Market SMU

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    Spring 2010(Jan-June)Master of Business Administration-MBA Semester 2

    MB0030 Marketing Management - 3 Credits(Book ID: B0912)

    Assignment Set- 1 (60 Marks)Note: Each question carries 10 Marks. Answer all the questions.

    Q.1 Explain the meaning of marketing and its importance in business. (10 marks)

    Marketing is one activity which all of us seem to observe around us. Any time you try to buy something,marketing has a role to play. It is often viewed by many as being advertising or sales promotion ormarketing research. But it is a concept much larger than any of them or all of them put together.Marketing consists of all those activities designed to create exchanges which satisfy human ororganizational needs or wants in a way that brings profit for the firm. It performs the task of bothidentifying and satisfying customer needs. This helps business enterprises in anticipating customerdemand and creating satisfied customers through conception, production, promotion and physicaldistribution of goods and services. No example can better illustrate this than the popular mobile phone.The need to communicate from anywhere to anywhere gave way to a portable device without therequirement of wires.

    What is Marketing?Simply seen marketing is a set of business activities that facilitate movement of goods and servicesfrom producers to consumers. It is an ongoing process of 1. Discovering and translating consumerneeds into products and services, 2. Creating demands for them, serving the customer and his demandthrough a marketing programme of promotion and 3. Distribution to fulfill the company s marketing goals in a competitive environment.

    American Marketing Association (AMA) offers the following definition of Marketing. (AMA 2004)Definition: Marketing is an organization function and a set of processes for creating, communicatingand delivering value to customers and for managing customer relationships in ways that benefit theorganization and its stake holders.

    Importance of Marketing

    Peter Drucker, the famous management thinker in one of his classic articles has said Marketing iseverything. All other activities in the organization are support services to the marketing strategy thatthe company pursues. Marketing is important not only to the company but to the consumers and societyand to the economy.Consumer stands to benefit from marketing activities. He has more alternatives to choose from,improved and better quality products are available and he is able to buy goods at convenient locations.Thanks to much improved customer service, a consumer is able to complain and expects his complaintto be attended in reasonable time. He can now buy with credit or debit card or cash or on installments.

    Successful operation of marketing activities creates, maintains and increases the demand for goodsand services in the economy. It results in the increased level of production. This, in turn, increases thenational income, which is beneficial to the economy. Marketing operations require the services of

    intermediaries such as wholesalers, retailers, transporters, and service provides for storage, finance,insurance and advertising. These services provide employment in large numbers.

    Marketing is a very important aspect in business since it contributes greatly to the success of theorganization. Production and distribution depend largely on marketing. Many people think that salesand marketing are basically the same. These two concepts are different in many aspects. Marketingcovers advertising, promotions, public relations, and sales. It is the process of introducing andpromoting the product or service into the market and encourages sales from the buying public. Salesrefer to the act of buying or the actual transaction of customers purchasing the product or service.

    Q.2 Explain the relevance of BCG matrix and GE matrix with examples (10 marks)

    Strategic planning is the process of defining the company mission, setting the long term and short termobjectives, designing an appropriate business portfolio and coordinating functional strategies of thecompany.

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    Looking at the definition, you will be able to identify four important factors of the strategic planning.They are

    1. Defining the company mission.2. Formulating the objectives3. Designing an appropriate business portfolio4. Coordination at business levels.

    The current business portfolio of the company is analyzed by the businesses in which it operates. Tomake it clearer, let me take an example of ITC group. The company operates in FMCG, hotels, paperboards, specialty papers and packaging and agribusiness. These businesses are independent fromeach other and have their mission and objectives separately. These subsidiaries of organizations arecalled as Strategic business units (SBU)

    Strategic business unit: The unit of the company that has separate mission and objectives and that canbe planned independently from other businesses.

    Characteristics of SBU.1. It may be brand, or a product line or separate division of the company.2. It is having distinct mission and objectives.3. It is managed by separate executive team.

    Strategic planning models used in assessing the existing businesses:1. BCG matrix ( Boston Consultancy Group)2. GE matrix ( General electric)

    BCG matrix: This model is used to identify companys SBUs position in the market. This modelidentifies the SBUs strength, weaknesses, opportunities and threats on the basis of market growth rateand relative market share. This model is also known as growth share matrix.The Boston Matrix is a well known tool for the marketing manager. It was developed by the large USconsulting group and is an approach to product portfolio planning. It has two controlling aspect namelyrelative market share (meaning relative to your competition) and market growth.

    You would look at each individual product in your range (or portfolio) and place it onto the matrix. You

    would do this for every product in the range. You can then plot the products of your rivals to giverelative market share.

    This is simplistic in many ways and the matrix has some understandable limitations that will beconsidered later. Each cell has its own name as follows.

    Dogs. These are products with a low share of a low growth market. These are the canine version of'real turkeys!'. They do not generate cash for the company, they tend to absorb it. Get rid of theseproducts.

    Cash Cows. These are products with a high share of a low growth market. Cash Cows generate morethan is invested in them. So keep them in your portfolio of products for the time being.

    Question Marks. These are products with a low share of a high growth market. They consumeresources and generate little in return. They absorb most money as you attempt to increase marketshare.

    Stars= high growth, high market share). These are products that are in high growth markets with arelatively high share of that market. Stars tend to generate high amounts of income. Keep and buildyour stars.

    Look for some kind of balance within your portfolio. Try not to have any Dogs. Cash Cows, ProblemChildren and Stars need to be kept in a kind of equilibrium. The funds generated by your Cash Cows isused to turn problem children into Stars, which may eventually become Cash Cows. Some of theProblem Children will become Dogs, and this means that you will need a larger contribution from thesuccessful products to compensate for the failures.

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    BCG matrix for ITC1. SBU: FMCGIndustry growth rate: 24% (AC Nielson retail audit report 2007)

    Company growth rate: 50% (the Hindu business line 19 th January 2008)Companys market share : 8% (outlook business)Largest competitor share: HUL: 54% (outlook business)Relative market share= 0.14

    2. SBU: Paper boardIndustry growth rate: 7.2% (the Hindu business line 27 th May 2007)Company growth rate: 11% (the Hindu business line 19 th January 2008)Companys market share: 55%Largest competitors share: BILT 35%ITCs FMCG segment analysis shows that though it is market leader in some categories their overallrelative market share is 0.14. Company is in the high growth low relative market share area i.e.question mark position. ITC should invest heavily to convert its SBU position into star.

    ITCs Paperboard industry is in low growth and high market share category i.e. in cash cow segment.It should plan for investing the cash generated from this position into other businesses.

    GE matrix:

    1 Management can use the GE business matrix to classify SBUs on the basis of two factorsa. Market attractiveness: Market size, entry barriers, competitors, technology andprofit margin are some factors used to analyze the market attractiveness.b. Business position can be determined on the basis of market share, SBU size, R&Dcapabilities and cost controlsEach cell in the model represented by the particular strategy namely, invest strategy,protect strategy, harvest strategy and divest strategy

    2 Invest strategy: In this position SBU

    a. Should receive ample resourcesb. Should support by well financed marketing efforts.

    3 Protect strategy: SBUs in this position should

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    a. Allocate the resources selectively.b. Develop strategies which help in maintain its market position.c. Generate cash needed by other SBUs.

    4. Harvest strategy: SBUs should not receive substantial new resources and if required, sell them.

    5. Divest strategy: SBUs which falls into this category should not receive any resources and sell i orshut it as early as possible

    The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box. Firstly, marketattractiveness replaces market growth as the dimension of industry attractiveness, and includes abroader range of factors other than just the market growth rate. Secondly, competitivestrengthreplaces market share as the dimension by which the competitive position of each SBU isassessed.

    Factors that Affect Market AttractivenessWhilst any assessment of market attractiveness is necessarily subjective, there are several factorswhich can help determine attractiveness. These are listed below:

    - Market Size- Market growth- Market profitability- Pricing trends- Competitive intensity / rivalry- Overall risk of returns in the industry- Opportunity to differentiate products and services- Segmentation- Distribution structure (e.g. retail, direct, wholesale

    Factors that Affect Competitive StrengthFactors to consider include:-Strength of assets and competencies- Relative brand strength- Market share- Customer loyalty- Relative cost position (cost structure compared with competitors)- Distribution strength- Record of technological or other innovation- Access to financial and other investment resources

    The Directional Policy Matrix (or GE-McKinsey Matrix) illustrates which segments the Host Companyshould actively pursue, and which segments should be divested. Development of the multivariate

    Directional Policy Matrix came about through recognition of the potential limitations of using only onesingle variable within the BCG Matrix. It was considered that a number of additional factors should alsobe utilised to develop a more representative analysis of the business.

