Marketing · Marketing Management [As PerNew CBCS Syllabus for Fourth Semester, BBA of All Universities in Andhra Pradesh, w.e.f. 2015-2016] Dr. V. Krishna Mohan

MarketingManagement

[As Per New CBCS Syllabus for Fourth Semester, BBA of All Universities inAndhra Pradesh, w.e.f. 2015-2016]

Dr. V. Krishna MohanM.Com., MBA, Ph.D., FDPM (IIM-A)

Professor in Marketing,Department of Commerce & Management Studies,

Andhra University, Visakhapatnam.

K.V. NagarajM.Com., MBA, M.Phil (Ph.D.),HOD of Management Studies,

Aditya Degree College,Asilmetta Campus,

Visakhapatnam.

S. Krishna SoujanyaMBA (Ph.D.), M.A., NET, APSET.,

Assistant Professor,Aditya Global Business School,Surampalem, E. Godavari Dist.,

Andhra Pradesh.

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PREFACE

Marketing is a way of doing business and backbone of any type oforganisation and its management. With increasing competition, complexity andtechnological advancements, it has become essential to adopt a suitable andscientific approach to marketing. The rules of thumb are completely replaced byscientific systems of marketing. The success of a firm is synonymous with themarketing success. Unless marketing is given adequate importance in almost allprocesses of organisation, the end result is never as envisaged. In other words,marketing is all pervasive and omnipresent in all activities and functions ofbusiness management. This is the reason why Management Education hasspecial emphasis on the Marketing Course, whether it is an undergraduate orpostgraduate course.

The students of business management in order to succeed in theirprofession should keep themselves in touch with the latest marketing technologyand tools. Our every action should have a real or potential customer. Truemarketers need to orient their every activity and spend all resources towardssatisfying and better satisfying needs and wants of target customers. A truemarketer always thinks of unfulfilled needs of the customers and adopts creativeefforts to satisfy them constantly better than any other competitor in the market.

The book is comprehensive and explains the fundamental principles ofeach topic in a lucid and conversational manner. This book is curriculum drivenand written in a very simple style. The emphasis is on describing the basicconcepts of marketing and use of examples to illustrate the subject, keeping inview the understanding ability of undergraduate students. Each unit in this bookis written with a rigorous exercise for the mind keeping in view the prescribedsyllabus for BBA Course under CBCS. Even the difficult ideas are explained inan easily understandable way. Questions are also given at the end of each unitfor discussion and guidance, covering vital areas in marketing syllabus. We aresure that teachers and students of marketing at UG level would receive this bookwith learning enthusiasm.

This book is a product of what we learned from others. It contains theefforts and expressions of many authors, although our expression is finallyculminated into this marketing content. We acknowledge our teachers,colleagues, friends, families and students who shaped our thinking process overa very long period to produce this material. We are extremely thankful to ourpublishers, Himalaya Publishing House Pvt. Ltd., and their team for theirwonderful efforts in shaping this book.

SYLLABUS

UNIT I

Concept of Marketing: Market, Marketing, Marketer – Selling concept, marketingconcept, Social marketing concept – Need of marketing in Business sector, Non-profitsector and Government sector – Marketing environment – Identifying marketsegments – Basis for market segmentation for consumer and industrial market andrequirement of effective segments.

UNIT II

Product and Product Lines: Product hierarchy, Product classification, Product mixdecisions – Product line decisions – Product attribute decisions, Branding and Branddecisions, packing and labelling decision – Product life cycle, Marketing strategies fordifferent stages of the product life cycle.

UNIT III

Pricing: Setting the price, Pricing process, Pricing methods. Adapting price:

Geographical pricing, price discounts and allowances, promotional pricing,discriminatory pricing, product mix pricing.

UNIT IV

Marketing Channels: The importance of marketing channels – Channel designdecisions – Channel management decisions – Channel Conflict: Types, Causes andmanaging the conflict.

UNIT V

Promotion Mix Advertisement: Meaning, Objectives – Types of Media – SalePromotion – Objectives and Tools – Public Relation – Meaning and Tools – PersonalSelling – Process.

CONTENTS

1 Concept of Marketing 1 – 36

2 Product 37 – 72

3 Pricing 73 – 90

4 Marketing Channels 91 – 107

5 Promotion 108 – 146

Objective Market, Marketing, Marketer Selling Concept, Marketing Concept, Social Marketing Concept Marketing Need in Various Sectors Marketing Environment Market Segmentation – Identification Bases for Consumer and Industrial Market Segmentation

INTRODUTIONMost of the people define marketing as selling or advertising. It is true that these are parts of the

marketing. But marketing is much more than advertising and selling. In fact marketing comprises of anumber of activities which are interlinked and the decision in one area affects the decision in otherareas.

To illustrate the number of activities that are included in marketing, think about all the bicyclesbeing peddled with varying degree of energy by bicycle riders in India. Most bicycles are intended todo the same thing get the rider from one place to another. But a bicyclist can choose from a wideassortment of models. They are designed in different sizes, with different frames for men and womenand with or without gears. Trekking cycles have large knobby tyres, and the tyres of racing cycles arenarrow. Kids want more wheels to make balancing easier; clowns want only one wheel, to makebalancing more interesting.

The variety of styles and features complicates the production and sale of bicycles. The followinglist shows some of the many things a firm like BAS Cycles or Hero Cycles should do before and afterit decides to produce a bicycle.

1. Analyse the needs of people who might buy a bicycle and decide if they want more ordifferent models.

Concept ofMarketing

1

2 Marketing Management

2. Predict what types of bicycles like handle bar styles, type of wheels, weights and materialsdifferent customers will want and decide to which firm will try to satisfy their need.

3. Estimate how many of these people will be riding bicycles over the next several years andhow many bicycles they will buy.

4. Predict exactly when these people will want to buy bicycles.5. Determine where in India these bicyclists will be and how to get the company’s bicycles to

them.6. Estimate the price they are willing to pay for their bicycles and if the firm can make a profit

selling at that price.7. Decide which kinds of promotion should be used to tell potential customers about the

company’s bicycles.8. Estimate how many competing companies will be making bicycles, how many bicycles they

will produce, what kind, and at what prices.9. Find out how to provide warranty service if a customer has a problem after buying the

bicycle.The above activities are not the part of production actually making goods or performing services.

Rather, they are part of a larger process called marketing that provide needed direction for productionand helps make sure that the right goods and services are produced and find their way to consumers. Inorder to understand the concept of marketing, firstly you must understand what a market is!

MarketThe term market originates from the Latin word ‘Marcatus’ which means a place where a

business is conducted. A layman regards market as a place where buyers and Sellers personallyinteract and finalise deals.

According to Perreault and McCarthy, market is defined as a group of potential customers withsimilar needs or wants who are willing to exchange something of value with sellers offering variousgoods and/or services to satisfy those needs or wants. Of course, some negotiation will be needed.This can be done face-to-face at some physical location (for example, a farmer’s market). Or it can bedone indirectly through a complex network that links middlemen, buyers and sellers living far apart.Depending upon who is involved, there are different types of markets which deal with products and/orservices such as:

1. Consumer Market: In this market the consumers obtain what they need or want for theirpersonal or family consumption. This market can be subdivided into two parts fast moving consumergoods market from where the consumers buy the products like toothpaste, biscuits, facial cream etc.and services like internet, transportation etc. Another is durables market from where, the consumersbuy the products of longer life like motorcycles, cars, washing machines etc. and services likeinsurance cover, fixed deposits in the banks and non-banking financial companies, etc.,Example: FMCG items—Colgate Toothpaste, Santoor Soap, Parachute Hair Oil, Durable items –Nilkamal Chairs, Yamaha Bike, IFB Washing Machine.

2. Industrial/Business Market: In this market, the industrial or business buyers purchaseproducts like raw materials (iron ore, coke, crude oil, etc.), components (windscreen, tyres, picturetubes, microprocessors etc.), finished products (packaging machine, generators etc.), office supplies

3Concept of Marketing

(computers, pens, paper etc.) and maintenance and repair items (grease, lubricating oil, broom etc.).Apart from products, nowadays due to outsourcing the industrial buyers also require a number ofservices like accounting services, security services, advertising, legal services etc. from the providersof these services. Example: IT Companies like Infosys and Wipro also get few jobs outsourced.

3. Government Market: In most of the countries central/federal, state or local governing bodiesare the largest buyers requiring and number of products and services. Government is also the biggestprovider of services to the people, especially in a developing country like India where army, railways,post and telegraph, etc. The services provided by the Central Government and State Government andlocal municipality are: roadways, police, sewage, disposal and water supply respectively.

4. Global Market: The world is rapidly moving towards borderless society thanks to informationrevolution and the efforts of WTO to lower the tariff and nontariff barriers. The product manufacturersand service providers are moving in different countries to sustain and increase their sales and profits.Although the global companies from the developed countries are more in number (AT & T,McDonald’s, Ford Motors, IBM, Sony, Citi Bank etc.); the companies from developing countries arealso making their presence felt in foreign countries (Aditya Birla Group, Infosys etc.). The ultimatewinners are the consumers who are getting world class quality products and services at affordableprices. Example: Indian companies like Tata’s is a conglomerate of Tata Power, Tata Steel, TataGlobal Beverages and many more are their divisions and branches worldwide. Marico whichmanufactures Parachute Oil, Saffola edible oil, Revive Instant starch and Set-wet Deodorants also haspresence in Bangladesh, Vietnam, Malaysia, Egypt, Middle East and South Africa.

