer for further purchase.
Service quality is an important parameter in the evaluation of a service and need to be
constantly monitored. The overall satisfaction with service is generally affected by five
individual parameters. While measuring the service satisfaction, marketers should measure
overall satisfaction and satisfaction with the following five elements contributing to the
overall satisfaction. The five factors are
Reliability: is the ability to perform the promised service dependably and accurately. Lack of
reliability is an indication of poor service. For example more customers solicit Indigo airlines
in comparison to Air India. This is because Indigo services are reliable and have a time
accuracy (punctuality) of more than 90% (one key customer evaluation attribute for airlines
is its punctuality) in comparison to less than 50% punctuality for Air India.
Responsiveness: is the willingness to help customers & provide prompt services. Services
have to be responsive to customer’s needs to ensure satisfaction, especially so during service
disturbances or crisis. In the above example when there is a flight delay, due to any act of
God, Indigo is more willing to answer customer queries and help them out with alternative
arrangements or supports ( like providing boarding & lodging) in comparison to Air India.
This needless to say results in increased customer satisfaction with Indigo in comparison to
Air India.
Assurance: is the knowledge and courtesy of the employees and ability to convey trust and
confidence. Assurance from the service provider is critical to customer satisfaction with the
service quality. For example a patient in a hospital need to be assured that he will receive the
best possible care. A lack of assurance will make the customer skeptical and less satisfied
with the product.
Empathy: is the provision for individualised and caring attention to customers. Empathy is
ability to think in from the customer’s view point. All Services cannot standardised as needs
of service seekers differ the service providers will have to be empathetic. This will help the
service providers to understand the exact customer need and provide tailor made solutions to

suit his needs and improve satisfaction. For eg: every patient in a hospital or a plaintiff of a
law firm has their own individual needs that may be different from others. The employees or
service providers should be empathetic in understanding this and provide suitable tailor made
services maximising service satisfaction.
Tangibility: is the appearance of physical evidence of the services in the form of employees,
facility, equipments, communication materials etc. Tangibility is critical in evaluating the
service quality and satisfaction with the service. Service provider should provide tangible
elements that will help the customers to evaluate the service quality. For example a law firm
should provide evidence of its services in the form of appropriate employee dressing (black
lawyers coats) library (lots of law book) signage (like names with ‘advocate’ prefix) etcetera.
The evaluation of overall service quality and individual service parameters (Five parameters
of assurance, empathy, responsiveness, reliability & tangibility) can be done using
‘SERVQVAL’ . SERVQUAL is a questionnaire/ instrument developed to measure service
quality by Zeithmal and Parasuram. It contains 22 items or questions. The SERVQUAL can
be adapted to the different industry and the total number of questions measuring may slightly
vary based on the service industry in question.
BRANDING
Branding has existed since the formation of human society and the development of
agriculture activities. The earliest of the branding incident dates back to the shepherds, who
used branding to identify the cattle from that of their fellow shepherds. They created a unique
symbol, which was burned into the skin of their cattle using hot iron. The actual meaning of
the word branding, in English is 'to burn'. Branding has evolved since then and today is a
core commercial activity.
Brand is defined as the name, term, sign, symbol, design or a combination of these intended
to identify the G/S of one seller (or a group of sellers) and differentiate them from those of
their competitors (Philip Kotler). Branding is the process of endowing P/S with the power of
brand. A product that has no identifiable brand element is called as a 'generic product'.
Generic products are common in the Pharmaceuticals industry; especially among products
that are off patent. A Brand can have many elements and most brands use a combination of
these elements. Some of the commonly used the brand elements are
Brand name: Adidas, Nike, Toyota, Honda...
Brand logo: 3 pointed star of Benz, swoosh of Nike (also commonly referred to as sign or
symbol)
Brand slogan: 'just do it 'or 'I am lovin it'
Brand style: kidney grill from BMW