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    The matrix shows the relative position of each segment using Relative Competitive Strength as the(horizontal) X-Axis and Relative Segment Attractiveness as the (vertical) Y-Axis. The diameter of eachpie is proportional to the Volume or Revenue accruing to each Segment, and the solid slice of each pierepresents the share of the market enjoyed by the Host Company.

    The company should invest in Product / Market opportunities that appear to the top left of the matrix.The rationale is that the company should invest in segments that are both attractive and in which it hasestablished some measure of competitive advantage. Product / Market opportunities appearing in thebottom right of the matrix are both unattractive to the host company and in which it is competitively

    weak. At best, these are candidates for cash management; at worst candidates for divestment.Product / Market opportunities appearing 'in between' these extremes pose more of a problem, and thehost company has to make a strategic decision whether to 'redouble its efforts' in the hopes ofachieving market leadership, manage them for cash, or cut its losses and divest.

    Q.3. What do you mean by MIS? Explain its benefits, types and components. (10 marks)

    A Marketing Information System is a set of procedures to collect, analyze and distribute accurate,prompt and appropriate information to different levels of marketing decision makers.A management information system (MIS) is a system or process that provides information needed tomanage organizations effectively . Management information systems are regarded to be a subset of theoverall internal controls procedures in a business, which cover the application of people, documents,

    technologies, and procedures used by management accountants to solve business problems such ascosting a product, service or a business-wide strategy. Management information systems are distinctfrom regular information systems in that they are used to analyze other information systems applied inoperational activities in the organization. Academically, the term is commonly used to refer to the groupof information management methods tied to the automation or support of human decision making, e.g.Decision Support Systems, Expert systems, and Executive information systems.

    An 'MIS' is a planned system of the collecting, processing, storing and disseminating data in the form ofinformation needed to carry out the functions of management. In a way it is a documented report of theactivities that were planned and executed. According to Philip Kotler "A marketing information systemconsists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distributeneeded, timely, and accurate information to marketing decision makers."

    Its characteristics are as follows:1. It is a planned system developed to facilitate smooth and continuous flow of information.2. It provides pertinent information, collected from sources both internal and external to the company,for use as the basis of marketing decision making.3. It provides right information at the right time to the right person.A well designed MIS serves as a companys nerve centre, continuously monitoring the marketenvironment both inside and outside the organization. In the process, it collects lot of data and stores inthe form of a database which is maintained in an organized manner. Marketers classify and analyze thisdata from the database as needed.

    Benefits of MISVarious benefits of having a MIS and resultant flow of marketing information are given below:1. It allows marketing managers to carry out their analysis, planning implementation and control

    responsibilities more effectively.2. It ensures effective tapping of marketing opportunities and enables the company to develop effectivesafeguard against emerging marketing threats.3. It provides marketing intelligence to the firm and helps in early spotting of changing trends.4. It helps the firm adapt its products and services to the needs and tastes of the customers.5. By providing quality marketing information to the decision maker, MIS helps in improving the qualityof decision making.

    Types of Marketing InformationA Marketing Information System supplies three types of information.1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly, quarterly, orannual interval. This includes data such as sales, Market Share, sales call reports, inventory levels,payables, and receivables etc. which are made available regularly. Information on customer awareness

    of companys brands, advertising campaigns and similar data on close competitors can also beprovided.

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    2. Monitoring Information is the data obtained from regular scanning of certain sources such as tradejournals and other publications. Here relevant data from external environment is captured tomonitorchanges and trends related to marketing situation. Data about competitors can also be part of thiscategory. Some of these data can be purchased at a price from commercial sources such as MarketResearch agencies or from Government sources.

    3. Problem related or customized information is developed in response to some specific requirementrelated to a marketing problem or any particular data requested by a manager.Primary Data or Secondary Data (or both) are collected through survey Research in response to

    specific need. For example, if the company has developed a new product, the marketing manager maywant to find out the opinion of the target customers before launching the product in the market. Suchdata is generated by conducting a market research study with adequate sample size, and the findingsobtained are used to help decide whether the product is accepted and can be launched.

    Components of MISThe following diagram shows a typical Marketing Information System with its components. Which are?

    1. Internal Records System2. Marketing Intelligence System3. Marketing Research System4. Analytical Marketing System

    The explanation of this model of an MIS begins with a description of each of its four main constituentparts: the internal reporting systems, marketing research system, marketing intelligence system andmarketing models. It is suggested that whilst the MIS varies in its degree of sophistication - with many inthe industrialised countries being computerised and few in the developing countries being so - a fullyfledged MIS should have these components, the methods (and technologies) of collection, storing,retrieving and processing data notwithstanding.

    Internal reporting systems: All enterprises which have been in operation for any period of time nave awealth of information. However, this information often remains under-utilised because it iscompartmentalised, either in the form of an individual entrepreneur or in the functional departments oflarger businesses. That is, information is usually categorised according to its nature so that there are,for example, financial, production, manpower, marketing, stockholding and logistical data. Often theentrepreneur, or various personnel working in the functional departments holding these pieces of data,do not see how it could help decision makers in other functional areas. Similarly, decision makers canfail to appreciate how information from other functional areas might help them and therefore do notrequest it.

    The internal records that are of immediate value to marketing decisions are: orders received,stockholdings and sales invoices.

    These are but a few of the internal records that can be used by marketing managers, but even thissmall set of records is capable of generating a great deal of information. Below, is a list of some of theinformation that can be derived from sales invoices.

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    Product type, size and pack type by territory

    Product type, size and pack type by type of account

    Product type, size and pack type by industry

    Product type, size and pack type by customer

    Average value and/or volume of sale by territory

    Average value and/or volume of sale by type of account

    Average value and/or volume of sale by industry

    Average value and/or volume of sale by sales person

    By comparing orders received with invoices an enterprise can establish the extent to which it isproviding an acceptable level of customer service. In the same way, comparing stockholding recordswith orders received helps an enterprise ascertain whether its stocks are in line with current demandpatterns.

    Marketing research systems: The general topic of marketing research has been the prime ' subject ofthe textbook and only a little more needs to be added here. Marketing research is a proactive search forinformation. That is, the enterprise which commissions these studies does so to solve a perceivedmarketing problem. In many cases, data is collected in a purposeful way to address a well-definedproblem (or a problem which can be defined and solved within the course of the study). The other formof marketing research centres not around a specific marketing problem but is an attempt tocontinuously monitor the marketing environment. These monitoring or tracking exercises are continuousmarketing research studies, often involving panels of farmers, consumers or distributors from which thesame data is collected at regular intervals. Whilst the ad hocstudy and continuous marketing researchdiffers in the orientation, yet they are both proactive.

    Marketing intelligence systems: Whereas marketing research is focused, market intelligence is not. A

    marketing intelligence system is a set of procedures and data sources used by marketing managers tosift information from the environment that they can use in their decision making.This is a set of procedures and sources used by managers to obtain everyday information aboutdevelopments in the marketing environment. This system supplies happenings data unlike InternalRecords System which supplies results data. Marketing managers collect data from published sourceslike books, magazines and journals; by talking to customers, intermediaries and sales personnel. Somecompanies appoint specialists to gather consumer and competitor information, who does mysteryshopping to monitor the performance of their own or competitors dealers. Competitor information canalso be obtained by buying their product, attending their press conferences, trade shows and readingtheir annual reports. Companies purchase commercial information from outside suppliers and marketresearch agencies like IMRB, ORG MARG to obtain competitive data on their sales, advertisingexpenditures etc., besides their own.

    Marketing models: Within the MIS there has to be the means of interpreting information in order togive direction to decision. These models may be computerised or may not. Typical tools are:

    Time series sales modes Brand switching models Linear programming Elasticity models (price, incomes, demand, supply, etc.) Regression and correlation models Analysis of Variance (ANOVA) models Sensitivity analysis Discounted cash flow Spreadsheet 'what if models

    These and similar mathematical, statistical, econometric and financial models are the analyticalsubsystem of the MIS. A relatively modest investment in a desktop computer is enough to allow anenterprise to automate the analysis of its data. Some of the models used are stochastic, i.e. those

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    containing a probabilistic element whereas others are deterministic models where chance plays no part.Brand switching models are stochastic since these express brand choices in probabilities whereaslinear programming is deterministic in that the relationships between variables are expressed in exactmathematical terms.