5. Non-profit Market: On one hand the society is making progress in every field, on the otherhand the number of problems that it is facing are also increasing. Most of the people don’t care forthese problems due to variety of reasons such as lack of awareness, lack of time, selfish nature etc. Soin order to fill the void, the non-profit organisations came into being. These organisations support aparticular issue or a charity and create awareness among the general public towards these issues andtry to obtain financial and non-financial support at national and international levels. The efforts ofUNICEF and CRY can be noteworthy in this regard. There are certain NGOs which are target specific.For example there are NGOs who are working towards the conservation of flora and fauna, NarmadaBachao Andolan, Chipko Andolan (to conserve the trees in Himalayan region) etc. These non-profitorganisations basically need monetary support from the individuals, institutions and governments topromote a cause or a charity like old age home, free dispensary, free education, home for destitute etc.These are the major markets which exist in the country. These can also be different markets whichdeals in a particular product or service such as Grain market (anaj mandi), vegetable and fruit market(subzi mandi), fish market, political market (comprising of political parties and voters) etc., whichserve a specific need or want of the consumers and marketers. Example: In recent times many NGOshave become very popular, Goonj a NGO which collects old clothes and modifies them into reusablebags, sanitary napkins for underprivileged and distributes them to the needy. Goonj was founded byMr. Anshu Gupta of India also received Ramon Magsaysay Award in 2015, which speaks how big theeffort of NGO is and what impact they are making on society.

MarketingNumerous definitions were offered for marketing by different authors. Some of the definitions

are as follows:


Marketing is the process of discovering and translating consumer needs and wants into productsand services, creating demand for these products and services and then in turn expanding this demand.

H.L. Hansen.Marketing is the business process by which products are matched with markets and through

which transfer of ownership are affected.Edward W. Cundiff

Marketing consists of the performance of business activities that direct the flow of goods andservices from producers or suppliers to consumers or end-users.

American Marketing AssociationMarketing is a societal process by which individuals and groups obtain what they need and want

through creating, offering and freely exchanging products and services of value with others.Philip Kotler

From the above definitions we can interpret marketing as:1. Applies to Profit and Non-profit Organisations: This definition applies to both profit and

non-profit organisations. Profit is the objective for most business firms. But other type oforganisations may seek more members or donations or acceptance of an idea. Consumer or clients maybe individual consumers, business firms, non-profit organisations, government agencies or evenforeign nations. While most customers and clients pay for goods and services they receive, others mayreceive them free of charge or at a reduced price through private or government support.

2. More than Just Persuading Customers: Marketing is not just selling and advertising, asmost of the people thinks. In fact, the aim of marketing is to identify customer’s needs and meet thoseneeds so well that the product almost sell itself. This is true whether the product is a physical good, aservice or even an idea. If the whole marketing job has been done well, customers don’t need muchpersuading. They will be ready to buy. And after consuming the product if they are satisfied then theywill come back for more. Example: Swach Bharat is an idea which is persuading customers towardsCleanliness for the benefit of all.

3. Begins with Customer Needs: Marketing should begin with potential customer needs’ notwith production process. Marketing should try to anticipate needs and then it should determine whatgoods and services are to be developed, including decisions about product design and packaging;prices or fees; credit and collection policies; use of middlemen; transporting and storing facilities;advertising and sales policies and after the sale, installation, customer service, warranty and perhapseven disposal policies. Example: Navratna Hair Oil identifies the need of customer to relax and bemade stress free by application of hair oil. They identified the need of customer very well and aretrying to fill the gap.

4. Does not do it Alone: It means that marketing by interpreting customer’s needs shouldprovide direction for production activities accounting and financial activities and research anddevelopment activities and try to coordinate them. Marketing by itself can never be able to satisfy theneeds and wants of the customers. It cannot exist in vacuum. It is an inter-dependent function. In fact,marketing needs the cooperation of other functional areas to become successful.

5. Builds a Relationship with the Customer: Marketing tries to identify and satisfy customerneeds and wants. Its activities do not end with the single sale but rather it tries to develop a


relationship with the customer to take advantage. When the customer has the same need again or someother need that the firm can meet to produce sales. The long lasting relationship is beneficial to boththe firm and the customer. Example: Loyalty programes are good example for building relationships.Landmark Rewards loyalty card can be used at various places like max, himecentre, spar, lifestyle andfuncity. SBI Rewardz programme delights loyal customers by rewarding them for being with them foryears as their customers.

Scope of MarketingMarketing is typically seen as the task of creating, promoting and delivering goods and services

to consumers and businesses. In fact, marketing people are involved in marketing different types ofentities such as: goods, services, experiences, events, persons, places, properties, organisations,information and ideas. Marketing concepts can be used effectively to market these entities.

1. Goods: Good is defined as something tangible that can be offered to market to satisfy a needor want. Physical goods constitute the bulk of most countries production and marketing effort. In adeveloping country like India fast moving consumer goods (shampoo, bread, ketchup, cigarettes,newspapers etc.) and consumer durables (television, gas appliances, fans etc.) are produced andconsumed in large quantities every year.

2. Services: As economies advance, the share of service in gross domestic product increases. Aservice can be defined as any performance that one party can offer to another that is essentiallyintangible and does not result in the ownership of anything. Its production may or may not be tied to aphysical product. Services include the work of hotels, airlines, banks, insurance companies,transportation corporations etc. as well as professionals like lawyers, doctors, teachers etc. Manymarket offerings consist of a variable mix of goods and services. At the pure service end would bepsychiatrist listening to a patient or watching movie in a cinema hall; at another level would be thelandline or mobile phone call that is supported by a huge investment in plant and equipment; and at amore tangible level would be a fast food establishment where the consumer consume both a good anda service.

3. Experiences: By mixing several services and goods, one can create a stage for marketexperiences. For example water parks, zoos, museums, etc., provide the experiences which are not thepart of routine life. There is a market for different experiences such as climbing Mount Everest orKanchanjunga, travelling in Palace on Wheels, river rafting etc.

4. Events: Marketers promote time based, theme-based or special events such as Olympics,company anniversaries, sports events (ICC WORLD CUP), artistic performances (ShankarMahadevan live concert), trade shows (International Book Fair at Pragati Maidan, Automobile fair),award ceremonies (Filmfare awards, Screen awards), beauty contests (MissWorld, Miss Universe,Miss India, Miss Andhra Pradesh), model hunts (Gladrags Mega Model). There is a whole professionof event planners who work out the details of an event and stage it.

5. Persons: Celebrity marketing has become a major business. Years ago, someone seeking famewould hire a press agent to plant stories in newspapers and magazines. Today most of cricket playerslike Dhoni, Virat Kholi etc. are drawing help from celebrity marketers to get the maximum benefit.Even Star-Plus TV channel focused more on Amitabh Bachchan to promote their programme KaunBanega Crorepati and this programme turned around fortunes of both Star Plus and Amitabh Bachchan.


6. Places: Places, Cities, States, Regions and whole nations compete actively to attract tourists,factories, company headquarters and new residents. India and China are competing actively to attractforeign companies to make their production hub. Cities like Bangaluru, Hyderabad and Gurgaon arepromoted as centre for development of software. Bangaluru is regarded as software capital of Indiaand Hyderabad is emerging as the hub of biotechnology industry. Gurgaon and Noida are competingfor call centre to open their offices. Kerala, Himachal Pradesh, Uttranchal Pradesh and Rajasthan areaggressively promoting themselves to attract local as well as foreign tourists. Due to its costeffectiveness and competitive ability of Indian doctors coupled with ancient therapies, India is fastemerging as country that can provide excellent medical treatment at minimum costs. If developedproperly, Bihar has strong potential to emerge as ultimate destination for Buddists.

7. Properties: Properties are the rights of ownership of either real property (real estate) orfinancial property (share and debt. instruments). Properties are bought and sold, and this requiresmarketing effort. Property dealers in India work for property owners or seekers to sell or buy plots,residential or commercial real estate. In India some builders like Ansal, Sahara Group, both build andmarket their residential and commercial real estates. Brokers and sub-brokers buy and sell securitieson behalf of individual and institutional buyers.

8. Organisations: Organisations actively work to build a strong, favourable image in the mind oftheir publics. We see ads of Reliance Info-com which is trying to provide communication at lowerrates, Dhirubhai Ambani Entrepreneur programme to promote entrepreneurship among the Indians.Companies can gain immensely by associating themselves with the social causes. Universities andcolleges are trying to boost their image to compete successfully for attracting the students bymentioning their NAAC grades in the advertisements and information brochures.

9. Information: Information can be produced and marketed as a product. This is essentially whatschools, colleges and universities produce and distribute at a price to parents, students andcommunities. Encyclopedias and most non-fiction books market information. Magazines such asFitness and Muscle provide information about staying healthy, Business India, Business Today andBusiness World provide information about business activities that are taking place in variousorganisations. Outlook Traveller provides information about various national and international touristdestinations. There are number of magazines which are focused an automobiles, architecture andinterior designing, computers, audio system, television programmes etc. which cater to the informationneeds of the customers.

10. Ideas: Film makers, marketing executives, management consultants and advertising agenciescontinuously look for a creative spark or an idea that can immortalise them and their work. Idea heremeans the social cause or an issue that can change the life of many. Narmada Bachao Andolan wastriggered to bring the plight of displaced people and to get them justice. Endorsement by AmitabhBachchan to Pulse Polio Immunisation drive and pledge by Aishwarya Rai to donate her eyes after herdeath gave immense boost to these. Various government and non-government organisations are tryingto promote a cause or issue which can directly and indirectly alter the life of many. For exampleTrafficpolice urges to not to mix drinks and drive, Central and state governments urging not to usepolyethylene as carrying bag for groceries.

“Functions of Marketing” The Scope of Marketing is very wide and may be analysed in termsof marketing performance through various functions namely functions of exchange, functions ofphysical distribution and functions of facilities.


Functions of Exchange(i) Buying Function: A manufacturer is required to buy raw materials for production purposes.

Similarly, a wholesaler has to buy goods from manufacturer for purposes of sales to retailer.A retailer has to sell the goods to consumers. Thus functions of buying have to be performedat various levels.

(ii) Assembling Function: Assembling is different and separate from buying involves transferof ownership of the goods from seller to me buyer, whereas in assembling goods arepurchased from various sources and assembled at one place to suit the requirements of thebuyer.

(iii) Selling Function: Selling involves transfer of ownership from seller to the buyer. Sellingfunction is vital to the success of any firm. Its importance has been continuously increasingin all organisations due to the emergence of severe competition. Producing goods is easy butit is very difficult to sell them.

Functions of Physical Distribution(i) Transportation: Includes decision to be taken on mode of transport, service selection,

carrier routing, vehicle scheduling, processing claims, etc.(ii) Inventory Management: It includes

Short-term sales forecasting Product mix at stocking points Number, size and location of stocking points Just in time (HT) or push or pull strategies.