Brand colour: green of Louis Vuitton
The most commonly used brand element is the brand name. Many organisations also develop
specialised type setting to highlight the brand name. This sometime may cause problems
while being reproduced for communication purpose. The same also applies to specific brand
colours and the company has to supervise closely, while producing their communications to
ensure the exact colour & type setting is maintained. Brand slogans are short sentences that
summarise brand experience. For example McD slogan is 'I am lovin it' & conveys the
customer what they can expect from McD. Brand sign/ symbol/ logo are inter changingly
used, however they are not the same. Sign or logo generally is 2 dimensional and symbol is a
three-dimensional creation. For some brands the sign/ logo & symbol maybe same, like
Mercedes Benz. However for some brands it may be different, for example Rolls Royce uses
2 capital 'Rs' as their sign/ logo. However, the symbol is the 'Spirit of extacy'. Brand styles
sometimes can be enduring like the distinct style of 'kidney grills' of BMW.
A brand differs in dimension from a direct competitor and the dimension may be different.
 Some brands differ in tangible /functional aspects that can be rational and is reflected
in terms of the products performance. Sony Television uses superior Technology that
results in better audio & visual performance of their television in comparison to that
of their competitors.
 Some brands differ symbolically. The differences are not tangible in nature, but
emotional in nature, in comparison to competitors. For example the colas are more
different on the emotions they create like Coke-love, Thums up-adventurism, Pepsi-
youthfulness etc. The same can be seen in pain balms. Moov is different in its image
from Amrutanjan/ Tiger balm. Moov create an image of back pain and Amrutanjan/
Tiger balm that of headache.
 Most brands try to create a combination of rational/ tangible and emotional/
intangible difference in comparison to their competitors. This helps the brand
maintain its competitive advantage even when competitors match one of the
differences (they acquire competitive PoP). For example ‘iPhone’ have a rational and
emotional connect with customers. So even when technically advanced Chinese
brands were introduced at much lower prices, it did not affect the sale of Apple
'iPhone' as the Chinese brands were not able to replicate the emotional difference of
Apple. However, the Chinese competitors have significantly affected the sale of
Samsung that had mostly technical/ rational difference with competitors and not
'emotional ' difference.
It should be clearly understood that any offering, be it product, services, people, places etc,
can all be branded. Branding is not a onetime effort and is evolutionary in nature. Any of the
brand element can change, as brands relation with the customers get redefined. For example
logos and symbols of most brands have evolved with the time and revamped to bring in

modernity. There also may be changed in the emotional or functional connect. VW-Beetle
was a small car of middle class during its initial decades. However it has evolved into a
premium, small, retro styled car over a period of time redefining its targets, position etc
(most of the brand elements have been retained-surprisingly!). All branding is based on the
principles of 'differentiation '&' Positioning'. If a brand is not differentiated in any dimension
& not distinctly positioned, there may be no use trying to Brand as the brand may not be able
to create a rational or emotional difference in comparison to the competitors. Whatever be
the basis & element used; branding in the end is a mental process of creating certain
perceptions in the mind of the target customers. It is about a mental contract between the
brand and its customers (legally not enforceable). For example buyer of Rolls Royce car
expects ultimate luxury (both’ tangible and intangible) and Rolls Royce fulfills this contract.
Any violation of this contract will affect the brand perception among its customers. When
Scholars go to Harvard, they anticipate the most competent people around, both students and
professors. Any violation of this, like poor students and professors, will break the mental
contract and change brand perception even when brand elements are not altered.
Advantages of brands:
Organisations invest resources in brands due to the advantages it offers. For the organisations
good branding offers
 Competitive advantage: in the market place, in comparison to the direct competitors. It

should be noted that no brand will have advantage every situation. For example when
your target is the luxury car buyer Benz will have advantage. When the target is the small
car buyer Maruti Suzuki will have the advantage. The advantage will be in the chosen
target segment only
 Price premium: due to its competitive advantage. For example people are ready to pay a
premium for 'Jockey ' when it comes to intimate wear due to its strong branding.
 Intangible assets: For example Apple brandies worth 110 billion USD, Google about 100
billion USD, Coco Cola about 80 billion USD. This value is reflected in the overall
wealth created by the organisation.
 Simplify product handling. Brands help organisation to simplify their product handling.
For example HUL can invoice their products according to the brand name and without
brands their 10 types of soaps would create havoc for both the company and its partners.
 Legal protection: to the owners. Brands can be registered with the trademark & patent
office. After an initial brand the search (to prevent any duplication or copying of existing
brand name) a marketer can register his brand name. The brand will be given an ® sign
which indicates that it is registered and the ® can be used as a super script after the brand
name. After 5 years day ® is converted into a (TM) which indicates that the brand can be
no more legally challenged by anybody else as theirs.
 Brands also act as an indicator of quality/performance or any other virtue that it possess
and delivers to the customers.

Brands also offer a wide range of advantages to the customers and some these include
Promise of performance: brands offer a promise of performance that is understood by the

customer through his association with the brand. The performance can be on any parameter
like quality, luxury, durability, performance, trust etc.
Brands can act as a basis for evaluation of certain product category. For example RR may be
a gold standard in evaluation of luxury cars, Maruthi for small economical cars etc.
Helps in simplifying decision making: brands can be a basis for customer decision
Making product choices: For example when you want to select a safe automotive, Volvo
becomes the choice. When you want a pain balm for backache The Automatic choice is
Moov.
Part of personality/ identity: brands can be a part of the person's identity or personality.
People use brands that match their personality. For example and an outdoorsy & active
person may use brands that are of the same personality and may include brands like
woodlands, Nike, Timberland etc. Many a time customers may also use brands to signal their
ideal-self (the Identity they desire but is not currently theirs). For example an overweight
person may use a sporty brand to signal his fitness and youthfulness.
Branding process:
The process of branding can be complex with many simultaneous steps. Adding to the
confusion is fact that individuality of the marketer may reflect in the process and may vary
from one marketer to the other. We will study the branding through a five step process
detailed below.
1: Understand and discover:

this step helps the marketer set
the context of branding. As
already seen the value
perception of a customer is
contextual. Here the marketer
learns about his customer &
their needs, his competitors &
their brand position, the
probable customer need gap &
possible brand positions; given the context.
2: Differentiate and position: is a step where the marketer creates his uniqueness and ' value ',
for the chosen customers. Here the marketer decides on the difference in comparison to his

competitors (differentiation). He decides/ discovers value that this differentiation provides
and how this should be perceived (Positioning) by the customers.
3: Identify and create: under this step the marketer constructs his brand elements that will
identify and convey the brand message. The tone of the brand (whether passive, aggressive or
instructive etc) and the key message to be conveyed are represented here.
4: Articulate and clarify: in the 4th step the brand conveys its story & personality. What is the
brand personality? (Sincere, exciting, rugged, sophisticated or competent) and what will be
the customers reason to associate with the brand.
5: Apply and extend: In this step the marketer executes the brand communication & conduct
with the customer. The communication involves the talk (of who I am) and the brand conduct
involves the walk of (of what you talk). For example Nike brand promises performance & is
conveyed through its various advertisements & other brand communications and
associations. However, Nike also ensures the same through their conduct. That is, they
should provide improved athletic performance and promote an active lifestyle through their
excellent products.
Just to understand the branding process let us take a brand like Disprin; a leading brand of
aspirin that is a common home remedy for headache in India.
1. Understand & Discover- Context:
Customers - the headache home remedy seeker who prefers tablets to balms.
Competitors - other aspirins, paracetamols that are also recommended as home remedy for
headache.
Needs/ Need Gaps- Need Quick relief, No competing brands promise quick relief.
2. Differentiation & position- Uniqueness & Value
Differentiation- Product dissolves in 30seconds.
Value/ Benefit- will dissolve faster & get absorbed faster and provide quick relief, in
comparison to competitors.
Position- The fast acting Aspirin/ headache medicine (tablet)
3. Identify & Create: Create identity & Assets.
Identity- Brand elements like name, logo, visuals
Voice & tone- Instructive when you want quick relief from headache take Disprin

Key message- Fast acting
4. Articulate & Clarify: your personality & story.
Personality- Sincere- down to earth & very practical solution for headache
Story/ Association- When you are troubled by headache & want Quick relief- depend on me.
5. Apply & Extend: Communicate & Conduct
Communication- Through various promotional mixes
Conduct- consistently provides superior Quality medicine that is better than competitors.
Brand Equity
Any good branding exercise should result in brand equity. Brand equity can be defined and
interpreted from various angles and some of these are
“Brand equity is a set of assets/ liabilities linked to a brand and its elements, which add to or
subtract from the value (customer value) provided by a product or service” David Aaker.
“Brand equity is the added value endowed to a product/ service with customers. It may be
reflected in the way customers think, feel & act with respect to the brand and results in better
prices, market share & profitability of the brand” Kotler.
“It is the premium a customer is willing to pay for the brand”
To understand the concept of brand equity let us look at two brands, Tudor & Rolex (both
from the same company). They have very similar/ same model of watches, under both
brands, say a model like “Oyster Perpetual”. However, customers pay more than twice for a
Rolex- Oyster Perpetual, in comparison to Tudor- Oyster Perpetual; clearly indicating equity
of the brand Rolex over Tudor (though both products perform the same tangible function of
keeping time). When we buy intimate wear we are ready to pay a premium for brands like
Jockey clearly indicating its brand equity. BE is a dimension that can be observed/ studied
from various angles, which may include that of an investor, a researcher, and most important
from the angle of a customer.
“Customer- based brand equity” is the differential effect of brand knowledge on customer
response to marketing of the brand. A brand has
• Positive equity: when customer responds favourably to the marketing efforts &
• Negative equity: when customer responds negatively to the marketing efforts.
Needless to say, the endeavour of any marketer is to create positive brand equity so that the
marketing efforts are better rewarded by customers. However, there are situations when the

brand equity may turn negative. For example, when the lead controversy was there, Maggi
had Negative brand equity. This had to be overcome by suitable marketing efforts over a
period of time. While studying Customer based equity, 4 dimensions have to be understood
and measured and they include.
 Brand awareness: How many customers are aware of the brand and how well they
are aware of it?
 Brand loyalty: loyalty towards the brand, is it high or low? Does customer frequently
switch brands?
 Brand Associations: what are the positive & negative associations with the brand? Is
the associations shared with others?
 Perceived Quality of the brand: Is the brand meeting or exceeding the customer
expectation? Does the customer perceiving value (Net customer value) in the brand?
Brand equity can be studied using different models. There are 3 widely used models that are
1. Brand Asset Valuator of Young & Rubicam; the advertising agency commonly referred
to as BAV.
2. Brandz- Brand dynamic model by the Market research agency Millward Brown
3. Brand Equity Model of David Aaker (often referred to as the father/ doyen of branding)
(BEM)
BEM (Brand Equity Model)