    Also known as Marketing Decision Support systems (MDSS), this is a coordinatecollection of data, systems, tools and techniques with supporting software and hardware by which anorganization gathers and interprets relevant information from business and environment and turns it intoa basis for marketing action. All the data which is generated through the other three systems described

    above are stored in a data base. The storage and retrieval capability of decision support system allowsthe collection and use of a wide variety of data throughout the company. Senior managers can accessthe data base and continually and monitor sales, markets, performance of the sales people and othermarketing systems as well.

    Q.4.Suppose you need to conduct a small marketing research in your neighbourhood regardingthe purchase and use of toothpastes, what will be your approach in the process? (10 marks)

    The objectives of marketing research study is

    To understand why consumers buy a product

    To forecast the probable volume of future sales or expected market share

    To assess competitive strengths and strategies

    To evaluate the effectiveness of marketing action already taken

    To assess customer satisfaction of companys products/services.

    Here we want to conduct a marketing research regarding toothpastes so the objective is thus defined.Potential data sources___ primary data is collected as the area of research is small.Data can be collected from shopkeepers, housewifes, maids, children, etc, in the area.

    Research Approaches Primary Data can be collected using any of the five approaches. They are:1. Observational Research Fresh data can be collected by observing the situation and the people inthe situation.

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    2. Focus Group Research is a method of discussion in which a team of eight to twelve persons invitedfor a group discussion in presence of a skilled moderator to discuss a product, service, a firm or anymarketing related activity. The proceedings are observed and recorded on videotape and subsequentlyanalyzed to understand consumer attitudes, beliefs and behavior.3. Survey Research This is the most common of the approaches wherein surveys are undertaken withthe help of a questionnaire to learn about people s knowledge, beliefs and preferences.4. Behavioral Research Customer s actual behavior in terms of actual purchases reflect their preferences and are more reliable than responses provided in surveys which are memory based.5. Experimental Research The most scientific method of research is experimental research which

    tries to capture cause and affect relationships.

    Research Instruments There are mainly two types of research instruments: questionnaires andmechanical devices

    i Questionnaire This consists of a set of questions logically arranged and presented to therespondents to answer. Questionnaire is the most commonly used instrument for collection of primarydata due to its flexibility. It needs to be carefully prepared and pre tested before being used for actualdata collection.ii Mechanical Devices Mechanical Devices such as galvanometers are used to measure the interestor emotions aroused by exposure to an ad. Eye Cameras study respondent s eye movement to see which part of an ad attracted attention first and how long they pay attention to a single item. These daysTelevision audience ratings are measured using Audiometers which can be attached to TV s in a set of

    sample households. These devices record when the set is on and to which channel it is tuned. The datacollected by mechanical devices are generally found to be more accurate than by human observation.

    Sampling Plan Now the researcher must prepare a sampling plan which outlines who should besurveyed (Sampling Unit), How many should be surveyed (Sample Size) and how should they beselected for the survey (Sampling Procedure).

    i Sampling Unit Researcher must define the element of the target population by whom informationshall be collected. For example, housewife or a youth between 16 25 years or an office located on M.G. Road.

    ii Sample Size Large samples provide more reliable results than smaller samples. But normallysample size is decided based on nature of the study and variance in the population, level of accuracy

    desired and above all money available for research.

    iii Sampling procedure Two types of methods are available for selecting the samples ProbabilitySampling and Non Probability Sampling.

    Probability sampling method requires that each element of the population has an equal or knownchance of getting selected. It also allows the calculation of confidence limits for Sampling Error. Threecommonly used Probability sampling methods are Simple Random Sampling, Stratified RandomSampling and Cluster Sampling.In Non Probability Sampling method, respondents are chosen on the basis of researcher s judgment or convenience and this method does not allow sampling error to be measured. In spite of theselimitations, many researchers take Non probability samples due to time and cost constraints. Threecommonly used Non Probability sampling methods are Convenience Sampling, Judgment Sampling

    and Quota Sampling.

    Contact Methods Now the researcher has to decide how the respondent should be contacted. Thechoices of methods available are mail, telephone, personal interview or online interview.Collect the Information After designing the research instrument, the researcher should now actuallycontact the respondent and collect the information. At this stage, it is very important to keep the qualityof the data under control by ensuring accurate unbiased answers and by seeking the entirerespondent s co operation. In case the researcher has to appoint data collectors to collect the information from respondents, they must be well trained and motivated.

    Analyze the information In this stage researcher collects the data and codify it. Nowadays, manyquestionnaires are pre coded which makes the task of data entry very easy. The coded data is then

    tabulated to provide frequency distributions. Tabulated data is now analyzed. Averages and measuresof dispersion are computed for the major variables. Advanced Statistical Techniques are used todiscover findings. Here the data is converted to information which may be used in decision making.

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    Present the findings At this last step, the researcher should present findings to the decision makersor users of the information.

    Q. 5 Explain the consumer buying decision process with respect to new products.Give examples. (10 marks)

    The buyer s decision for existing products and new products varies. in the existing product buying decision process consumers have the option to search for the information and evaluate them. In thenew product such options don t exist. Therefore we should understand how consumer comes to know

    about the product. Kotler defined this process as adoption process.

    According to Philip Kotler Adoption is The mental process through which an individual passes from firsthearing about an innovation to final adoption .Adoption process

    1. Awareness: the consumer became aware of the product but lacks information about it. Beforeanything else can happen the potential customers must become aware that the product or serviceexists. Thus, the first task must be to gain the attention of the target audience. All the different modelsare, predictably, agreed on this first step. If the audience never hears the message, they will not act onit, no matter how powerful it is.2. Interest: By this stage previous information is available, consumer shows interest to get theinformation about the product. but it is not sufficient to grab their attention. The message must interestthem and persuade them that the product or service is relevant to their needs. The content of themessage(s) must therefore be meaningful and clearly relevant to that target audience's needs, and thisis where marketing research can come into its own.3. Evaluation: After receiving the information consumer analyzes the benefits of new products over any

    existing products or substitutes and decides whether to buy or not. once an interest is established, theprospective customer must be able to appreciate how well the offering may meet his or her needs,again as revealed by the marketing research. This may be no small achievement where the advertiserhas just a few words, or ten seconds, to convey their message.4. Trial: The consumer tries the new product on a small scale to improve his or her estimate of itsvalue.5. Adoption: In this stage consumer decides to make full and regular use of the product. but in mostcases this first purchase is best viewed as just a trial purchase. Only if the experience is a success forthe customer will it be turned into repeat purchases. These repeats, not the single purchase which isthe focus of most models, are where the vendors focus should be, for these are where the profits aregenerated. The earlier stages are merely a very necessary prerequisite for this!

    It is generally agreed that biases can creep into our decision making processes, calling into questionthe correctness of a decision. Below is a list of some of the more common cognitive biases.

    - Selective search for evidence - We tend to be willing to gather facts that support certainconclusions but disregard other facts that support different conclusions.

    - Premature termination of search for evidence - We tend to accept the first alternative that lookslike it might work.

    - Conservatism and inertia - Unwillingness to change thought patterns that we have used in thepast in the face of new circumstances.

    - Experiential limitations - Unwillingness or inability to look beyond the scope of our pastexperiences; rejection of the unfamiliar.

    - Selective perception - We actively screen-out information that we do not think is salient.- Wishful thinking or optimism - We tend to want to see things in a positive light and this can

    distort our perception and thinking.- Recency - We tend to place more attention on more recent information and either ignore or

    forget more distant information.

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    - Repetition bias - A willingness to believe what we have been told most often and by thegreatest number of different of sources.

    - Anchoring - Decisions are unduly influenced by initial information that shapes our view ofsubsequent information.

    - Group think - Peer pressure to conform to the opinions held by the group.- Source credibility bias - We reject something if we have a bias against the person, organization,

    or group to which the person belongs: We are inclined to accept a statement by someone welike.