(iii) Warehousing: It includes the following functions Spice determination Stock layout and design Stock placements.

(iv) Material handling: It includes the following functions Equipment selection Equipment replacement Order picking procedure Stock storage and retrieval

Functions of Facilities1. Financing: The importance of extending liberal credit facilities as a selling tool cannot be

'underestimated. This would necessarily involve higher working capital requirements. Hencearrangement of finance has become an increasingly important function. Therefore, a marketer; canplan for various kinds of finance: Short-term Finance, Medium-term Finance, and Long-term Finance.There are various sources of finance, for example, commercial banks, co-operative banks, credit-societies, government agencies, etc.


2. Risk Taking: There are innumerable risks which a marketing enterprise has to take in theprocess of marketing of goods and services. Risks arise due to unforeseen circumstances. Risks can beinsured also. For example, the risk due to fire find accidents may be covered by insurance. But therisks due to changes in government policies, risks due to increased competition, technological risksand business cycle risks cannot be insured.

3. Standardisation: Buyers and sellers always prefer to have standardised goods and services.This will relieve buyers from examining the product and wasting time. That is why standardisation hasnow been accepted as a convenient and ethical basis of marketing.

4. After-sales Service: The importance of after-sales service facilities as a marketing tool cannotbe ignored. Hence arrangement of after-sales service has become an increasingly important function.Therefore, a marketer has to plan for after-sales service. For example, repairs, replacements,maintenance, etc.

Approaches to MarketingMarketing management is a conscious effort to achieve desired exchange outcomes with target

markets therefore there should be a philosophy to guide company's marketing efforts. Marketingactivities should be carried out under a well-thought-out philosophy of efficient, effective and sociallyresponsible marketing.

The five competing concepts under which organisations conduct marketing activities include theproduction concept, the product concept, the selling concept, the marketing concept and the societalmarketing concept.

1. Production Concept: “The production concept holds that consumers will prefer thoseproducts that are widely available and inexpensive”.

Organisations that adopt the production concept concentrate on achieving high productionefficiency, low cost and mass distribution. Such organisations believe that marketing can be managedby managing production. They achieve cost reduction through maximisation of output they assumethat the lower cost will automatically make all the customers choose their product. In many cases, theorganisation does not get the expected customer response. The customers consider various otherattributes other than price and so the concept may not be a success all the time.

2. Product Concept: “The product concept holds that consumers will favour those products thatoffer the most quality, performance or innovative features”.

'The product concept seeks to achieve product excellence. through improved products, newproducts and ideally designed and engineered products. It also places an emphasis on qualityassurance. In general the concept tries to achieve marketing success through product attributes.

Organisations that adopt this concept assume that consumers would automatically vote forproducts of high quality so they concentrate on product excellence, they spend their time and moneyon research and development and bring out many new products. In many cases such organisations failin the marketplace as they neglect studying the market and the consumer in depth. They get engrossedin the production and fail to serve the customers need. This phenomenon is known as marketingmyopia.

Marketing Myopia: Prof. Theodore Levitt coined the term marketing myopia, which means acoloured (or) crooked, perception of marketing and a short-sightedness about business. Prof. Levitt has


explained the disadvantages of excessive preoccupation with the product or production or selling andthereby ignoring the customer. Such a myopia leads to a wrong or inadequate understanding of themarket and hence failure in the market place, it even leads to a wrong understanding of the very natureof the business in which the organisation is engaged.

3. Selling Concept: The selling concept holds that consumers and business if left alone willordinarily not buy enough of the company’s products. The organisations must, therefore, undertakeaggressive selling and promotion efforts.

Organisations that adopt selling concept undertake heavy advertising, high power personal selling,large scale sales promotion, heavy price discounts and strong publicity and public relations in order tostimulate more buying.

This concept is practiced mostly with unsought goods such as insurance. It is also followed innon-profit organisations by fund raisers. Most firms practice selling concept when they have, overcapacity. Their aim is to sell what they make rather than make what the market wants.

Marketing based on hard core selling carries high risks. It assumes that customers who areoffered the products – through selling even bad mouth the product if they do not like it.

4. The Marketing Concept: The marketing concepts holds that the key to achieving usorganisational goals consists of the company being more effective than competitors in creating,delivering and communicating customer value to its chosen target markets.

The concept was born out of the awareness that a business should start with the determination ofconsumer wants and end with the satisfaction of those wants. The concept puts the consumers at boththe beginning and the end of the business cycle. According to Peter F. Drucker entire business has tobe seen from the point of the view of the customer. In a company following this concept alldepartments will recognise that their actions have a great impact on the company's abilities to createand retain customers. Every department and every manager will think customer and act like acustomer. This concept takes an outside - in perspective. The marketing concept rests on 4 pillars –target market, customer needs, integrated marketing, and profitability:

(a) Target Market: Companies choose their target market carefully and prepare tailoredmarketing programmes.

(b) Customer Needs: A company can define its target market but fail to understand thecustomer needs. Some customers are not fully aware of their need and so it becomesdifficult for the marketer to understand customer’s needs and wants. Customers needs are of5 types: (i) Stated needs, (ii) Real needs, (iii) Unstated needs, (iv) Delight needs, and(v) Secret needs. A responsible marketer finds a stated need and fills it, an anticipativemarketer identifies the customer need in the near future. A creative marketer discovers andproduces solutions customers need not ask for but to which they enthusiastically respond.Example: Sony Customer retention is thus more important than customer attraction.

(c) Integrated Marketing: When all the company’s department’s work together to serve thecustomers interest then it is known as integrated marketing. It takes places on two levels,First the various marketing functions – sales force, advertising, customer service, productmanagement, marketing research must work together. Secondly, marketing must beembraced by the other departments, they must also- think customer.To inculcate team work among all departments the company carries out internal marketingand external marketing. Internal marketing is a task of hiring training and motivating


employees to serve customers well. On the other hand, external marketing is directed atpeople outside the company. In practice internal marketing must precede external marketing.

(d) Profitability: The ultimate purpose of marketing concept is to help organisations achievetheir objectives. In the case of private firms the major objective is profit, in the case of non-profit organisations it is surviving and attracting 'enough funds to perform useful work. Acompany makes money by satisfying customer needs better than its competitors.

5. The Societal Marketing Concept: “The societal marketing concept holds that theorganisations task is to determine the needs, wants and interest of target markets and to deliver thedesired satisfactions more effectively and efficiently than competitors in a way that preserves orenhances the consumer's and the society's well being”.

This concept helps marketers to build social and ethical considerations into their marketingpractices. They must balance between company profits, consumers want satisfaction and publicinterest. For instance, Regency Ceramics Limited established a school for the blind. The concept isperceived as an affordable opportunity by the companies to enhance their corporate image raise brandawareness, increase customer loyalty, build sales and increase press coverage.

Traditional and Modern Approaches to MarketingMarketing came into existence as the society moved from the stage of self-sufficiency to the

point where a change is observed in the socio-economic system. This system developed when therewas division of labour, industrialisation and organisation of the population marketing has beendeveloped as an evolutionary approach than a revolutionary approach.

Evolution of marketing can, therefore, be studied under two distinct periods – the pre-industrialera and the post-industrial era.

Pre-industrial Era: In the upper Paleolithic period i.e. around 20,000 B.C. the homosapienswere engaged in hunting and food gathering alone during the Neolithic period of the New stone ageAgriculture and domestic animals appeared in such a backward economy people were self-sufficientgrowing their own food, making their own clothes and buildings (their own shelters thus self-sufficiency gave no chance for exchange of goods. After the evolution of the concepts of division oflabour each man started producing more. Gradually specialisation developed and it was attached totheir families this laid a foundation for ‘trade’ which is the heart of marketing. Extensive Bartersystem developed among the people in an area and merchant class, local trading places and channelsof distributions appeared. With barter and specialisation of the product, local markets took the shapeof trade fairs taking place only on certain week days. Later stalls, bazaars and market squares alsodeveloped;

On the whole, early capitalism operated essentially in an economy of scarcity and there was littlereason to study the needs or wants of consumer. In the early 16th century A.D. Mercantilism appearedas a reaction against the economic and spiritual chaos of the medieval period and the commercialrevolution. Mercantilism thus based on governmental restriction and control and was practiced by allcolonial powers front the 15th century to the time of Laissezfaire economic doctrine and the industrialrevolution.

Post Industrial Era: Modern marketing arisen as a by-product of industrial revolution. Therewas a growth of urban centres and a decline in rural population due to which home handicrafts movedinto factories and entered into mass production this was stimulated by a rapid growth of population,


improvement in means of transport and communication, development of large cities, movement ofnations away from the economic self-sufficiency towards economic specialisation and theaccumulation of wealth. These developments laid emphasis on the growth of large scale enterprisesbecause the market demand generally exceeded the supply. As the factory economy became morecomplex the channels of trade became longer and better methods were needed to market the industrialoutput branding, packaging advertising sales promotion, distribution channels are the conceptsevolved as a consequence. These marketing facilities became. Increasingly popular as a way ofbuilding consumer preference in the marketplace and reducing the need to resort to price competitionfor meeting the situations of falling demand.

The technological advances during the industrial revolution include(a) Inventions of various machines, tools and designs took place especially in English textile

industry.(b) Classical economists like Adam Smith, Bentham developed a reactionary movement against

mercantilism.(c) Automation was introduced in the manufacturing process.(d) Scientific revolution is another consequence of industrial revolution.(e) Biological researches and knowledge about genetic control of hereditary, traits. and related

development have taken place very fast.Traditionally the Structure of Organisation is given below

TopMiddle

Pron line supervisorsCustomers

In this case marketing was given equal important with other functions

Later on the producers realised the importance of marketing andstarted modernising which includes the following stages.