We will briefly look at the BEM. It is a 3 step - 6 block model and looks at duality of brand
influence (Rational & Emotional route to influencing the customers).
The different level of the BE model are
• Brand Salience- that

requires creation of your
brand identity and its deep &
broad awareness. It tells the
customers who you are?
What is your brand identity?
• The next level includes

Performance & imagery- and
talks about the functional
expectation fulfilled by the
brand (for the customer) and
psychological & social associations the brand will have through images. Here the brand
clarifies “what it is/ what are you?” or meaning of the brand in tangible & intangible terms.

• The 3rd level includes Judgments
& feelings: and tries to create positive
accessible reactions to the brand. The
brand tries to form positive emotional
responses to the brand & create
favourable opinions & evaluations about
the brand. The brand creates responses
from the customers, by answering ‘what
about the brand (functionally & emotionally)?’
• The last stage is resonance: where the brand is personally identifying with the customer
and creating intense & active customer loyalty. Brand resonance answers the Question of
what about the relation between the brand & its customers. To understand the BE pyramid let
us look at the example of Colgate and the different stages in the pyramid.
 Salience: Colgate is a
tooth paste; it prevents
Cavity & protect from
germs
 Performance: Cleans good
& recommended by
DOCTORS.
 Imagery: Caring family/doctor
 Judgment: It is a good tooth paste, time tested, recommended by doctors & used by
many
 Feelings: I feel protected and Confident when I use Colgate.
 Resonance: I need protection you provide it and let us go together.
The performance & Judgments look at the rational route to influence the customers and the
Imagery & Feelings indicate the emotional route to influencing customers. The Resonance
indicates the relation between the brand and the customers. When a customer identifies
rationally and emotionally with a brand there will be ‘brand resonance’
 While Building Brand equity the marketer should keep in mind the following.
 Choose the right brand elements: that are memorable, meaningful, likeable,
transferable, adaptable & legally protectable.
 Design holistic marketing activities that will ensure a synchronised walk and talk.
Ensure delivery of all tangible & intangible (rational & emotional) benefits promised.
 Leverage secondary associations that will include association with people (Longines
& Aishwarya Rai), events (like omega and Olympics), places (French Perfume) &
other brands (Dell with Intel inside).

 Do a proper internal branding where all internal stakeholders are conveyed about the
brand essence.
Benefits of Brand Equity: Good brand equity brings huge benefits to the marketer that may
include
 Trade leverage where trade partners (like distributors & retailers) are ready to carry
the marketer’s products in their shelf.
 It gives competitive advantage in terms of being distinct from the competitors and
pricing power due to the advantage.
 Good brand equity will include the product in the consideration set of the customers
when they are making purchase decisions.
 Brand equity will ensure marketing efficiency where by the customers will respond
favourably to the marketing efforts of the organisation.
 Brand equity can be the basis for brand extensions. The brand can be extended in to
other category and leverage the association. For example Dove has extended the
brand from personal wash to, hair care & skin care.
 BE will improve customer Loyalty, Life time value and customer equity.

PRICING
Price is the amount of money charged for a product or service and called by different names
like rent, fee, toll, rate etc. It is the sum of all the values a customer give up in order to gain
the benefits of a product or service. It may not be only money but other efforts like travelling
to get the product, waiting period for the product, efforts in searching for the product etc.
Importance: Pricing is an important function due to various reasons. Some of them are
 It is the only revenue producing element in the marketing mix and all others are cost
incurring.
 It is the easiest element to change in the marketing mix. Changing product,
distribution, or Promotion will need complete change in the marketing strategy (STP).
 Pricing communicates the intended value proposition. Customer consider price to be
directly proportionate to the value. Higher price generally indicate premium product.
Price is perceptual in nature so can be manipulated. The brand image created by a
premium brand will manipulate the price perception of the customer and make him
pay more. For example, though all watches functions as time keepers-customers pay a
premium for a brand like Omega in comparison to Titan/Swatch.
Factors affecting pricing: various factors affect pricing of a product. They include
 Company’s cost: As the company’s average cost of production increases prices also
increase. The company cost may be affected by its capacity, location, capital
investment, fixed costs etc.
 Competition: Inversely affects pricing. As competition increases prices decrease.
Perfect competition will leads to the lowest prices and monopoly higher prices. For
perfect competition customer is price maker and in the monopoly customer is price
taker.
 Customers: is another factor affecting prices. Richer customer may be less sensitive
to prices than economically weaker customers whose price sensitivity may be higher.
 Market structure: is another price influencing factor. Monopoly will lead to high
prices and perfect competition will leads to lowest prices. Other market structures like
oligopoly and monopolistic competition lead to price between these two.
 Marketing environment: also may affect the prices especially so the legal and
economic environment. Increased economic affluence among customers will ensure
less price sensitivity and higher prices. Sometimes law may restrict prices. For
example, Govt. controls many prices in India, especially so for product categories like
medicines.
 Tax structure: is another factor that affects prices. Taxes for certain items like
tobacco, liquor, junk food etc. tend to be high making them generally costlier.