    - Incremental decision making and escalating commitment - We look at a decision as a small

    step in a process and this tends to perpetuate a series of similar decisions. This can becontrasted with zero-based decision making.- Inconsistency - The unwillingness to apply the same decision criteria in similar situations.- Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we

    attribute our failures to bad luck and external factors. We attribute other's success to good luck,and their failures to their mistakes.

    - Role fulfillment - We conform to the decision making expectations that others have of someonein our position.

    - Underestimating uncertainty and the illusion of control - We tend to underestimate futureuncertainty because we tend to believe we have more control over events than we really do.

    - Faulty generalizations - In order to simplify an extremely complex world, we tend to groupthings and people. These simplifying generalizations can bias decision making processes.

    - Ascription of causality - We tend to ascribe causation even when the evidence only suggests

    correlation. Just because birds fly to the equatorial regions when the trees lose their leaves,does not mean that the birds migrate because the trees lose their leaves.

    Q. 6. Explain the different consumer behaviour models. (10 marks)

    Buyer decision processes are the decision making processes undertaken by consumers in regard to apotential market transaction before, during, and after the purchase of a product or service.

    An understanding of consumer behaviour is essential to the development of social marketingprogrammes. There are, however, a whole range of individuals and organisations, other than the finalconsumer, who/which may be target markets,

    More generally, decision making is the cognitive process of selecting a course of action from amongmultiple alternatives. Common examples include shopping and deciding what to eat. Decision making issaid to be a psychological construct. This means that although we can never "see" a decision, we caninfer from observable behaviour that a decision has been made. Therefore we conclude that apsychological event that we call "decision making" has occurred. It is a construction that imputescommitment to action. That is, based on observable actions, we assume that people have made acommitment to effect the action.

    In general there are three ways of analysing consumer buying decisions. They are:

    Economic models - These models are largely quantitative and are based on the assumptions ofrationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumertheory. Game theory can also be used in some circumstances.

    According to the economic model of buyer behavior, the buyer is a rational man and his buyingdecisions are totally governed by the concept of utility. If he has a certain amount of purchasing power,a set of needs to be met and a set of products to choose from, he will allocate the amount over the setof products in a very rational manner with the intention of maximizing the utility or benefits.

    Psychological models - These models concentrate on psychological and cognitive processes such asmotivation and need recognition. They are qualitative rather than quantitative and build on sociologicalfactors like cultural influences and family influences.According to the learning model which takes its cue from the Pavlovian stimulus response theory, buyerbehavior can be influenced by manipulating the drives, stimuli and responses of the buyer. The modelrests on man s ability at learning, forgetting and discriminating. The stimulus response learning theory states that there develops a bond between behavior producing stimulus and a behavior response (S. R.

    Bond) on account of the conditioning of behavior and formation of habits. This theory may be traced toPavlov and his experiments on salivating dogs. Pavlov s experiments brought out associations by conditioning.

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    In his well known research with dogs, a bell was rung every time food was served to a dog. Eventually,the dog started salivating each time upon hearing the bell though no food was served. The dog s behavior is conditioned; it is related to behavior-producing stimulus (bell ringing) and behavior response(salivation). The S.R. bond so established causes a setpattern of behavior learnt by the object dog. Interms of consumer behavior, an advertisement would be a stimulus whereas purchase would be aresponse.

    Consumer behaviour models - These are practical models used by marketers. They typically blend botheconomic and psychological models.

    The Psychoanalytical Model:The psychoanalytical model draws from Freudian Psychology. Accordingto this model, the individual consumer has a complex set of deep-seated motives which drive himtowards certain buying decisions. The buyer has a private world with all his hidden fears, suppresseddesires and totally subjective longings. His buying action can be influenced by appealing to thesedesires and longings. The psychoanalytical theory is attributed to the work of eminent psychologistSigmund Freud. Freud introduced personality as a motivating force in human behavior. According tothis theory, the mental framework of a human being is composed of three elements, namely,1. The idor the instinctive, pleasure-seeking element. It is the reservoir of the instinctive impulses that aman is born with and whose processes are entirely subconscious. It includes the aggressive,destructive and sexual impulses of man.2. The superego or the internal filter that presents to the individual the behavioral expectations ofsociety. It develops out of the id, dominates the ego and represents the inhibitions of instinct which is

    characteristic of man. It represents the moral and ethical elements, the conscience.3. The ego or the control device that maintains a balance between the id and the superego. It is themost superficial portion of the id. It is modified by the influence of the outside world. Its processes areentirely conscious because it is concerned with the perception of the outside world.

    The basic theme of the theory is the belief that a person is unable to satisfy all his needs within thebounds of society. Consequently, such unsatisfied needs create tension within an individual which haveto berepressed. Such repressed tension is always said to exist in the sub-conscious and continues toinfluence consumer behavior.

    4. The Sociological Model: According to the sociological model, the individual buyer is influenced bysociety or intimate groups as well as social classes. His buying decisions are not totally governed byutility; he has a desire to emulate, follow and fit in with his immediate environment.

    5. The Nicosia Model: In recent years, some efforts have been made by marketing scholars to buildbuyer behavior models totally from the marketing man s standpoint. The Nicosia model and the Howard and Sheth model are two important models in this category. Both of them belong to thecategory called the systems model, where the human being is analyzed as a system with stimuli as theinput to the system and behavior as the output of the system. Francesco Nicosia, an expert inconsumer motivation and behavior put forward his model of buyer behavior in 1966. The model tries toestablish the linkages between a firm and its consumer how the activities of the firm influence theconsumer and result in his decision to buy. The messages from the firm first influence the pre-disposition of the consumer towards the product. Depending on the situation, he develops a certainattitude towards the product. It may lead to a search for the product or an evaluation of the product. Ifthese steps have a positive impact on him, it may result in a decision to buy. This is the sum andsubstance of the activity explanations in the Nicosia Model.

    The Nicosia Model groups these activities into four basic fields.Field one has two sub-fields the firm s attributes and the consumer s attributes. An advertising message from the firm reaches the consumer s attributes. Depending on the way the message is received by the consumer, a certain attribute may develop, and this becomes the input for Field Two.Field Two is the area of search and evaluation of the advertised product and other alternatives. If thisprocess results in a motivation to buy, it becomes the input for Field Three.Field Three consists of the act of purchase.And Field Four consists of the use of the purchased item.

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    In Psychographic segmentation, buyers are classified into different groups on the basis of life-style orpersonality and values. People within the same demographic group can exhibit very differentpsychographic profiles.

    - Personality type

    When Marketers use personality variables to segment the markets, they endow their products withbrand personality that corresponds to consumer personalities. For example, Raymond advertises itsfabrics with the tag The Complete Man.

    Behavioural Product usage - e.g. light, medium ,heavy users

    Benefits: Buyers can be classified according to the benefits they seek from the products. For example,Peter England, a Madhura garment brand positioned its wrinkle free trousers on the basis of benefits.User Status: Markets can be segmented into non-users, potential users, first time users and regularusers of a product. Each market segment requires a different marketing strategy. The company s market position will also influence its focus. Market leaders will focus on attracting potential users,whereas smaller firms will try to attract current users away from the market leader. For example,Kishkinda resort near Hampi classifies its customers according to this characteristic. Resort believesthat locals falls into non- user category, affluent class come to Hampi as potential users, foreigners as

    first time users, rich people near Hampi who frequently come there as regular users.Usage Rate: Markets can be segmented into light, medium and heavy product users. Heavy users are

    often a small percentage of the market but account for a high percentage of total consumption.Marketers prefer to attract one heavy user rather than several light users and so, they vary theirpromotional efforts accordingly.For example, Alan Paine textile brand, offered 4 cotton trousers for Rs. 999. Here, the Company isinterested in getting profits from sales volume rather than its selling price

    Brand loyalty: none, medium, high

    Consumers have varying degrees of loyalty to specific brands, stores and other entities. Buyers can bedivided into four groups according to brand loyalty status.

    a) Hard-core Loyals: Consumers who buy one brand all the time. For example, customer may beusing only BSNL cellular services though there are different options available.

    b) Split Loyals: Consumers who are loyal to two or three brands. For example, consumer may go fortax savings schemes of post offices and Life Insurance Corporation of India

    c) Shifting Loyals: Consumers who shift from one brand to another. For example, consumer who usedNokia cell phones starts buying Sony- Ericsson mobiles.