Stage: 1 Stage: 2

Marketing as a moreImportant function

Stage: 3

They started treating marketing asmajor function

Stage: 4

Customer act as controllingfunction

Customer as controlling function Marketingis treated as integrating

Thus the modern concept of marketing has come into existences. The organisationalstructure after the evolution of modern marketing concept is as follows:

Top Manag-ement

Middle ManagementFront line supervisors

Customers

P F

HR MM

P

HRF

MP

HR

M ktg

F

M

PHR C

PHR

C

PMkig


Differences between Marketing and SellingVery often these two terms selling and marketing are synonymously used but they actually differ

in their meaning. In the words of Edword G. Koch the difference between selling and marketing ismore than semantic exercise. Selling focuses on the needs of seller, on the contrary marketing on theneeds of customers. As Peter F. Drucker emphasises marketing and selling are antithetical rather thancomplementary. The differences between selling and marketing are summarised as follows:

Bases of Difference Selling MarketingInitial Point Selling starts with the existing products

of the corporation and views business asa task of somehow promoting theseproducts.

On the contrary marketing starts with theidentification of needs of the customer andthen produce and supply products andservices that would satisfy such needs.

Profits Selling seeks profits by pushing theproducts on the buyers.

Marketing too seeks profits but notthrough aggressive selling but by meetingthe needs of customers.

Emphasis Selling emphasises on saleable surplusavailable with the corporation.

Marketing emphasises on identification ofmarket opportunity.

Nature Selling seeks to quickly convertproducts into cash.

Marketing seeks to convertcustomers needs into products

Business Selling views business as goodsproducing process.

Marketing views business as acustomer satisfying process.

Value Satisfaction Selling insists on exchange and neglectsvalue satisfaction.

Marketing is concerned with valuesatisfaction that should flow to thecustomers from the exchange.

Marketing Mix In selling, seller's preferencedominates the formulation ofmarketing mix.

Whereas, in marketing buyer determinesthe marketing mix.

Communication In selling seller's motives dominatemarketing communication.

In marketing communication is treated asa tool for communicating the benefits ofsatisfaction providing by the product.

Price In selling price is determined by themanufacturer.

Here the price is determined by the marketforces and consumer plays a major role inprice determination.

Customer Selling views the customer as the lastlink in the business,

On the contrary marketing views thecustomers as the very purpose of business.

Focus Selling focuses on the needs of the sellerto convert his products into profits.

Marketing focuses on the needs of thepurchaser.

Aim It aims at selling the goods which areactively produced, through intensivepromotion at a profit.

It aims to forecast the customer demand toundertake the production activity.

Marketing Mix Sellers convenience dominates theformulation of the ‘marketing mix’.

Buyer determines the shape of the‘marketing mix’.

Priority It gives top priority to sales volume andmaximisation of profits.

It gives top priority to profitable volume ofsales and market share at fair andreasonable prices.

Philosophy Selling philosophy considers all The marketing philosophy differentiates


customers as a homogeneous mass withrelatively static needs, wants, tastes andbuying habits. In fact, the customers aretaken for granted.

group of customers in terms of theirseveral distinct characterisitcs. Customersare viewd with respect.

Need of Marketing(a) Society Point of View:1. It is instrumental in improving the living standards. Marketing continuously identifies the

needs and wants satisfying products or services which can propel the people to do an extrato earn money which can be exchanged for the desired products or services. The people arelikely to spend the additional income over and above the disposable income on the productsor services which helps in minimising the physical efforts. Thus marketing by indirectlyincreasing the earning ability will help in improving the standard of living of the customers.

2. Marketing generates gainful employment opportunities both directly and indirectly. Directly,marketing provides employment to the people in various areas like in advertising agency, inthe company sales force, in the distributor’s sales force, in public relation firms etc.Indirectly, marketing is responsible for selling the offerings of the organisation. If theorganisation’s products or services are able to satisfy the customers, then customers willdemand organisation’s products or services again and again, thereby sustaining theproduction activities. Thus marketing indirectly provides employment in other functionalareas like finance, production, research and development, human resource management etc.

3. Marketing helps in stabilising economic condition in the sense that marketing helps inselling the products or services, which keeps the various organisations functioning andgainful employment is available to the people. With the earnings from the employment, thepeople will purchase the products and/or services, thus sustaining the demand. This willhappen in all the industries, then gainful employment will be available throughout the timeperiod and economy will remain stable, healthy and vibrant.

(b) Firms/Companies Point of View:1. Marketing sustains the company by bringing in profits. Marketing is the only activity that

brings revenue to the firm, whereas other activities incur expenditure. If the company’sproducts or services satisfy the customer’s requirements, then the satisfied customers willkeep the company in business by repeat orders and recommending other profitablecustomers. Thus marketing is the driving force behind a successful company.

2. Marketing is the source of new ideas. New product or service ideas usually come from theresearch laboratories, employees or from marketplace. It’s the marketing people who are incontinuous touch with the consumers and marketing intermediaries. Interaction with themhelps in identifying strong and weak points of company’s product or services as well ascompetitor’s products or services. This interaction can also help in identifying unmet needsor wants of the consumers and the features, consumers are looking into the products orservices which can satisfy those unmet needs or wants. Thus marketing can help immenselyin identifying new product or service ideas which can help in sustaining the firm’soperations. Successful companies are those which identify customer’s requirements earlyand provides the solution earlier than the competitors.


3. Marketing provides direction for the future course. The marketing oriented companycontinuously brings out new product and service ideas which provide the direction forcorporate strategic planning for longer time horizon.

(c) Consumers Point of View:1. Meeting the unmet needs or wants. Marketing identifies those needs or wants which were

not satisfied and helps in developing the product or service which can satisfy those unmetneeds or wants of the people. For example a number of drugs were invented to treat variousphysical problems of the people. Again the low cost formulations were developed to treatthe people who are unable to afford the expensive drugs.

2. Reducing the price of products or services. Marketing helps in popularising the product orservice which attracts the customers as well as competitors towards that product or servicecategories. Due to increase in demand, the manufacturing capacity increase which bringsdown per unit fixed costs of the product or service. Further more, increase in competitionled to decrease in the prices charged by the firm. Thus the growing demand and increasingcompetition both help in bringing down the price of the product or service. For exampleprice of both mobile phone handset and mobile phone service are showing a continuousdownward trend thereby making the mobile phone service affordable to more and morepeople.

MARKETING ENVIRONMENTEnvironment literally means the surroundings, external objects, influences or circumstances

under which someone or something exists. The environment of any organisation is the aggregate of allconditions, events and influences that surround and affect it. Since the environment influences anorganisation in many ways, its understanding is or crucial importance. The concept of environmentcan be understood by looking at some of its characteristics.

Marketing activities of a business firm are affected by a large number of environmental factorsthat surrounds the company These factors or forces influence the decision-making capability of theenterprise. The factors or forces are collectively called marketing environment. It comprises all thoseforces, which have an impact on market and marketing efforts of the enterprise.

According to Philip Kotler, “Marketing environment refers to external factors and forces thataffect the company's ability to develop and maintain successful relationship with its target customers”.

For example, the relevant environment for a car tyre manufacturer may be the car manufacturersand buyers, the tyre manufacturing technology, the tax structure, import-export regulations, thedistributors, dealers, competitors, etc. In addition to these, the company has to consider its ownmanufacturing capabilities in terms of production capacity, technology used, finance, sales force, etc.

The marketing environment across India is changing rapidly and business leaders are underincreasing pressure to cope with this dynamic macro-environment. The IT strategies of companies arealso witnessing corresponding shifts, realignments and modifications in order to stay competitive, gainmarket share or reach out to new markets.


Nature of Marketing EnvironmentThe nature of marketing environment is discussed below:1. Marketing Environment is Complex: Marketing environment is quite complex. It consists of

large number of factors, which are interrelated and interdependent. Any change in one factor maygenerate changes in other factors. However, the nature of interrelationships and inter-dependenciesamong the various factors is not fixed. Therefore, predictability of environment becomes a difficultexercise.

2. Marketing Environment is Dynamic: The marketing environment is constantly changing innature. Due to the many and varied influences operating; there is dynamism in the environmentcausing it to continuously change its shape and character.

3. Marketing Environment is Multi-Faceted: What shape and character a marketingenvironment assumes depends on the perception of the observer. A particular change in the marketingenvironment, or a new development, may be viewed differently by different observers. This isfrequently seen when the same development is welcomed as an opportunity by one company whileanother company perceives it as a threat.

4. Marketing Environment has a Far-Reaching Impact: The marketing environment has a far-reaching impact on organisations. The growth and profitability of an organisation depends critically onthe environment change has an impact on the organisation in several different ways. Since themarketing environment is complex, dynamic, multi-faceted and has a far-reaching impact, dividing itinto external and internal components enables us to understand it better.

Factors Affecting Marketing EnvironmentThere are certainly various factors that have both positive as well negative impacts over

marketing function of a company. These environmental factors can be broadly grouped into two partsas:

1. Internal environment/Controllable elements, and2. External environment/Uncontrollable elements.

Internal Marketing Environment - Controllable FactorsInternal environment refers to factors existing within a marketing firm. The internal factors are

generally regarded as controllable factors or elements because the company has control over thesefactors; it can alter or modify such factors as its personnel, physical facilities, organisation andfunctional means, such as marketing mix, to suit the environment. Controllable elements are eligible tocontrolling the operation of an organisation. Controllable variables are further categorised into twoaspects which are the strategy variables and unmarketable variables.

Marketing managers must also work closely with other company departments. Together, all ofthese departments have an impact on the marketing department's plans and actions. There are anumber of internal forces or controllable elements, which influence the marketing decisions, are asfollows:

1. Top Management: The organisational structure, the composition of the Board of Director,extent of professionalisation of management etc., are important factors influencing business decisions.


The business domains of the company, priorities, direction of development, business philosophy,business policy etc., are guided by the mission and objectives of the company. Factors like the amountof support the top management enjoys from different levels of employees, shareholders and Board ofDirectors have important influence on the marketing decisions and their implementation.Example: Companies like Infosys take due care in appointing the CEO and hence an expert like VishalSikka is appointed. Mahindra and Mahindra has Mr Pawan Goenka as its head who is a very capable,talented and high performing individual. The performance of the firm depends of individuals of thisstature.

2. Finance and Accounting: Finance is concerned with funding and using funds to carry out themarketing plan. Financial Factors like financial policies, financial position and capital structure arealso important internal environment affecting business performances, strategies and decisions.Accounting has to measure revenues and costs to help marketing know how well it is achieving itsobjectives.