Steps in setting pricing policy:
Pricing policy should be a

systematic effort and should
reflect the value proposition. It
should not be a haphazard
activity and should be
continuous process in any
market driven organization. The
steps in a systematic pricing
policy are as following.
Step 1 Set the Pricing Objective:

The first step in pricing is to set
the pricing objective. This mainly depends on the marketing strategy, marketing objective,
PLC of the product, competition etc. some of the common pricing objectives are.
 Survival – where pricing is done with objective of ensuring the market survival. This
is done generally at maturity stages of PLC, where the product penetration is
maximum (high CDI) and there is commoditization of the product where customers
look at the price as a critical KSF. For example, In Indian cell phone services industry
today pricing is done to survive. Airtel, Jio and Vodafone ensures that their prices are
kept in line with the other (they increase or decrease the price together) so as to
ensure market survival (as customers may migrate to a lower priced service provider
when there is price disparity).
 Maximising current profits - is done in some special situations. For example, the
product has a patent protection. For example in pharmaceutical industry products
under patent are costly. The prices crash by 90% when the product goes out of patent.
 Maximizing market share: can be another pricing objective. This is done during
growth/ maturity stage of PLC, when many competitors enter the market. The
competitors ensure a penetration price that maximizes product usage by the target
segment. Currently, the new entrants into smart phone market in India are practicing a
penetration pricing to ensure highest smart phone adoption among the user of mobile
phones.
 Maximum market skimming: can be another pricing objective. This is done at the
introduction stage of PLC, when the customers are innovators and are highly resource
rich and low in price sensitivity. For example, when the panel TV was introduced by
the Sony, a 32 inch TV costs 4000 USD which was gradually reduced as the product
grew and newer customer segments (early adopters, majority….) started using the
products. Currently the prices are about 400 USD for 32 inch TV.

 Product quality Leadership: is another objective of pricing. The pricing is used to
indicate product quality leadership with the highest pricing indicating highest quality.
For example, the prices of Vodka brands Smirnoff, Absolut, Grey Goose and
Stolychnaya are in the range of USD 15, 25, 35 and 60 respectively. This indicates
their quality leadership with Smirnoff being the normal Vodka, Absolute- premium,
Grey Goose- super premium and Stolychnaya-luxury Vodka.
 There also may be other objectives like non- profit where pricing is done to attain
Break even. Another may be pricing for charity where prices are done to maximize
revenue and costs are kept lowest so that maximum profits can be generated for
charitable purpose.
Step 2: Determine Demand
The marketer should look at the price sensitivity of demand (price elasticity of demand).
Price elasticity of products is high at
the maturity stage of the PLC and
when the products have got
commoditized. However smart
marketers are concerned more
about reducing price elasticity of
demand. Price as a competitive
advantage is a poor marketing strategy
and indicates an inability to create proper differentiation in comparison to competitors.
Marketers reduce price sensitivity to the products through
 Making the product distinctly superior, through functional or emotional product

performance (or a combination of both), in comparison to competitors. For example,
Jokey makes better products and has created higher brand equity over a period of time
making customers less sensitive to the brand pricing.
Price sensitivity also reduces when
 Customers are unaware of the substitutes. For example there are not many office suits
to compete with MS-office and the customers are not aware of the competitors, if any.
 Buyers are technically not competent to compare product quality. For example,
patients are not capable of comparing medicine quality (of different brands) and
accept prices as it is.
 Customers are less ‘price sensitive’ when their expenditure on the product is
generally a small part of their income. For example, urban customers are less
sensitive to food prices as they spent only about 10-15 % of their income on food.
However rural customers are very sensitive to food prices as they spent about 50-60
% of their income on food.