    Type of user (e.g. with meals, special occasions)

    According to the occasions, buyers develop a need, purchase a product or use a product. It can helpfirms expand product usage. A company can consider critical life events to see whether they areaccompanied by certain needs. For example, Tanishq a TATA enterprise offers gold schemes andpromotions for Akshaya Thrutiya (auspicious day to purchase jewellery)

    In behavioral segmentation, buyers are divided into groups on the basis of their knowledge or attitudetowards the use of, or response to a product. Some marketers believe that behavioral variables are theideal primary factors for creating market segments.

    b. Analyze the pricing methods with relevant examples (5 marks)

    Price determination is very important aspect of strategic planning. Marketers fix price of product onbasis of cost, demand or competition. Dell, which allows customers to customize product adoptedflexible pricing methods.

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    Cost based pricing

    I. Cost plus pricing: The method of adding markup to total cost of product Procedure for calculating costplus pricing:

    a. Find out the variable cost per unit and fixed cost.

    b. Estimate the number of units the company is intended to sell.

    c. Calculate the Unit cost by the following formula

    Unit cost = Variable cost + (Fixed costs /Unit sales)

    d. Find out the required mark up( desired return on sales)

    e. Calculate the price by the following formula.

    Price = Unit cost / (1 - Desired return on sales)

    Advantages of cost plus pricing:

    1. Sellers are more certain about the cost than the demand.

    2. If all the companies in the industry use this method price become standard.

    3. It is fairer to both buyers and sellers.

    Disadvantages of cost plus pricing:

    1. It ignores the demand and competition

    2. If fewer units are sold then fixed cost will be spread to less number of units. This leads to higher unitcost and higher final price.

    II. Break even pricing: The firm determines the price at which it will make the target profit. Procedure tocalculate the break even volume:

    1. Find out the total fixed cost of the company.

    2. Determine the price on which company would like to sell

    3. Calculate the variable cost per unit.

    4. Determine the break even volume by the following formula

    Break even volume= Fixed cost/ (Price - variable cost)

    Procedure to identify breakeven price1. Determine the unit demand needed to break even at a given price.

    2. Find out the expected unit demand at given price.

    3. Find out the total revenue at a given price.

    4. Calculate the total cost ( assuming fixed cost and total of variable cost)

    5. Determine the profit from the following formula

    Profit= Total revenue total cost.

    Value Based and Competition Based pricing

    I. Value based pricing: Setting the price of a product on the basis of consumers value rather thanmanufacturers cost. Difference between value based and competition based pricing

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    VALUEBASEDPRICING Cost based pricing starts with development of product and prices werefixedlater. In case of value based pricing customers are give nut most importance. The product isdeveloped only after the price and cost estimation in value based pricing method. To explain both orieslet me take examples, company Xthat manufactures electric switches develops theproduct and sets theprice on basis of total cost andtarget returnrequired. Company Y that manufactures food productsresearches consumer need and prepares customer values. On basis of values company sets the price

    Every day low pricing: In this strategy organization charges constant low prices and no temporary

    discounts. This method is popularized by Wal Mart.High Low pricing: Charging higher prices everyday but running frequent promotions to lower the priceson temporary prices.

    2. Competition Based pricing: Method in which a seller uses prices of competing products as abenchmark instead of considering own costs or the customer demand

    a) Destroyer Pricing This strategy is used as an attempt to eliminate competition. It involves low erringcompanies prices to an extent where competition can not compete and consequently, they go out ofProduct Cost Price Value Customers Product Cost Price Value Customers business. It is thereforeimportant that one has to recognize how threatening the competition is and research how competitivethey can be with their prices: they may be able to compete with organizations price cuts andconsequently both, or even just competitor may go out of business.

    b) Price Matching or Going Rate Pricing - -Many businesses feel that lowering prices to become morecompetitive can be disastrous for them (and often very true!) and so instead, they settle for a price thatis close to their competitors. Any price movements made by competition is then mirrored by theorganization so long that one can compensate for any reductions if they lower their price.

    c) Price Bidding or Close Bid Pricing - Price bidding is a strategy most common with manufacturing,building & construction services. In this strategy, companies submit the quotation according to tenderstipulations

    Q.2 Explain the benefits and demerits of the different types of advertising media.How will a marketer decide on the suitable media for his/her products? (10marks)

    Types of advertisements

    - Institutional advertising: The objectives of advertisements are to enhance the image of thecompany rather than selling the product. For example, Wipro uses Applying Thought for all its businesses thus promoting the company.

    - Product advertising: The objective of this type of advertisement is to communicate about theproduct attributes to the target customer. Product advertising is further classified into threetypes.

    They are1. Pioneer advertising: This mode of advertisements is used to create awareness and demand in theinitial stage of the product life cycle. For example, TATA Docomo advertised initially as to why a personshould pay for the unused minutes when talks may last for seconds.2. Competitive advertisements: This type of advertisement is used to highlight the differentiation oforganizations product. This method is usually used in the growth phase of product life cycle. Forexample, Detergents like Ariel, Surf and Tide constantly differentiate their product features from eachother.3. Comparative advertisements: This type of advertisements highlight on the comparing companyscommunication message with competitors product information. This method is used when thecompetition is very high or sales are sluggish. For example, soft drinks like Pepsi and Coca-cola atsome point were involved in comparative advertising.

    Decisions involved in developing advertisement programsDetermining the advertisement objectives: Marketers should determine the objectives of

    advertisements in the initial phase of the program. The objectives of advertisements arei. Provide the information about advertisements and create awareness about the product.

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    ii. Highlight the uniqueness of company s products over competitors.iii. Reminding about the product and facilitating the thinking about the product in order to make apurchase.

    Determining the advertisement budget: We discussed four important techniques used in setting up communication budget in the beginning of this unit. In this section we will discuss the factors thatinfluence the advertisement budget decisions.i. Stage of the product in the product life cycle: In the introduction stage of product life cycle Company

    spends more money on advertising to inform the consumers about the product and to createawareness.ii. The market share of the company: If the share of the company is high, it tries to defend by heavyadvertisement and if it is low and market is attractive organizations promote company s product heavily.

    Developing advertisement strategy: Advertisement strategy depends on two important factors. They are developing messages and choosing proper media.

    i. Message development:

    Message should be developed only after preparing the complete target profile.Understand what interests target customer.Message should answer the objectives of the program.

    Message should be simple and can be understood by anybody.

    Use more interactive communication tools.

    ii. Selecting advertising media:Assess how many target customers should view the communication message.Point out how many times a target customer will expose to the advertisement.Evaluate the impact of advertisement message on the target audience.List out the media habits of the target customers.Find the suitable media for type of product organization have.

    Prepare cost sheet and choose optimum media.Choose particular media vehicle (Zee channel, Times now, Prajavani, Hindu etc)

    Decide how many times advertisement should be given in the year and also decide the continuity of

    advertisement.

    Allocate the media execution strategy on the basis of prime time and non prime time or seasonal and non seasonal decisions.

    Evaluating advertisements: Communication department is interested in identifying whether the message given is effectively reaching the consumer and inducing them to purchase the product.Therefore they critically evaluate the advertisements through various methods. Some of the importantmethods through which advertisements evaluated are recognition method (showing the advertisementand asking whether thy have seen it before), aided recall (asking people to tell the brand theyremember) and unaided recall (asking people if they can remember seeing any ads within an identifiedproduct category).

    Characteristics of major media

    I. Broad cast media

    Radio1. Provides up to date information2. Reaches the local audience effectively3. After FM revolution this is one of the fastest growing media.

    Television1. Expensive medium2. Products can be well explained and demonstrated.3. It provides wide geographic coverage4. Image creation is difficult in this medium because of spontaneity.5. Wide number of media vehicle creates the problem for media planners.

    II. Print media

    Newspapers1. Continue to dominate local markets

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    persons who work like agent to distribute the cars. The final part contains marketing mix strategy andprofit goals.Stage 6 - Business analysis: it is the analysis of sales, costs and profits estimated for a new productand to find out whether these align with the company mission and objectives.Stage 7 - Product development: during this stage, product is made to undergo further improvements,new features or improvised versions are added to the product. There is also scope for innovation andusing the latest technology into the product.Stage 8 - Test marketing: is the most crucial stage for the testing products performance and its futurein the market. There are certain cases where product has failed in the test marketing and had to be

    withdrawn. The product is introduced into the realistic market The 4Ps of marketing are tested. The cost of test marketing varies with the type of product.Stage 9 - Commercialization: In this stage product is completely placed in the open market andaggressive communication program accompanied with promotion activities is carried out to support it.