3. Research and Development: The R&D department focuses on designing safe and attractiveproducts. R & D and technological capabilities, determine a company’s ability to innovate andcompete. Example: Companies like 3M spend around 3.5-4% on Research and development and henceprove to be world’s one of the best innovative companies.

4. Manufacturing: Manufacturing is responsible for producing the desired quality and quantityof products. Physical assets and facilities like the production capacity, technology and efficiency of theproductive apparatus, distribution logistics etc., are among the factors which influence thecompetitiveness of a firm.

5. Purchasing: Purchasing worries about getting supplies and materials. Purchasing meansprocurement of goods and services from some external agencies. Purchasing is one of the mostcommon at the same time a strategic activity of the business. The success of any business activity iscontingent upon having materials and parts, stores and supplies, machines and equipment available inproper quantity, with proper quality, at the proper place and time and at titer proper price.

6. Company Image and Brand Equity: The image of the company matters while raisingfinance, forming joint ventures or other alliances, soliciting marketing intermediaries, enteringpurchase or sale contracts, launching new products etc. Brand equity is also relevant in several of thesecases. Marketing resources like the organisation for marketing, quality of the marketing men, brandequity and distribution network have direct bearing on marketing efficiency. They are important alsofor brand extension, new product introduction etc. Example: Tata Starbucks is an example whereglobal organisation like starbucks has tied up with Tatas for foray into Indian markets.

External Marketing Environment - Uncontrollable FactorsThe external marketing environment refers to the factors existing outside the marketing firm.

The external factors are, by and large, beyond the control of a company. The external orenvironmental factors such as the economic factors, socio-cultural factors, government and legalfactors, demographic factors, socio-culture factors, government and legal factors, demographic factors,geo-physical factors etc., are, therefore, generally regarded as uncontrollable factors or elements.Uncontrollable factors are those which are outside of an organisation and affect a marketer’s ability todevelop and maintain its marketing strategies. These variables are called uncontrollable because themarketing manager cannot directly control any of the elements. The marketing manager is left with the


option of adapting to the environment by prompt observation, analysis and forecasting of theseenvironmental factors.

The external marketing environment or uncontrollable elements consists of the following:1. Micro-environment, and2. Macro environment.

1. Micro-Environment

Micro-environment refers to the company’s immediate environment i.e., those environmentalfactors that are in its proximity. These factors influence the company’s non-capability to produce andserve the market. These are also the groups of people who affect the company’s prospects directly.These factors are:

1. Suppliers: The suppliers to a firm can also alter its competitive position and marketingcapabilities. These are raw material suppliers, energy suppliers, suppliers of labour and capital.According to Michael Porter the relationship between suppliers and the firm epitomises a powerequation between them. This equation is based on the industry conditions and the extent to which eachof them is dependent on the other. Example: Tata operates a separate website called “Tata Steelsuppliers”. This shows how significant are suppliers to a firm.

2. Market Intermediaries: Normally, every producer has to appoint a number of intermediariesin assisting him in promoting, selling and distributing the goods and services to ultimate consumers.These intermediaries may be individuals or business firms. These intermediaries are middlemen(wholesalers, retailers, agents etc.), distributing agency market service agencies and financialinstitutions.

3. Customers: The customers of a company may be of five kinds:(i) Ultimate Consumers: They may be individuals and householders.

(ii) Industrial Consumers: Industrial consumers are organisations which buy goods andservices for producing other goods and services for the purpose of other earning profits orfulfilling other objectives.

(iii) Resellers: These are intermediaries who purchase goods with a view to resell them at aprofit. They may be wholesalers, retailers, distributors etc.

(iv) Government and Other Non-Profit Customers: These customers purchase goods andservices to those for whom they are produced, for their consumption in most of the cases.

(v) International Customers: These are individuals and organisations of other countries whobuy goods and services either for consumption or for industrial use. Such buyers may beconsumers, producers, resellers and governments.

4. Competitors: Competitors are those who sell the goods and service of the same and similardescription, in the same market. Apart from competition on price factor, there are other forms ofcompetition like product differentiation. It is’ therefore, necessary to build an efficient system ofmarketing. This will create confidence and better results. For this purpose first of all, competitors areto be identified and closely monitored. The competitive environment consists of certain basic thingswhich every marketing manager must take note of Philip Kotler is of the opinion that, the best wayfor a company to grasp the full range of its competition is to take the viewpoint of a buyer.


5. Publics: It is the duty of the company to satisfy the people at large along with its competitorsand the consumers. It is necessary for future stay and growth. The actions of the company do influencethe other groups forming the general public for the company. A public is defined as, “any group thathas an actual or potential interest in or impact on a company's ability to achieve its objectives.” Publicrelations are certainly a broad marketing operation which must be fully taken care of.

2. Macro EnvironmentMacro environment refers to those factors, which are not concerned to the immediate

environment. These factors are external to the company and are quite uncontrollable. These factors donot affect the marketing ability of the concern directly but indirectly they influence marketingdecisions of the company.

The following are the macro environmental factors that affect the company's marketing decisions:1. Demographic Environment: The first macro-environmental force that marketer monitor is

population because people make up markets. Marketers are keenly interested in the size and growthrate of population in different cities, regions, and nations; age distribution and ethnic mix; educationallevels; household patterns; and regional characteristics and movements. Corporate planners shouldstudy the demographic environment and identify the broad characteristics of the population that affectthe organisation. An alert management will have plenty of advance notice of potential changes indemographic factors and can start searching for new product lines and more attractive markets. Majorfactors in the demographic environment relevant to business organisations are trends in size, ageinggeographical shift and literacy of population. Example: In India 40% of population are below 20 years,hence brands like Fastrack-lifestyle, engage –deodorant are successful.

2. Economic Environment: The economic environment consists of macro-level factors related tothe means of production and distribution of wealth that have an impact on the business of anorganisation. Economic factors affect the spending power of people. Further economic developmentand growth affects the product choice of customers. For example, recently with a drop in interest ratesthe banking industry is finding it hard to mobilise small savings and stock markets are fast emergingas better investment option to investors. In order to assess the impact of these forces, it is necessarythat a marketer examine the following factors in a greater detail:

(i) Gross Domestic Product (GDP) & Gross National Products (GNP);(ii) Per capita income of the population;

(iii) Balance of payments position;(iv) Industry life cycle and current phase through which the industry is passing. The different

phases of this life cycle could be classified as growth/prosperity, boom, recession,depression and recovery;

(v) Consumers buying and financial power, willingness to buy and ability to buy;(vi) Trends in the prices of goods and services specifically, whether the inflationary or

deflationary trends are visible;(vii) Fiscal policies and prime rate of interest charged by commercial banks have direct impact on

investment by business and indirect impact on consumer demand in terms of the amount ofdiscretionary spending; and


(viii) Fall in exchange rate boosts exports and makes imports more expensive and causes cost-push inflation. Example: EMI scheme of many offline and online companies like Amazonmake it possible for all kinds of customers to buy products of their choice irrespective oftheir income groups.

3. Physical Environment: Components of physical forces are earth's natural renewal and non-renewal resources. Natural renewal forces are forests, food products from agriculture or sea etc. Non-renewable natural resources are finite such as oil, coal, minerals etc. Both these components quiteoften change the level and type of resources available to a marketer for his production. Thegovernments of most of the countries are trying to conserve and recycling their natural resourcesthrough legislation and vigorous campaign. It is because the world is about to face a crisis of thecurrent rate of consumption is not checked. Ecological balance may also be disturbed. All these willhave an impact on marketing decisions. For example, India does not have enough petroleum reservesand imports petrol and other products. Recently the gulf war has drastically affected the supply ofpetrol, diesel and other petroleum products in our country. This had a lot of implications for thecompanies consuming petro-products.

In order to ensure sustainability of natural resources, companies should examine the ecologicalbalance, efforts to reduce ozone layer depletion, impact of global warming and also need much effortto protect natural resources, avoid pollution etc.

4. Technological Environment: The technological environment consists of those factors relatedto knowledge applied, and the materials and machines used in the production of goods and servicesthat have an impact on the business of an organisation.

Some of the important factors and influences operating in the technological environment are asfollows:

(i) Sources of technology like company sources, external sources and foreign sources, cost oftechnology acquisition, collaboration in Technological development stages of development,change and rate of change of technology and research and development, for example,manual typewriters were replaced by electronic typewriters, which were further replaced bycomputers.

(ii) Impact of technology on human beings, the non-machine system, and the environmentaleffects of technology, for example, invention of microwave, kitchen appliances and frozenfoods have given housewives more free time to carry on other activities.

(iii) Communication and infrastructural technology, for example, electronic marketing, voicemail, video conferencing affecting travel industry, and transfer of technology. Example:Launch of Allo and Duo by Google in competition to Skype and Facetime.

5. Political and Legal Environment: Developments in political and legal field greatly affect themarketing decisions. Sound marketing decision cannot be taken without taking into account, thegovernment agencies, political party in power and in opposition their ideologies, pressure groups, andlaws of the land. These variables create tremendous pressures on marketing management. Laws affectproduction capacity, capability, product designs, pricing and promotion. Government in almost all thenations intervenes in marketing process irrespective of their political ideologies. Some of theimportant factors and influences operating in the regulatory environment are as follows:

(i) The constitutional framework, directive principles, fundamental rights and division oflegislative powers between Central and State Governments.


(ii) Policies related to the public sector, small-scale industries, sick industries, development ofbackward areas, control of environmental pollution and consumer protection, Policiesrelated to licensing, monopolies, foreign investment and financing of industries, Policiesrelated to imports and exports.

(iii) Polices related consumers protection and environmental protection.(iv) Policies related to patent, preventions of food, water and air adulteration.6. Social and Cultural Environment: Social responsibility concept has crept into marketing

literature as an alternative to the marketing concept. The social forces attempt to make the marketingsocially responsible. It means that the business firms should take a lead in eliminating socially harmfulproducts (e.g., cigarettes or wine) and produce only what is beneficial to the society. There areinnumerable numbers of pressure groups in the society (like activist consumers, social workers, massmedia, professional groups, politicians, government, consuming public, social organisations, etc.) whoimpose restrictions on the marketing process.