 Price sensitivity is low when the part of the cost is provided by another party. For
example transporters are less sensitive to bus prices as the operational cost are
provided by the passengers.
 Price sensitivity is low when the products are used with previously bought products
(captive products). For example customers are less sensitive to blade prices as it is
used with the razor. Users are less sensitive to cartridge prices as it is used with the
printer.
 Price sensitivity also reduces when customers cannot store the product. For example,
customers are less sensitive to the price of services as services cannot be bought and
stored.
Step 3: Estimate Cost
As explained earlier cost affects the price immensely. So as part of the pricing policy the
company should understand their costs properly. They should understand about their fixed
cost, variable cost, average cost, total cost and the impact of economies of scale and scope on
the prices. They should understand their learning curve and its impact on costs when other
things are remaining constant.
Step 4: Analyse Competitor’s Price Mix
Competitors are another factor affecting the pricing policy. There should be thorough
analysis of the competitor’s price for similar products and for substitute products. They also
should analyse the movement of prices for the product; whether it is stable, increasing or
reducing. They also should look at the cost movements in producing the goods (the input
costs may be increasing, for example petroleum prices currently). The marketer should also
have a thorough understanding of the profitability trends regarding the product in question.
Step 5: Selecting the Pricing Method
There are many possible pricing methods which includes
 Mark-up pricing: Mark up pricing involves charging a markup on the cost of goods
sold. For example if the cost is 20 Rs and the markup required is 40% the final price
will be 20+(40% of 20) or 28 rupees. It is a relatively simple method to apply and can
be used when the market is stable.
 Target-return pricing involves pricing a product to achieve a target return. For
example if the fixed cost is one lakh rupees and the variable cost Rs 100/unit, the total
sale is 1000 unit and a target return of 20% on the capital is expected. Then the price
Fixed cost – 100000/- Target return 20% or 20000
Total fixed cost – 100000+20000=120000

Variable cost = 1000*100=100000
Total cost = VC+FC=220000/-
Average price =220000/1000=Rs.220/-
This is again a simple method to apply and can be used to ensure a minimum return on the
capital invested.
 Perceived value pricing: It is the most scientific method of pricing and reflects the
customer value. For example, let us assume that a deodorant soap costs Rs 10/ bar. If
a new product is being introduced where the soap is providing dual benefits of
deodorant + moisturizing, then the pricing is as follows:
Price paid for deodorant soap – Rs 10/-
Customer willingness to pay for additional moisturizer – Rs 3/-
Total price chargeable for the new product = 10+3 = 13/-
However while calculating the perceived value pricing the company should understand all
values derived by the customer form a product that should include all the tangible &
intangible values. The tangible value will be the functional value and intangible value will
include social status, feel good factor, etcetera.
 Value pricing is another pricing method where a fairly low price is charged for a
product high quality/ value. Examples of value pricing include Maruthi 800, VW-
Polo etcetera. The advantage of value pricing is that it attracts the customers in droves
and the product generally becomes a Gold standard in its category. Competitors will
be unable to match the value-price equation and generally stays away from the market
giving a monopoly. However, the down side is that company may lose its profits,
slightly, as it is delivering high value at a less price.
 Going rate pricing a simple method and the price is controlled by the competitor.
However, the pricing will not take into account the company’s costs. In such cases the
marketer should innovate changing the pricing paradigm. The pricing is no more cost
+ profit but cost is price-profit. The company should decide on the profits & price and
then try to match the cost through innovation.
 Auction – type pricing: is a method of pricing where the price is discovered through
an auction. The seller offers the product in the market and interested customers make
their offer. Highest bidder wins the auction. This type of auction is called a forward
auction. Example includes most sales on ebay. Reverse auction is one where the
buyer specifies his needs to the seller with price he is ready to pay. The sellers accept
the offer or make counter offer and the final price is discovered after a series of offers
& counter offers.

Step 6: Selecting the Final Price.
After going through all the above 5 steps the company has to select a final price. While
selecting the final price the following should be kept in mind.
 It should reflect the value preposition of the marketer.

 It should be integrated with the rest of the 3Ps (integrated marketing is a part of
Holistic marketing)
 It should reflect upon the impact of the final price on the customers and partners and
how would they react.
 The final pricing also should consider the possible reactions of the competitors.
 It should consider the PLC implications. A skimming pricing should not be attempted
at the growth or maturity stage but only in the introductory stages.
Changing Pricing Environment: There have been many changes in the pricing environment
of companies. They include
 Digital Economy: that has ensured easier price comparisons and also price discovery.
This has made pricing difficult due to customer scrutiny and comparisons.
 Growth of sharing economy: where customers share the products rather than
individually owning them. Example of sharing includes holiday time share, shared
corporate jets, Agriculturists sharing implements like tractor etc. Hence the marketer
may have to look at time share sale as a revenue & not product sales; creating need
for developing a new price discovery mechanism.
 Bartering is making a comeback. There are websites like swap.com that allows
customers to barter products/ services of mutual interest. The practice of bartering has
been increasing in the business world too. For example Chandrika Soap had a sales
promotion scheme of 1 Reynolds pen free with 3 units of Chandrika soap. Here
Reynolds gave the pens freely for the campaign and got the advertisement in return,
which was paid for by Chandrika soap.
 Renting is another trend that is fast catching up. Instead of the buying the product
customers rent the product and manufacturers may have to re-look in to the pricing
under such candidates. Computer hardware manufacturers like HCL & Wipro set up
complete IT system for clients on rent.
 Gain / risk sharing: is another change that affects the pricing. Companies are no more
willing to invest in capital intensive assets. Instead they agree to share the gains,
brought in by use of such assets, with the manufacturer of the capital items. For
example a small company may be unwilling to buy an ERP system through upfront
payment. However, they may be more than willing to share the financial gains,
accrued through use of an ERP system, with the system manufacturer.