    Product Mix

    Product mix: The number of product lines and items offered by marketer to the consumersA companys product mix has four different dimensions. They are product mix width, product mix length,product mix depth and product mix consistency.

    The product mix of a company, which is generally defined as the total composite of products offered bya particular organization, consists of both product lines and individual products. A product line is agroup of products within the product mix that are closely related, either because they function in asimilar manner, are sold to the same customer groups, are marketed through the same types of outlets,or fall within given price ranges. A product is a distinct unit within the product line that is distinguishableby size, price, appearance, or some other attribute. For example, all the courses a university offersconstitute its product mix; courses in the marketing department constitute a product line; and the basicmarketing course is a product item. Product decisions at these three levels are generally of two types:those that involve width (variety) and depth (assortment) of the product line and those that involvechanges in the product mix occur over time.

    PRODUCT-MIX MANAGEMENT AND RESPONSIBILITIESIt is extremely important for any organization to have a well-managed product mix. Most organizations

    break down managing the product mix, product line, and actual product into three different levels.Product-mix decisions are concerned with the combination of product lines offered by the company.Management of the companies' product mix is the responsibility of top management.Some basic product-mix decisions include:(1) reviewing the mix of existing product lines;(2) adding new lines to and deleting existing lines from the product mix;(3) determining the relative emphasis on new versus existing product lines in the mix;(4) determining the appropriate emphasis on internal development versus external acquisition in theproduct mix;(5) gauging the effects of adding or deleting a product line in relationship to other lines in the productmix; and(6) forecasting the effects of future external change on the company's product mix.

    Decisions at the first level of product management involve the marketing mix for an individualbrand/product. These decisions are the responsibility of a brand manager (sometimes called a productmanager). Decisions regarding the marketing mix for a brand are represented in the product'smarketing plan. The plan for a new brand would specify price level, advertising expenditures for thecoming year, coupons, trade discounts, distribution facilities, and a five-year statement of projectedsales and earnings. The plan for an existing product would focus on any changes in the marketingstrategy. Some of these changes might include the product's target market, advertising and promotionalexpenditures, product characteristics, price level, and recommended distribution strategy.

    The depth (assortment) of the product mix refers to the number of product items offeredHypothetical State University Product MixWIDE WIDTH, AVERAGE DEPTH

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    PoliticalScience

    Education Mathematics

    Political Elementary Calculus I

    Theory Teaching

    American Secondary Calculus II

    Government Teaching

    International Teaching Trigonometry

    Relations Internship

    State Post Secondary Math Theory

    Government Teaching

    Nursing Engineering English

    Biology Physics English Literature

    Chemistry Advanced Math European Writers

    Organic Electrical Hemingway

    Chemistry Concepts Seminar

    Statistics Logic Design Creative Writing

    within each line; the width (variety) refers to the number of product lines a company carries. Forexample, Table 1 illustrates the hypothetical product mix of a major state university.The product lines are defined in terms of academic departments. The depth of each line is shown bythe number of different product itemscourse offeringsoffered within each product line. (Theexamples represent only a partial listing of what a real university would offer.) The state university hasmade the strategic decision to offer a diverse market mix. Because the university has numerousacademic departments, it can appeal to a large cross-section of potential students. This university hasdecided to offer a wide product line (academic departments), but the depth of each department (courseofferings) is only average.In order to see the difference in product mix, product line, and products, consider a smaller college thatfocuses on the sciences represented in Table 2. This college has decided to concentrate its resourcesin a few departments (again, this isHypothetical Small College Product MixNARROW WIDTH, LARGE DEPTH

    Mathematics Physics

    Geometric Concepts Intermediate Physics

    Analytic Geometry Advanced Physics

    and Calculus

    Calculus II Topics on Physics

    and Astronomy

    Calculus III Thermodynamics

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    Mathematics Physics

    Numerical Analysis Condensed Matter Physics II

    Differential Equations Electromagnetic Theory

    Matrix Theory Quantum Mechanics II

    only a partial listing); that is, it has chosen a concentrated market strategy (focus on limited markets).This college offers narrow product line (academic departments) with a large product depth (extensivecourse offerings within each department). This product mix would most likely appeal to a muchnarrower group of potential studentsthose students who are interested in pursuing intensive studiesin math and science.

    Q.4. Select any brand of toilet soap and evaluate its positioning strengths or weaknesses interms of attributes, benefits, values, brand name and brand equity. Also, examine howcompetitive brands influence the marketing strategies of the selected soap. (10 marks)

    SWOT AnalysisThe Strength, Weakness, Opportunity and Threat (SWOT) analysis provides asnapshot of Luxs internal

    strength and weakness and external opportunities andthreats.

    StrengthsStrong market research (Door to door sampling once in a year Rural and Urban area.)Many variants (Almond oil, Orchid extracts, Milk cream, Fruit extracts, Saffron sandalwood oil and

    Honey)Strong sales and distribution network backed by HULStrong brand imageDynamically continuous innovations New variants and innovative promotions (22 carat gold coin

    promotion Chance Hai)Strong brand promotion but relatively lower prices Winning combination.Mass appeal/Market presence across all segments ( 15% of soap market)

    WeaknessMainly positioned as beauty soap targeted towards women, lack unisex appealSome variation like the sunscreen, international variant did not do well in the marketNot much popular in rural areas

    OpportunitiesSoap industry is growing by 10% in IndiaBeauty segments compounded annual growth rate (CAGR) is very highLiquid body wash is currently in growth stage Lux should come out with more variants in this

    segmentLarge market share Strong hold over the market

    Threats

    High internal competition (Pears Beauty segment)New entrantsMaturity stage threat of slipping down to decline stage if constant reinvention is not carried out

    Price

    If price is too high then a company may never sell a single item of it. If price is too low then one can losemoney on every sale once all of costs of doing business are considered. Therefore the key is to price itin such way that it appears attractive to the customer as well as profitable to the company. HUL seemsto have mastered this idea. Prices of HUL are considered the most competitive in Indian market. Themain fact for this huge success story is the strategic pricing decision the company has adopted fromtime to time.

    HUL always gives value for money to their consumers. It is known for its competitive pricing. It has theadvantage of quoting a reasonable price due to its economies of scale. HUL also can quote a verycompetitive price due to its superior technology and optimum utilization of inventory. It has the product

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    range that meets the needs of all classes of consumers. It has the products that are categorized aspremium and mass products. HUL matches its prices with the competitor who is operating in the samecategory. HUL also gives price offs on its products to reward consumers who are using it for a long timeand also to attract new consumers.

    The price of the premium segment products is twice that of economy segment products. The economyand popular segments are 4/5ths of the entire soaps market.

    Price segments of toilet soaps

    Segment Price/weightPremium > Rs. 15 / 75 gmsPopular Rs. 8-15/75 gmsEconomy < Rs. 8 /75 gms

    d. Place

    Cutting-edge distribution network

    HULs distribution network is recognized as one of its key strengths -- that which helps reach out itsproducts across the length and breadth of this vast country. The need for a strong distribution networkis imperative, since HULs corporate purpose is to meet the everyday needs of people everywhere.

    At Hindustan Unilever Limited, distribution network is one of the key strengths that help them reachtheir products across the length and breadth of this vast country. It has 2000+ suppliers and associates7,000 stockists and direct coverage in over 1 million retail outlets across India.To meet the ever-changing needs of the consumer, HUL has set up a distribution network that ensuresavailability of all their products, in all outlets, at all times. This includes, maintaining favourable traderelations, providing innovative incentives to retailers and organizing demand generation activitiesamong a host of other things. HUL boasts of placing a product across the country in less than 72 hrs.The first phase of the HUL distribution network had wholesalers placing bulk orders directly with thecompany. Large retailers also placed direct orders, which comprised almost 30 per cent of the totalorders collected.Today, the goods are transferred from the factory to the company warehouses and are sent to thedistributor from there on a daily basis. From the distributor, the stock reaches the market through dailysales. Typically, these include the salesman registering the order of a retail outlet and delivering the

    goods the next day.Recently HUL has changed its traditional way distribution and came out with a new strategy ofdistribution. Its because of the change in buying pattern of the consumer due to more disposableincome. There are different channels of distribution like Modern Trade, which covers all chains of supermarkets like Food World, who get the stocks directly from the company. Wholesalers and second leg ofbig retail outlets called Super Value stores come under the surveillance of the distributor along with themass retail outlets. There is also this new concept in the HUL distribution channel called Kiosk. Kiosk isa small shop that sells only sachets and low priced items (below Rs.10/-). Kiosk also does not comeunder the surveillance of the distributor.