There are some core-cultural values, which are found in our society deep rooted and stable andhence change very little. There are also secondary cultural values, which are susceptible to fastchanges. Some of them like hairstyles, clothing, etc. Even in a given culture, the entire populationdoes not adopt the changes. There are different degrees with which people adopt them. Religion is alsoan important element of culture, which has implication on marketing. However, it can berecommended to marketing manager, in order to estimate the impact of the socio-cultural forces onmarketing, he/she should carefully consider elements of socio-cultural factors such as attitude, beliefs,values, norms, cultures, sub-culture, cross-culture and lifestyles of individuals. Because these socio-cultural factors determines about what the customers exactly buying from market, how they are buying,where they are buying, timing of buying and also whom they buying products and ways they use it.

7. International Environment: The international environment is particularly important forindustries directly depending on imports or exports and import-competing industries. For example, arecession in foreign markets, or the adoption of protectionist policies by foreign nations, may createdifficulties for industries depending on exports. On the other hand, a boom in the export market or arelaxation of the protectionist policies may help the export-oriented industries. Internationalenvironment is very important for certain types of business. It is particularly important for industriesdirectly depending on imports or exports. A recession in foreign market or protection policy by foreignnations may create difficulties for industries depending on exports. Liberalisation of imports may helpsome industries but may adversely affect other industries, e.g., the entry of multinationals such as L.G.Samsung in electronics industry has adversely affected the market share of domestic business firmslike Videocon. Liberalised imports of capital goods, technology, raw materials have increased theproductivity and efficiency of some domestic industrial units.

Indian Marketing EnvironmentThe marketing environment in India has undergone a drastic change in the six and a half decades

since independence, especially since liberalisation of the early 90s. Two decades hence, the country isin step with the world with global brands shining in Indian shop shelves, and vice-versa. This has notonly led to a sharp learning curve for the Indian marketer, but it is a learning that continues today asthe world and India, fine tune their steps for this marketing waltz.


The marketing environment across India is changing rapidly and business leaders are underincreasing pressure to cope with this dynamic macro-environment. The IT strategies of companies arealso witnessing corresponding shifts, realignments and modifications in order to stay competitive, gainmarket share or reach out to new markets. India is the second most populated country in the world,with nearly one billion people. It has a reasonably favourable pro-business environment that aims toattract multinational companies (MNCs). Because of this enormous market size and positive businessclimate, scores of American firms including General Electric, General Motors, McDonalds, Kellogg’s,and Microsoft have recently entered the Indian market. As a result, the country has forged strongcommercial interests with the United States, with trade and business relations across many industrialsectors. In fact, the U.S. is India's leading source of technology and her most valuable investor.

However, any company that desires to enter the Indian market must realise the serious challengesof doing business there segmenting the marketplace properly, understanding the country's economicand political situations, getting through the government bureaucracy, and understanding deep-seatedcultural biases and attitudes.

Components of Marketing Environment in IndiaIt is important to understand the components of marketing environment in India which are as

follows:1. Indian Demographic Environment: Indian demographic characteristics strongly affect

buying behaviour. The current population of India is 1.30 billion and it is the second most populouscountry in the world next to China. Fast growth of population accompanied with rising income meansexpanding markets and among this 1.30 billion population, more than 50% are below 25 years of ageis the reason why there is tough competition in the area of soft drinks, networking sites, stylish mobilehandsets, job portals and all. Around 71% population lives in rural areas even after so much migrationto urban cities and that is the reason why low cost brands have started targeting rural communities.They put Camps, Hat in meals to promote their products. Literacy rate, for men it was 76.9% and forwomen it was 54.5%, though there is still wide gender disparity, but it has been observed that growthin women literacy rate is more than men's. So a woman is another big target for marketers. Especiallyfor home based products, as we know women is the chief person to select them for her home.

2. Indian Political Environment: The political environment of a country is influenced bypolitical structures and organisations, political stability, government's interventions, constitutionalprovisions, government's attitude, foreign policy. India is the biggest democracy in the world withmulti-party political system. During the last couple of decades, India has opened its market to world. Ithas absolutely become an open global market. Banking sector, Insurance sector and all fields ofindustrial and business are now open for multinational investment. Of course there are manyobstructions to cross. And mostly all issues can overcome and establish business if you have thepolitical patronage. India has a plural political system. With numerous political parties, national leveland state level, it is very difficult to get a consensus among all parties for starting any business. Alsothese political parties have patronage of many factors, caste, creed and ideologies.

3. Indian Legal Environment: Since the advent of liberalisation and the beginning of theeconomic reforms process in 1991, there has been hectic activity in the legal-regulatory arena. Overthe last few years several far-reaching legislative changes have taken place in the Core Sector. Be itinsurance, power, telecom, IT or environment these changes have impacted industry structures and thelegal environment in which business was being conducted or project development was taking place.


With greater interest shown by private sector to participate in infrastructure development, legal issuesin areas of agreements and contract management had to be addressed. In the changing environment, anunderstanding of regulatory and legal issues has been very important for all the players.

4. Indian Social-Cultural Factors: Social factors influence the products people buy, the pricesthey are willing to pay, the effectiveness of specific promotions and how, when and where peoplepurchase products. They change gradually and some changes will be imperceptible if not watchedclosely. That is the reason why it is most difficult variable for marketing managers to forecast,influence and integrate into marketing plans. One thing India faces no competition is its varied cultureand heritage. It has great diversity in cultural practices, languages, customs and traditions. In Indiapeople before starting a new business consult astrologers. Superstitions are a part of life like theyavoid eating non-vegetarian on Tuesdays due to some religious reasons.

5. Indian Natural Environment: Natural environment includes factors such as seasonalvariations, climatic differences, soil conditions and natural terrain. In consumer markets, the naturalenvironment affects companies because of the differences in the nature of products bought byconsumers due to variations in seasons and climate. In difficult terrains like hilly areas it is difficultand expensive to get products to the customers. It becomes more expensive to build distributionchannels for companies whose target markets are geographically disperse. There are so manyenvironmental issues in India, for example, extinction of tigers, pollution in urban cities, watershortages, deforestation etc. So a company raising even a single issue could do well here. How can weforget to mention Idea's initiative to save paper by using mobile phones. Its outstandingadvertisements and promotional campaigns have really cached our attention.

6. Indian Technological Environment: Today companies offering outdated or obsoletetechnology couldn't survive. People are demanding up-to-date gadgets and gizmos. And this issomething learned very well by Nokia in India, which introduces new and innovative handsets everymonth. In case of banking transactions, earlier people used to go to banks for each transaction. Thenthey start doing it over the internet at home or offices and today they are demanding banking on themove i.e. on their mobile phones. Also IT sector has made India one of the biggest outsourcing hub inthe world. So basically if a company wants to survive and stay ahead in India market, it needs to keepdeveloping new products through its R&D. With more features and functions, computers have led toloss of jobs for millions. In this context, we can look at the impact of technology, especially computers,in the Indian context. Cloud computing, voice over internet, online social involvement, 3G/4Gtechnology, e-banking are some of the remarkable technological improvements that has changed thelifestyles of Indian consumers.

7. Indian Economic Environment: The economic environment can have a major impact onbusinesses by affecting patters of Demand and Supply. Companies need to monitor these indicators tosurvive in the market. Income of Indian consumer has increased and now they are more and more highstandard of living products. That is the reason why Harley Davidson, Porsche has set up theirshowrooms here. After inflation next issue is Inflation which is rising at constant speed increase inprices of fuel, Food items has really impacted producers here. India's reforms have been piecemeal andincremental. So a casual observer will find nothing happening. In the present age of globalisation andliberalisation the Indian economy has opened its doors for foreign players to come. They have beenallowed to enter, establish and compete. This has sparked a desperate scramble for partners oracquisition targets by incumbent firms. So they are now scared that if they do not grow fast they maybecome prey to the merger strategies of the giants.


MARKET SEGMENTATIONIntroduction: The modern marketing is customer-oriented. All marketing activities revolve

around the customer. The customer is the focal point and the nerve centre for the performance ofmarketing activities. The customers of a market are in quite a large number and scattered, and all havedifferent characteristics: They differ in many and distinctive ways. Two consumers of the sameproduct are never in conformity with each other so far as their nature, habits, tastes, income, age, modeof purchasing or other attitudes are concerned. Hence, all consumers cannot be satisfied by offeringthe same product. As a result, a marketer has to produce and distribute different, products to satisfythose customers. This leads to division of total market into different homogeneous sub-markets orsegments. Each segment can be a group of people with similar or homogeneous demand. When amarket is split up into several small units, each with homogeneous characteristics, it facilitates theeffective tapping of the market.

Meaning and definition of market segmentation: Market segmentation is the process ofdividing the total heterogeneous market into several homogeneous sub-markets or segments. It is theprocess of dividing the market in order to conquer them. It is a technique of product differentiationwhich involves manipulation of either the product and promotion or pricing variables. It is the strategythat sub-divides the target market into sub-groups of customers with definable, distinct andhomogeneous characteristics with a view to develop and follow a distinct and differentiated marketingprogrammes for each subgroup in order to enhance satisfaction to consumers, and profit to themarketer. Market segmentation is based on the fact that buyers are not alike. Segmentation strategy isan answer to, the question “to whom should we sell our products, and what should we sell them”. It isa strategic choice concerned with “doing the right things” as opposed to tactical choice doing thingssegmentation or subdivision of the market is based upon the modern marketing concept.

Market segmentation has been defined by several experts in different ways. The oft-quoteddefinitions are given below:

Philip Kotler: “Market segmentation is the sub-dividing of a market into homogeneous sub-setsof customers, where any sub-set may conceivably, be selected as a market target to be reached with adistinct marketing mix”:

American Marketing Association: “Market segmentation is dividing, a market into distinctgroup of buyers who might require separate products or marketing-mixes”.

On the basis of the above definitions, it can be understood that market segmentation is the art ofdividing the customers of a product into several homogeneous groups on the basis of their commoncharacteristics, such as, income, age, education, race, sex, profession, geographic location, etc. It isthe process of disaggregating the total market for a given product into a number of sub-marketsor segments.