Price Adaptation: Prices sometimes may have to adapt due to extraneous factors. There are
many price adaptation methods and some of them include
Geographical Pricing: one where the price changes based on the geography of the user.
Very widely used by manufacturers of commodity, the price of the product increases as the
geography of the customer gets further from the manufacturing plant. This higher/ increasing
price helps the marketer recover the additional cost & risk involved in transporting the goods
to further geographies. This also ensures profitability to the marketer as commodities are
very price sensitive and offers lower profit margins.
Discounts & Allowances are another price adjustment method used by marketers. Many
organisations offer a quantity discount to its customers who purchases higher volume. This
ensures rewarding high value customers and helps maintain good customer relations. Some
organisations provide allowances to large volume purchases like waiving off the
transportation costs that are generally charged to the buyer. This also will have the same
effect like discounts on the customer.
Promotional pricing helps in price adjustments during certain occasions. For example
most FMCG companies have some kind of a promotional price during the festive season like
Diwali. This helps attract the festival shoppers and attain higher volumes during these
season.
Differentiated pricing or price discrimination is the act of charging different prices, for
the same products, from different customers. This may be done keeping in mind various
factors like type of customers, season/ demand situation, social considerations etcetera. For
examples Railway Charges only 50% fare for kids between 5 – 12 years and 75% from senior
citizens. This has social reasons as both age groups are generally not of the earning age. The
PDS (public distribution system for grains) system charges different prices, for the same
grain, based on the income of the service seeker.
Price adaptations are common in marketing. However, the marketer should have a clear idea
on its impact on the profitability, market image and competitors reaction to such price
adaption. It is generally found that most participants in the industry generally follow the
same price adaptation techniques.
Price changes: As indicated earlier price is a reflection of the value and the market
conditions. A change in any of this may necessitate price change and this may involve
 Initiating price cuts which may be necessitated due to competitive action, cost
reduction, regulatory control or a combination of these.
 Initiating price increase is another of the common price change that may have to be
made. The price increase may be a result of cost increases, change in market
dynamics or regulatory change like increase in taxes.

 Responding to price change is another important decision in the pricing policy. The
response may be in the context of the competitor increasing or decreasing their price.
The firm has to first assess impact of the price change, if it is not going to impact the
marketer there will no need for a change in the prices. However, when competitors
reduce price, marketers have to
mostly respond and this
include reducing your prices,
keeping your prices unchanged
but increase the value deliver
or sometimes introducing a
new low priced brand. Among
the cell phone services in
India, when one of the players
reduce prices all other follow
suit and this is because cell phone services are at the maturity stage and has got
commoditised with no service being fundamentally different from the other. Some
marketers may keep their prices unchanged and improve value delivery. For example,
the tyre manufactures (Indian like MRF & Apollo) have largely responded to price
reduction by Chinese brands by providing additional services like wheel alignment,
balancing etc. that improve the life of their tyre and there by deliver more value to the
customers. Marketers also can introduce a low priced variant to take on the low
priced competitors. When Nirma introduced a detergent at very low price, HUL did
not reduce prices. They introduced a low priced fighter variant called ’Wheel”. The
response to any price cuts should be logical & well thought out as it may change the
brand perception completely.
Psychology of pricing:
As indicated earlier, price is perceptual and subject to manipulation. Psychology plays an
important role in pricing by changing/ influencing customer perception. Some of the
psychological effects on pricing are;
• Price-quality inferences: Customers tend to infer higher quality for high priced items.
Marketers use this to manipulate consumer perception of products/brands; especially when
customers are not competent to evaluate such products like jewellery & fashion. They charge
higher prices for the products giving it an air of exclusivity.
• Price ending/ psychology pricing: Customers evaluate prices based on the length of the
price string. For example 999 is considered economical than 1000 (as the former has only 3
digits & latter 4 digits) though the difference is an insignificant 0.1%. This is used by
marketers to give an air of affordability to their product. For example Bata charges this kind
of price (where the price is in the highest 3 digit but not in 4 digits) for most of its products.