    In addition to the ongoing commitment to the traditional grocery trade, HUL is building a specialrelationship with the small but fast emerging modern trade. HUL's scale enables it to provide superiorcustomer service including daily servicing, improving their range availability whilst reducing inventories.

    HUL is using the opportunity of interfacing more directly with consumers in this retail environmentthrough specially designed communication and promotions. This is building traffic into the stores whileyielding high growth for the business.

    Positioning

    Luxderived from the word luxury was launched in 1899 as a laundry soap in the UK. In 1925, thebrand was extended to the toilet soap category. It was positioned as a beauty soap in India, and HULhas since used successful film actors of the timesuch as Leela Chitnis, Madhubala, Hema Malini andKareena Kapoorto endorse the product.Luxs secret of longevity has been its consistent evolutionbe it the soap colour, packaging or newvariants, the brand has banked on innovation to keep its youthful image intact. Extending the soap caketo a range of shower gels, liquid soaps and moisturizing bars has helped the brand keep consumers

    excited and the competition at bay.

    What has not changed is the consistency in its communication and its positioning. Its tag linesif itsgood enough for a film star, then its good for you too to Play with beautyhave conveyed the same

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    message over the years. It taps into an emotion very close to humanitys basic needsocial interaction.The brand has always hired celebrities when they have reached a certain height rather than using themat the start of their careers. This has helped the customers to relate to their idols on screen.From being a soap for the stars, Lux has recently started positioning itself in such a way that theordinary woman can relate to the brand. The advertisements show not the star, but the actress in thecharacter of an ordinary girl or woman, which any woman can identify with. This positioning has helpedthe brand in striking a chord with the target consumers.

    Brand name

    LUX

    Lux soap was first launched in 1916 as laundry soap targeted specifically at 'delicates'.Lever Brothers encouraged women to home launder their clothes without fear of satinsand silks being turned yellow by harsh lyes that were often used in soaps at the time. Theflake-type soap allowed the manufacturer some leeway from lye because it did not need tobe shaped into traditional cake-shaped loaves as other soaps were. The result was agentler soap that dissolved more readily and was advertised as suitable for home laundryuse.

    Lux toilet soap was introduced in 1925 as bathroom soap. The name 'Lux' was chosen as aplay on the word "luxury." Lux has been marketed in several forms, including bar and flake

    and liquid (hand wash, shower gel and cream bath soap).

    Lux in step with the changing trends and evolving beauty needs of the consumers, offersan exciting range of soaps and Body Washes with unique elements to make bathing timemore pleasurable. One can choose from a range of skincare benefits like firming, fairnessand moisturising.Lux stands for the promise of beauty and glamour as one of India's most trusted personalcare brands. Since its launch in India in the year 1929, Lux has offered a range of soaps indifferent colours and world class fragrances. Lux is a beauty soap of film stars. Luxrecognized the need for a compelling message about beauty that would resonate withwomen of today.From the 1930s right through to the 1970s, Lux soap colours and packaging were alteredseveral times to reflect fashion trends. In 1958 five colours made up the range: pink,

    white, blue, green and yellow. People enjoyed matching their soap with their bathroomcolours.In the early 1990s, Lux responded to the growing trend away from traditional soap bars bylaunching its own range of shower gels, liquid soaps and moisturizing bars. Lux beautyfacial wash, Lux beauty bath and Lux beauty shower were launched in 1992.

    In 2004, the entire Lux range was re-launched in the UK to include five shower gels, threebath products and two new soap bars. 2005 saw the launch of three exciting new variantswith dreamy names such as Wine & Roses bath cream, Glowing Touch and SparklingMorning shower gels.

    Lux has recently launched its two fruit extract variants New Lux Strawberry & Cream andLux Peach & Cream contain a blend of succulent fruits & luscious Chantilly cream. Themost recent addition in the brand is Lux Crystal Shine.

    Competitors

    Competitors of Lux like Ponds, LOreal, Garnier and Lakme etc are competing at the upper (premium)segment while Ayur, Clean and Clear, Himalaya etc are competing at the lower segment. Besides thesethere are also other small players dominating the rural market where these big players are not able toreach.The companies like LOreal, Garnier, Ponds, Lakme have very strong brand positioning. It will not bethat easy for Lux to enter the target market of these companies.But since Lux is already a established brand so, it will not be that difficult for the company to create its

    dominance in the lower market segment. The company can also use its wide distribution channel toreach the market where the other players lack.

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    Q. 5 As a salesperson in a fast moving consumer goods company, what kind of training anddevelopment methods do you feel are required? How important is training for sales force andhow can it be evaluated? (10 marks)

    The activity of procuring, training, developing and managing sales force for the purpose of achievingmore customers or sales and also to maintain existing customers can be called as Sales Management.

    The important tasks in order to make Sales management effective and efficient include the following HRpractices which are normally adopted in any organization:

    RecruitingRecruitment is a process of finding out candidates, who are encouraged to apply. Selection is processof choosing or short-listing some suitable candidates out of many those who have applied. Therefore,we can say that selection is recruitment, but recruitment is not selection. Selection is a process ofrejection of unfits. Recruitment precedes the selection process.

    SelectingSelection procedure differs from firm to firm. Each firm has got its own method in choosing people foremployment. The qualities that the recruiters seek in people to be appointed, depends on the jobdescription. Similarly the selection method also depends upon the sales managementTraining

    Training is a continuation of selection. Having selected the salesmen, there are two options. They canbe sent to the field directly with samples, order books etc., and/or they can be sent for trainingprogramme. Some people think that salesmanship is born, but there are no born salesmen like thereare no born doctors, lawyer, engineers, teachers etc. However, all these people need training to callthem qualified, and so also is the case with salespersons. A person may have interest in the profession.Thiess interest can be fully developed, through proper training. One attains perfection, self-development etc., through training.Training means the process of perfecting the salespersons for their work. Training programmes areorganized procedures or methods through which knowledge as well as skill, for a definite purpose, isacquired. By training, one can increase knowledge in a particular field. The salesmanship is not bornbut can be made effective through training.Significance of Training: The present era of marketing world is full of stiff and cut-throat competition.The world is dynamic and not static. Customers are more benefit-oriented. Producers, in order to meet

    the ever-changing demands of the consumers, produce new products, new devices, and products withmultiple uses and so on. Thus, training or repeated training is essential to keep the salesmen, with up-to-date knowledge, in respect of new or developed goods. Training gives scope for improvement.Objectives of Training: The objectives are summed up below:1. To facilitate the salespersons to acquire the techniques and principles of salesmanship, process ofsales, canvassing etc.2. To bring down the labor turnover in the sales force.3. To facilitate better sales performance.4. To improve the relations with the customers.5. To increase the efficiency of sales personnel.6. To keep the salesperson informed about the products, market, competitors etc., to face differentsituations.7. To lower the selling expense so as to increase the profits.

    8. To maintain sound relations between employer and employee.9. To develop better knowledge, and the ways and means to resist all undesirable situations.10. To motivate the consumers more effectively.

    Advantages of Training to Salespersons1. A trained salesperson always wins customers by systematic approach.

    2. Salesperson acquires better understanding of the firm, as to its past history, policies and proceduresand this helps the salesperson for effective dealings.3. A trained salesperson takes less time in concluding a sale-early selling maturity.4. A trained salesperson brings increased volume of sales, in turn, more profit to the firm andhimself/herself.5. A trained salesperson is able to meet consumer s demand and help in solving problems.

    6. Increased volume of sales facilitates reduction in cost of production i.e., sales rise faster thanexpected. The cost per unit of order or per prospect can be minimized.7. A better relationship is created among the customers through reducing customer s complaint, increasing brand loyalty etc. Customer s satisfaction is gained.