Objectives of market segmentation: The main object of segmentation of market is to preparedifferent programmes and strategies for all segments so that maximum satisfaction may be provided toall the consumers of these segments and the object of earning maximum profits may be achieved.According to Esmond Pearch “the purpose of market segmentation is to .determine the differenceamong the purchasers which may affect the choice of market area or marketing methods”. Accordingto Philip Kotler “the purpose of market segmentation is to determine difference among thebuyers which may be consequential in choosing among them or marketing to them”.


Conditions for effective segmentation: Market segmentation serves certain practical purposes.As such, while carrying out the segmentation. The practical requirements have to be kept in view.Following are the essential requirements or requisites or conditions for an effective and successfulmarket segmentation:

1. Measurability: The very first requirement of an effective market segmentation is that thecharacteristics used to categorise customers must be measurable. The extent of influence ofa specific marketing mix over the segment must also be measurable. But this is a verydifficult task and the segments are to be under constant review.

2. Easy Accessibility: Accessibility is the degree to which the segments can be reached andserved effectively. The segments must be accessible or available to the firm. They shouldnot remain a dreamland. The market segments must be easily accessible so that individualmarketing plans, programmes and policies may be prepared for individual segments, and theefforts may be made to implement these plans, programmes and policies successfully.Market segment should be accessible through advertising media, sales force, etc.

3. Substantiality: The segments must also be sizeable. A very small segment may not servethe purpose of commercial exploitation: The market segments must be substantial to that themarketing programmes and plans may be effectively implemented. Unless NIA. of thesegment is large enough, the marketing effort cannot yield rich dividend. Hence, marketer isto develop strategies only for substantial segments.

4. Profitable: The market segments must be profitable to the firm. There is no use in locatingsizeable markets that are unprofitable.

5. Relevance: The segments arrived at must be relevant to the marketing requirements of thefirm.

6. Response Rates: The segments must show differences in responses to the marketingvariables. If all segments respond in identical fashion to price changes, there is no need fordifferent price for individual segments.

Thus, segmentation to be useful, the segments must be relevant, accessible, sizeable, measurableand profitable. The strength of market segmentation lies in better understanding of consumers formaking intelligent marketing decisions and their implementation.

Importance of market segmentation: Segmentation strategy is a custom-oriented philosophy.Market segmentation strategy, if used properly, can benefit both the marketing organisation and theconsumers. Market segmentation is described as the strategy of dividing the markets in order toconquer them. The following benefits or advantages accrue to the firms practicing such segmentationstrategy:

1. A More Precise Definition of the Market: Generally, marketers are in a better position toidentify and compare marketing opportunities. Market can be defined more precisely interms of customer needs. The products, promotion, price and place are all geared tochanging consumer needs.

2. Effective Utilisation of Marketing Resources: The resources of any given firm are usuallylimited. As such, no firm can normally afford to attack the entire market without anydelimitation whatsoever. Segmentation provides an effective utilisation of marketingresources because the customer is the focus of marketing effort and only target markets areserved. We can have precise marketing objectives. Marketing programme is tailored exactly


in accordance with the needs of specific market segments, and product, price and promotioncan have best co-ordination.

3. Best Assessment of the Competition: In these days of globalisation, organisations facedomestic and international competition. They have, therefore, to assess the strengths.Market segmentation helps in assessing effectively and correctly the strength andweaknesses of the competitors. If a competing product appears to be deeply entrenched inone segment, there is hardly any point in wasting precious resources in marketing to such agroup. However, where the firm's product fails to relate to a potentially strong target,management can take full advantage of the same.

4. Helps in Preparing sound and Effective Marketing Programme: Through segmentationa marketer understands fully the consumer needs. Therefore, a marketer can effectivelyformulate and implement marketing programmes which will be tuned with the demands ofthe market. This results in instilling customer loyalty to the firm and its product. This alsoleads to efficiency and more success in selling.

5. Use of Advertising Media More Effectively: A firm employing market segmentationstrategy can use advertising media more effectively and can develop promotional messagesspecifically aimed towards each market segment.

6. Increase in Sales Volume: Marketing Segmentation helps in increasing the volume of salesof the enterprise. It is based on the fact that multiple demand curves are better than a singledemand curve. Since market segmentation helps in better identification of the needs andwants of consumers, special efforts may be made to penetrate market segments deeply andthoroughly. It helps in increasing the sales volume of the enterprise.

7. Marketing Research: Market segmentation provides various types of information whichare useful in marketing research, product development, evaluation of marketing activities,evaluation of facilities of marketing and distribution, etc.

Segmentation brings benefits not only to the enterprise but also to customers. When marketsegmentation reaches higher levels of sophistication and perfection, customers and enterprises canchoose each other for mutual benefit and satisfaction. They can rely on each other's discrimination.The firm can anticipate the future wants of customers and the customers can anticipate the futurecapabilities of the firm. The marketing segment strategy chosen is the key input to the marketingmanager's most vital decisions.

Limitations of Market Segmentation: Market segmentation is net panacea for poormanagement skills and organisational deficits. It suffers from several shortcomings or limitations.They are as wider

1. Consumes Valuable Time of Management: Market segmentation strategy consumes gooddeal of valuable time of management. The management is to design and implement a co-ordinated marketing strategy for each market segment. Such a coordinated strategy dealswith product pricing, promotion and distribution.

2. Mounting Promotion Costs: Every organisation has to develop a promotion strategy thatfits to each market segment. It is but natural that multiple strategies require hugeexpenditure on both human and financial resources to design different advertisements andplace them in various media. Multiplicity of ads deprives the firms of quantity discounts andconcessions. This results in mounting promotion costs.


3. Higher Inventory Level Costs: More the segments the firm wants to serve, the larger willbe the inventory costs. Keeping adequate inventories of each style, colour also go upbecause the firm must maintain increased buffer stock for normal demand.

4. Higher Productivity Costs: Market segmentation can be an expensive preposition in boththe production and marketing of products. From marketing point of view, the marketer hasto develop different marketing - mixes for different segments. In product, producing in massquantities is much cheaper than making variety of products.

5. Small Segments are Ineffective: Division of heterogeneous market into homogeneoussmall segments is in effective as it leads to uneconomical from the view point of theorganisation.

Thus, the strategy of market segmentation has some limitations with respect to cost and marketcoverage. But in spite of the drawbacks, the trend in marketing is towards market segmentation. Withthe rising cost of production, distribution and promotion, marketing segmentation has achievedconsiderable importance in marketing management. It is becoming popular day by day.

Bases for Market Segmentation: There may be several criteria or bases or parameters formarket segmentation. In other words, market can be segmented into various segments by usingdifferent bases. These bases may differ from product to product because the sensitivity of customersdiffers. For example; the bases for segmenting the markets of consumer products can be the age,income, sex, education, family unit of consumers etc. On the other hand, markets of industrialproducts can be segmented on the bases of nature and size of the business location and purchasingprocedure etc. of the market.

Bases for Consumer Products: The bases for segmenting the market of consumer products canbe divided into four categories:

1. Demographic and socio-economic factors2. Geographical factors3. Ratability factors

I. Demographic and Socio-economic Factors: Demographic and socio-economic factors are themost common factors for segmenting the market of consumer products. This basis is considered to bemore purposeful since the emphasis ultimately rests on consumers. Demographic is the study ofhuman population in terms of its size, density and distribution. These demographic and socio-economic factors are: age group, sex, family size, income, occupation, level of education, religion andthe like. They are discussed below:

1. Age: Age is perhaps the most important criteria for segmenting a market. A market can bedivided into four parts on the basis of age: (a) children, (b) young, (c) adults, and (d) old. Asuccessful marketing manager is one who understands the age group for which his productwould be most suited and determines his marketing policy, pricing policy, andadvertisement policy accordingly. For example, different sizes of tooth brush are preparedfor the consumers of different age groups. Similarly, cloth market or garment market may besegmented on the basis of age of consumers as children; young, adults and old. Example:First cry brand for children, BIBA for women and girls, Manyavar for Men and boys.

2. Sex: Male-female buying behaviour shows remarkable differences. So sex is a veryimportant criteria of segmenting a market. On the basis of sex, the market can be divide into


two parts : (a) ladies, and (b) gents. As ladies and gents have different needs and attitudes,the marketers can penetrate their markets on the basis of sex. Sonic products are specificallyproduced for women while some others are for men. Example: lipstick is meant for women,and on the other hand, shaving cream is meant only for men. While selling to ladies, thestress should be upon fashion, beauty, packing colour etc. On the other hand, while sellingto gents, stress should be upon duarability, utility, family standard, and social prestige, etc.Example: Fair and Lovely for women and Dark and Handsome for men.

3. Income: Income is another very important factor affecting nature, attitudes, preferences andbehaviour of consumers. Therefore, a market can be segmented on the basis of income ofconsumers. The market for consumer goods in India has been segmented by marketersbroadly into three segments: the high income group, the middle class and the lower incomegroup. Consumers can be divided into three parts on the basis of income – (a) high incomegroup, (b) middle income group and (c) low income group. The consumers of high incomegroup stress upon the design, fashion, quality and the feeling of social prestige. Theconsumers of middle income group stress upon the durability and quality of products. Theconsumers of low income group stress upon or prefer the price and quality of goods.Different models of television sets are introduced to meet the needs of buyers of differentincome groups. Similarly certain items like people segmenting markets on the basis ofincome is commonly done by firms selling products and services as autos, housing, traveland jewellery. Example: Tata-Goldplus for middle income and Tanishq for the high endcustomers.

4. Educational level: Some particular products, mainly books and stationery, are sold in themarket on the basis of educational level or standard of consumers. A market can besegmented into several parts on the basis of educational standard – (a) primary, (b) juniorhigh school, (c) high school, (d) intermediate, (e) graduate, (f) postgraduate and(g) competitive and professional. Different pricing policies and advertising policies may headopted for different segments of the market. Products used by low-educated people may beadvertised through radio, television and cinema, whereas the advertisement for educatedpeople may be given in newspapers, journals and magazines. Example: Tinkle magazine forschool level, Outlook Business for highly educated professionals.