• Price references: They are another psychological aspect of pricing customers form a price
range for every product that is indicated by the lower higher limit. Customers will not buy
below the lower limit as they consider the product to be of inferior quality & will not buy
above to higher limit, which they feel may be expensive. The price references are developed
by customer from the past experience, economics condition or other influences. For example;
if the price reference for a water purifier is Rs.12000-25000, then customers may not prefer
the brand below or above this price. The price reference, is contingent to the customer
segment (SEC-A may have different price reference from SEC-C for the same product
category) and has to be clearly understood by the marketer while setting the prices.
• Price anchoring is another trick that marketers use especially in personal selling. This is
about creating artificial price references. For example; when a TV salesman wants to sell a
television set for say Rs.30000, he will start by showing the customer a high price variant say
for Rs.70000. As the customer stalls his selling efforts, the salesman will show a very low
priced version say for 15000 rupees which again gets stalled by the customer. Then the
30000 version is shown, which gets accepted by the customer. Here, the customer has been
manipulated by the salesman who created artificial price references and led him to choose
something in between. This is also called the Goldilocks effect (the bear Goldilocks) where
the middle option is always preferred among the 3 choices.
• Currency signs are commonly used to indicate prices as customers consider currency
signs favourably. Then consider the prices to be lower when currency signs are used instead
of full words like $ instead of Dollar.
• Font sizes have an influence on the price perception. Smaller fonts are considered more
favourable than large fonts. For example: a USD 100 price may look fair when the font size
is say 12, but pretty costly when the font size is 24.
• Per customer limit is another trick to influence customers. When per customer limits are
set, customers feel the product is in high demand. As the perception of the product demand
increases the customers become willing to pay higher price for products.
• 10 for 10 is a trick that gives a feel of economy to the price instead of 1/unit prices.
• Computational fluency is another trick in the hats of the marketer. A marketer will not
allow computational fluency to the customers. They may give a Rs. 26/- discount on Rs. 90/-
instead of Rs. 27/- on Rs. 90/-. Customers find it difficult to calculate the discount of Rs. 26/-
in comparison to Rs. 27/- (out of 90) making the offer with less discount look more
attractive.
• Hyperbolic discount is another trick. Prices affect the same portion of brain affected by
pain indicating the prices cause pain. The marketer may use hyperbolic discounts to reduce
this pain; like an EMI offer on the price. They may offer a 2500*12 EMI instead of charging

Rs. 23000/- one time, making it look more attractive and less painful (even when it is really
not so).
It is imperative that the marketer develops a systematic pricing policy that will ensure that
the prices are scientifically set and constantly received. Pricing is not about assigning a
number to the value offering. It is about ensuring a proper reflection of customer value.

Integrated Notes - Marketing - Recover

Uploaded by

Copyright:

Available Formats

Integrated Notes - Marketing - Recover

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Integrated Notes - Marketing - Recover

Uploaded by

Copyright:

Available Formats

MARKETING

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 1

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 2

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 3

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 4

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 5

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 6

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 7

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 8

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 9

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 10

It is easy to understand the

 Stated need - Want an inexpensive car

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 11

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 12

Structure of modern exchange economy These are interdependent

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 13

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 14

We shall look at an industry

 Infrastructure: Consists of activities such as accounting, legal services, financing, control,

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 15

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 16

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 17

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 18

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 19

Selling Concept Marketing Concept

Concept is suitable for commoditised or Concept is suitable for differentiated products.

Economies of scale resorted to Uses economies of scope.

Starts with the company/factory/product Starts with customers in mind

Matches organisational capabilities to Develop organisational capabilities to match

Strong competitive forces Relatively differentiated and low in competition.

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 20

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 21

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 22

Performance marketing: looks at the key metrics to be achieved as a result of internal,

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 23

MARKETING MIX: 4P’s

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 24

• Promotion: Promotion is a blend of communication tools that is used to inform of or

Product 5/5 (superior technically) 3/5 ( product is fine But not as

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 25

Place 2/5 (not widely available) 5/5 (very widely available)

Promotion 3/5 ( limited communication 4/5 ( widely promoted & high

Total Value 13/20 17/20

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 26

• Performance: We saw in holistic marketing that an organization’s marketing efforts

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 27

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 28

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 29

Employees: Who affect the

Structure: The importance of organizational structure in exploiting business opportunities

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 30

Micro- Environment: Micro-environment is a part of the external environment that is closer to

Competitors: One of the most important constituent in an organisation’s business. Their

Channel Partners: Includes various intermediaries that facilitate an organsation’s interactions

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 31

Consumers/customer: have a significant influence on the market success of an organization.

Dr. M. A. Sanjeev (masanjeev@rediffmail.com/ masanjeev1973@gmail.com) Page 32