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    8. The ability of the salesperson is increased by expert knowledge.9. Controlling of salespersons becomes easy.10. Training facilitates better demonstrations, selling the products which have high profit margin, bettermethods of canvassing etc. Sales training helps to increase the sales volume. Supervision cost isreduced as trained salesperson needs less supervision.Training ProgrammeA firm should chalk out a programme for sales training. The training is based on the nature of the joband the products to be sold. A planned training programme should function with the following ideas orprinciples, often referred to as ACMEE.

    A: Aim of TrainingC: Content of TrainingM: Method of TrainingE: Execution of TrainingE: Evaluation.1. Aim of Training: The whole idea behind the training is to make a recruit a good salesperson. It istrue that some of the qualities of a good salesperson may be inherent, but not all qualities. It is thetraining which makes him/her have all qualities required of a salesperson. It must aim to make him/hera guide to the buyer, taking into account his/her needs, problems etc. and to make him/her asalesperson of effective power by which an interest in the product may be aroused and a desire topurchase may be created.2. Content of Training: No hard and fast rules can be laid down as to the contents of training. Thecontent of the training programme relates to the subject-matter of training. A training programme varies

    from firm to firm, because of the differences in products, markets, policies of the company, trainee s ability etc. In general terms, sales training is the teaching of salesperson and prospective salespersonshow to do their jobs better. A good training programme facilitates the trainee-salesperson to learn andunderstand the following aspects:a) The knowledge of the jobb) The productsc) The company or the organizationd) The markets and consumerse) The competitorsf) The sales techniquesg) The routine reports etc.

    a) The Knowledge of his/her Job: The job of a salesperson is not complete, as soon as the transfer of

    goods takes place. Today, the salespersons carry out more work than the salesperson who merelytakes orders. He/she must understand what the firm expects of him/her; what power he possesses andhow to convince the buyers about the company s product and image. The company assigns responsibilities and powers, with which he/she works as a guide to buyers by projecting the merits ofthe products and on the other hand with profit to the firm. He is expected to do services to both the firmand the customers. He must have concrete plans as to his sales planning, meeting customers, salestalks, demonstration, presenting the goods, concluding sales, securing order, collecting dues, handlingobjections and complaints etc. Apart from these, he must be a keen observer of market conditions,competition, consumers likes and dislikes etc. He should co-operate with his senior fellows. Thus, he is trained with a purpose, the aim of his appointment being to know what the firm eagerly expects fromhim.b) The Products: A good understanding of the product is essential. The firm must give or ensure thatthe salesman has a thorough knowledge of the products to be dealt with. In brief, they are:

    1. Raw materials used in the product.2. Manufacturing methods in brief.3. Research and development undertaken.4. Improvement made.5. Its suitability to the consumers.6. Its trade mark, brand, characteristics.7. Its color, weight, packaging, quality control etc.8. Selling points of the products.9. Product merits and uses to consumers.10. Limitation of the product performance.11. Its price and discounts offered.12. Service, after sales and guarantee period.13. Demonstration of its actual working.

    14. Availability of the products.15. Cost of operation and maintenance.16. Comparative study of similar or competitive products.17. Strengths and weaknesses of competitors products.

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    18. The position of the product in the product line.

    The above-said knowledge of the products is essential for a salesperson so as to emerge as a creativesalesperson. When the salesperson has a sound knowledge, he/she meets the public and convertsthem as buyers, in a better and more efficient way.c) The Company: A clear-cut knowledge about the company is essential to the salesperson to enablehim to work accordingly. A salesperson should be well-informed about the following:1) Brief history of the organization or company2) Organizational hierarchy, top management and key people, organization s stake-holders and

    investors3) Organization s objectives and purposes4) Economic and social objectives5) Past performances of the company6) Future plans and ventures of the company7) Its position in the market or in the industry

    8) Credit policies, sales policies, personnel policies9) Capacity of the plant10) Execution and handling of orders, sales accounting and collection methods11) Salary structure, commission computation, traveling and daily allowances etc. and their paymentprocedures12) Method of exercising control over sales methods

    13) Allocation of quotas and territories14) Marketing policies, pricing policies, etc.15) Long term customers of the companyd) The Markets and Consumers: Information about the market is an important and essential part ofthe training programme. The salesperson must have a thorough knowledge of the size of the market,demand for the products and the area under the competitor s side. Besides the knowledge of the market, salesperson should know about the type of customers, buying motives, likes and dislikes of theproducts. Different types of customers need different types of approaches. People differ widely fromperson to person, sex to sex, age to age, place to place etc. Different persons require specialized waysof persuasion. The salesperson must adjust him/her according to the nature of the customers. A blanketpolicy to all classes of people is not advisable.e) The Competition: Salespersons must be given a good knowledge or comparative study of theselling activities of rivals. Study relating to comparison with the rivals as to the merits and demerits of

    the product is important i.e., strong as well as weak points. The salesperson should know the rivalfirm s policies, method of approaching the customers, how they are paid, customers opinion, how their product is, how they fulfill their duties, the features they like or dislike, their selling-points etc.f) The Sales Techniques: The sales techniques are the essential part in sales training. After thetraining, the salesperson has to be sent to the field, where he/she has to sell the company s product. He/she must be given exhaustive training in Sales Process. The selling points must be correlated andsales talk be applied at the appropriate situation. A born salesperson has to be instructed with thevarious selling techniques in detail. In short, training on the following items must be imparted.a) Selling process.b) Method of gaining interview from consumers.c) Method of approach to consumers.d) Demonstration and presentation.e) Method of handling objections of consumers.

    f) Reasons for failure of salesperson in the field etc.g) Routine Reports: Salespersons should be trained to know their routine work and submit theirreports to the firm. The report may include:a) Amount (quantity/units and money value) of sales made.b) List of new customers.c) Credit outstanding of customers.d) Collection of outstanding dues.e) Competitor s position in the market.f) Maintenance of accounts of expenses.g) Demonstration and display of products.h) Action taken on complaints, grievances etc.i) The attitude of market in respect of competitors.j) Consumers suggestions or experience with the product if any.

    The reports may be sent to the firm, daily, weekly or monthly etc. as directed. The salespersons areeyes and ears of the selling firm. The salesperson must be aware of the method of reporting and itsimportance.Training Needs of Salespersons at Different Times:

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    New Salespersons Need:1. Facts about the company-history, policies etc.2. Product details3. Company s system and procedures4. Fundamentals of selling their specific products5. Moral trainingRegular Salespersons need1. The subject matter of the above five aspects2. Changes in policies and procedures

    3. Facts about new products4. Future plans of the company5. Knowledge to supervise others6. Know-how to discharge responsibility (or delegation of duties)Supervisors Need:1. Skill needed to discharge duties2. Ability to train others3. Ability to organize4. Ability to analyze and plan5. Ability to evaluate and follow up

    Training MethodsFor imparting training to the salespersons, different methods are being used. Broadly, these methods

    may be divided into two:1. Group Traininga) Lecture Method: An expert or a lecturer speaks to trainee-salespersons about the various aspectsof selling. It consists of oral talk in a classroom. This system is widely used. The trainees listen to thelectures. The instructor invites questions and answers from them. To make the lecture more interesting,visual aids, demonstration, suitable examples may be added. This system is more economical, and isthe easiest and quickest in imparting theoretical training to a group of salespersons. But it is difficult toevaluate the effectiveness of lecture method. This method can be used more effectively in continuingsales training programme to provide new information or changes in the policies of the firm. This mayinclude seminars, demonstration etc., by expert salespersons.b) Audio-Visual Method: In order to supplement the lecturing (telling) method, training programsinclude the use of visual aids, such as films, slides, posters etc., and are capable of making them moreinteresting.

    c) Discussion Method: This is a good method wherein an actual case or an imaginary case is givenwith a specific problem to be solved, by different groups. The case or the problem may be typed orprinted. Each group is asked to understand the problem and draw aconclusion. Later, the different conclusions or suggestions are analyzed collectively, under theleadership of the instructor, in drawing generalizations from each case or problem. This type of trainingenables the salespersons in correcting their own views. It is suitable for a small group. It is slow andcostly.d) Conference Method: Sales conferences and sales meetings are a kind of get together of all the concerned staff, weekly, fortnightly or monthly. The thoughts of various persons are pooled