Basics of Marketing

Marketing Management

Management: set of activities to help an organization realizes a stated goal by maximizing limited resources.

Marketing management: administering the process of satisfying consumer needs while ensuring the company makes a profit.

Aim of marketing:

· Make new customers by highlighting the potential value of a good

· Retain old customers meeting and surpassing customer’s expectations

Satisfied customer brings 80% of the revenue. He does word of mouth

Need, desire and demand

Need: basic things

Desire: variation in things

Demand: desire backed by money

Market Segmentation: taking a population and dividing it into small groups according to set of shared characteristics.

Market Research: is the planned, systematic collection and analysis of data used by managers to make a decision.

Target Market: the segment the firm decides to market their product to is known as target mkt.

8 types of demand

· Negative demand

· No demand

· Latent demand

· Declining demand

· Irregular demand

· Full demand

· Overfull demand

· Unwholesome demand

Marketing Myopia

When marketers lose sight of what is driving the consumer’s purchasing decision: satisfying their needs. Marketing Myopia starts when a firm starts to market a product not a solution to a need. They pay more attention to a product as a standalone object instead of highlighting the benefits and experiences a product offers to an object.

Societal Marketing : marketing for the long term goals.

Strategic planning: process of developing and maintaining a plan of action that coordinates the activities of every business unit to ensure the long term goals of an organization are fulfilled.

Strategic plan: it states company’s goals and explains the sequence of events in how they will achieve their objectives.

Mission Statement: explains in general terms the organization’s goals and their purpose.

3 characteristics of mission statement:

1. Limited number of goals

2. Explain the polices and values of the firm

3. Which market the company is targeting

To understand your business environment, we have to study porter 5 force model

1. Barriers to entry

2. Degree of Rivalry

3. Power of Supplier

4. Power of Buyer

5. Threat of substitute

Strategic Business Unit(SBU) : develops strategies tailored to fit their resources and capabilities to fulfill the overall corporate objective outlined by senior management.

Core Competencies: is a task or skill or people that enables a company to have an advantage over their competitors.

Characteristics of core competencies:

1. Hard to copy

2. Opens access to wide variety of market

3. Increases customer benefits

Sustained Competitive advantage: core competencies that endure over a long period of time

BCG Approach: assess the performance of SBUs according to their relative market share and growth rate.

Star: growing rapidly

Cash Cow: could be milked to finance the growth

Dog: SBUS to divest

Question Mark: have potential being turned into star but they require development through finance.

Product: it is a bundle of physical, psychological and experiential benefits that the customer receives that satisfies one or many wants or needs.

Product-line length: number of products sold in one category

Product-line width: number of different categories

Product-line depth: different packaging sizes

Inventory Turnover: the no. of times the stock of the company is replaced. High value means the product is selling fast.

ROI = return on investment.

Product level Strategy

Product Filling: same product with different size, shape, quality or price to capture the consumer surplus by customizing the offering to different buyers with the same needs and wants. Vendor’s bargaining power increases coz retailer shelves are full of his product. Entry for new players become difficult.

But we aware of self-cannibalization, it means reducing your product market share because of entry of many products by the same producer.

Line Stretching: lengthening the product line by offering products to potential customers residing upstream and downstream.

Product line Pruning: trimming of product line due to increased cost or cannibalization

PLACEMENT:

Market Channel: marketing channel is a group of interdependent organizations involved in the process of production and distribution of a good or service.

Developing a right market channel to reach the target market is crucial to the success of a product.

The distribution system becomes a source of competitive advantage because the seller has privileged access to their target market.

Channel level: number of intermediary between the producer and the consumer i.e., 1, 2,3

Vertical marketing channel and horizontal marketing channel.

Hybrid marketing channel:

BUILDING A MARKET CHANNEL

Setting channel goals and type

Identifying Partners

a) Intensive distribution

b) Extensive distribution

c) Selective distribution

Designing international market channel

Channel management decision

a) Coercive Power

b) Reward power

c) Legitimate power

d) Expert power

e) Referent power

Evaluating Partners

PRICE

Setting market objectives

a) Maximize short term profit

b) Maximize current market share

c) Market skimming – riding down the demand curve

d) Product-quality leadership

e) Survival

Determining demand

a) Past history to predict the future

b) Price experiments

c) Market Survey

Estimating Cost

a) Variable cost

b) Fixed cost

c) Total cost

d) ABC (activity based cost accounting)

e) Customer Pyramid

· Platinum

· Gold

· Iron

· Lead

Try to convert lead into iron, by saving cost on lead, or by generating more revenue out of lead. Platinum customers are lost easily because when they retire, they become zero from hero.

Learning Curve: more often a task is performed the less cost will be incurred in future. With this, we can sell at lower price, spend more on brand differentiation or simply earn more profit.

Analyze the competitor’s cost, price and offers to position the product

By making a scorecard consisting of competitor’s price, cost, and offers .

Selecting a price method

a) Mark up price: adding a mark up over cost of producing one unit. Calculation is below

Unit cost = variable cost + (fixed cost/expected sales)

Mark up price = unit cost /(1-expected rate of return)

b) Target return pricing: setting a price that yields an expected return on investment.

TRP = unit cost + [(opportunity cost)*(fixed cost)]/unit sales

Break even volume = Fixed cost/(price – variable cost)used to cover operating cost

c) Perceived-value pricing: depends upon the perception of the customer

d) Value pricing: keep the price low of commonly known goods and earn on other goods.

e) Going-rate pricing: same rate as the competitor

f) Psychological Pricing: $99

g) Price Discrimination: different price for different consumers.

h) Geographical Pricing: charge more to places which are further from the plant.