5. Caste or religion: Religion, race and culture are also used as bases for segmentation. Theycan explain regularities and diversities in human behaviour. India is a country number ofvarieties of communities, castes, sub-castes and religions. The tool tugs, attitudes and life-style of the consumers of different castes and religions are ill i elem. Therefore, a marketcan be segmented on the basis of caste or religion. For utensils or book market may bedivided on the bases of religion.

6. Size of the family: A Market can be segmented on the basis of size of the family also. Aunit of family may be large or medium or small in size. The needs of every size of familyare different. Refrigerators and cookers are produced in different sizes for the families ofdifferent sizes.Example: 5 KG Aashirvad Atta for joint households and 1 kg for nuclear family.

7. Business or Profession: It is also an important criterion to segment the market. On thisbasis, market may be divided into businessmen, professionals and employed persons.Professionals may further be sub-divided into doctors, chartered accountants, lawyers, etc.


Employed persons may be classified as clerks, officers, teachers, executives, judges andarmy personnel. The needs, attitudes and preferences differ in all these customers. Example:Banks offering loans to various professions like Syndicate Bank offering loan for TextileBusiness operator.Although demographic and social, economic segmentation tells the enterprise as to who isthe most likely to buy the product or service, it does not disclose about the brand he or shelikes.

II. Geographical Factors: The second most important and popular criteria for segmenting themarketing of a product may be the geographical factors of the market. Geographic segmentation helpsthe marketers to concentrate their efforts to the exact places. It also helps to utilise fruitfullydistributional efforts. On the basis of this criteria, a market may be segmented as rural, town and urban;national and international; hill and plain; or hot and cold etc. In other words, geographic segmentationmay be on the basis of region, country size, density and climate. Segmentation of a market on the basisof geographical factors is useful where the customers are scattered over a vast area and the productionis done on large scale. The producer may design his marketing strategies taking the characteristics ofthe individual markets into consideration. Thus segmentation based on region, continent, country, state,district, urban and rural characteristics and climate of the area comes under geographic segmentation.Example: Navratna hair oil leverages celebrity endorsers like Amitabh Bachchan, Jr. NTR andChiranjeevi according to the geographical location they want to serve.

III. Psychographic or Personality Factors: Psychographic is a recent approach to marketsegmentation. In a fundamental sense it is not a different approach. Different consumers of a producthave different personality. The thinking, attitudes and buying motives of different consumers aredifferent. Therefore, a Market can also be segmented on the basis of psychographic factors, anddifferent marketing strategies may be adopted for different consumers. Some of the consumers arecrazy for novel design or products of new fashion that, may increase their prestige in the society. Themotto of some other consumer is simple living and high thinking and they never aspire for showy-items. For instance, congress workers wear khadi irrespective of their income-level or social status.Psychographics is also called life-style and attitude research.

(a) Consumer Behaviour Factors: Consumer behaviour may also be a basis for segmenting amarket. Consumer behaviour divides the markets on three bases: (a) usage-rate, (b) buying motives,and (c) brand loyalty. On the basis of usage rate, the consumers may further be divided into fourcategories: (a) non-users, (b) light-users, (c) medium-users, and (d) heavy-users. Buying motives meanthe motives which affect a consumer, such as the quality of goods, reliability of goods; social prestige,etc. Customers may also be divided on the basis of loyalty to a particular brand. Loyalty response orproduct-space response is 'the latest base used for segmentation. Suppose, four brands of a commodityare in the market, customers may be grouped into four classes on the basis of their preference of aparticular brand. This approach believes in why a consumer buys a product than asking as to who isthe consumer.

(b) Bases for Industrial Products: Industrial products are the products which are used in anindustry for producing a product. Industrial products are not meant for direct consumption. The marketof industrial product is nearly as large as the consumer market. The industrial products market like theconsumer market is also made up of different market segments. This market segmentation isappropriate for industrial products as for consumer products. Many different bases are used forsegmenting the industrial market. The four most important bases are: (1) kinds of business,


(2) purchasing procedure of the buyers, (3) geographical location of the buyers or users, and (4) thesize of user.

1. Kinds of Business or Activities: When an industrial enterprise produces or provides anumber of different products or services, the market can be segmented on the basis of kindsof business. For example, the business of an insurance company can be divided as fire,marine, general and life insurance business. A separate division: may be formed for eachsegment representing a specific kind of activity. Different marketing policies andprogrammes may be prepared for these segments. .

2. Purchasing Procedure of the Buyer: The buyers of industrial products are very conscious.Some buyers adopt very systematic and sound system of making purchases while someother buyers do not pay much attention to it. Different marketing policies must be preparedfor these customers.

3. Geographical Location of the Buyers: Market of industrial products can be divided on thebasis of geographical location of buyers also. The geographical location affects the cost oftransportation. Variation in climate affects the needs of the industrial users for buildingmaterials, heating and cooling equipment. Geographical segmentation may also existbecause some kinds of business and service organisations seem to settle in particular areas.

4. The Size of the Buyers: Market of an industrial product can be divided in the basis of sizeof the buyers. The market according to size may be divided into large buyers and smallbuyers. The needs and attitudes of these buyers are different. Since it is generally moreeconomical to sell in large lots than small, the industrial markets quote lower rates to buyersof large quantities.

Thus, there are several bases on which market for consumer and industrial products may besegmented. Unfortunately, there is no one best way of segmenting the markets. Therefore, .a marketermust try different segmentation bases, singly and in combination. Marketer is expected to examine avariety of segmentation criteria so as to identify those that will be most effective in defining hismarkets.

Marketing Strategies Towards Market Segmentation: Buyer’s behaviour is never the sameand the market could be segmented on the basis of buyer’s characteristics. The producer mustunderstand the behaviour of his customers and adopt different strategies according to the needs andcharacteristics of his buyers so that all the physical and human resources of the enterprise may be fullyexploited, and marketing objectives may be fully achieved. Marketing strategies play an important rolein the success of marketing efforts of a producer. There are three types of marketing strategies towardsmarket segmentation. They are:

(I) Undifferentiated marketing strategy(II) Differentiated marketing strategy, and

(III) Concentrated marketing strategy(I) Undifferentiated marketing strategy: Undifferentiated marketing strategy concentrates

upon marketing efforts in the total market. This strategy ignores the market segment differences andtrait; the market for a product as one unit, and aims at serving it in its entirety. Single marketingprogramme, identical advertisement, single brand similar look and uniform price are the maincharacteristics of this strategy. For this reason, this strategy is known as “market aggregation” or“mass-market strategy”.


There are some examples of market aggregation, such as soft drinks, milk, certain automobilesand resort services.

Advantages: A firm adopting this marketing strategy gets the following advantages:1. Market aggregation enables a firm to produce and sell its product, on large scale. Large

scale production offers various economies.2. This strategy enables the firm to adopt the theories of standardisation, specialisation and

division of labour.3. There is no need of preparing different marketing programmes and policies.4. It enables the firm to make the maximum possible utilisation of its resources.

Disadvantages: Despite the cost economies accruing from undifferentiated marketing, manymarketers and experts of marketing management are doubtful about its effectiveness and discount itsbenefits. The disadvantages of undifferentiated marketing strategy are as follows:

1. This strategy is not a consumer-oriented strategy. This is a product-oriented strategy. Thisstrategy concentrates only upon the .product.

2. The effectiveness of this strategy in the modern consumer-oriented markets is very doubtfulbecause all the consumers can never be of the same tastes and attitudes. It is rarely possiblefor a product or brand to be all things to all people.

3. This strategy may be successful in short-run, but in the long-run its success is alwaysdoubtful.

4. This strategy is more vulnerable to competition than the other marketing strategies,sometimes, appealing to the largest market results in majority fallacy. After sometimeseveral other competitors also enter the same segment which results in terrific competitionin that segment.

(II) Differentiated marketing strategy: Under differentiated marketing strategy, totalmarket of the enterprise is divided into several segments and different products areoffered in different segments. For this reason, this strategy is known as “market segregation”. Underthis strategy, different marketing programmes are prepared, different advertising campaigns arelaunched, different methods of sales promotion are adopted, and different policies regarding prices,packing, etc., are adopted. For example, a shoe market can be divided into several groups, such as,shoes for businessmen, executives, doctors, professors, students, etc., or on the basis of sex, such as,shoes for ladies, gents, children and so on. Example: MSL, Metro, Mochi division by Metro shoes fordifferent target segments.

This strategy is sales-oriented. The Hindustan Lever Limited, selling several brands of toiletsoaps such as, Lux, Rexona, Lifebuoy, Breeze etc., and the Godrej Company offering its differentbrands are good examples of the Indian companies practising differentiated marketing.

Advantages: Differentiated marketing strategy offers the following advantages to the enterprise:1. It is a consumer-oriented strategy.2. It attracts maximum number of consumers from all corners.3. It maximises the sales of the enterprise.4. It increases the profits of the enterprise.5. It provides maximum satisfaction to the consumers.


Disadvantages: The following are the drawbacks and risks of differentiated marketing strategy1. Different types of products are to be produced for different segments of the market to satisfy

the needs of the consumers.2. It requires intensive marketing research.3. Different marketing programmes and strategies are required for different segments of the

market.4. It increases the overall cost of the product5. This strategy is useful only for the firms producing different products on large scale basis.

(III) Concentrated Marketing Strategy: Concentrated marketing strategy is quite a differentstrategy. It does not concentrate upon marketing efforts in the total market. It concentrates upon someselected segments of the market. It selects a market area where there is no strong competition and itcan do best in that area. It is an all the eggs in one basket strategy. Under this strategy, the efforts aremade to discover the market segments in which the products of the enterprise can be sold and all theefforts of the enterprise are diverted and devoted to these segments. It is believed that whole-heartedconcentration upon some selected segments of the market may produce better results than halfheartedefforts in total market. In the words of Philip Kotler “Instead of going after a small share of a largemarket, the firm goes after a large of one or a few special markets”. Put it in another way, instead ofspreading itself than in many parts of the market, it concentrates its forces to gain a good marketposition in few areas.

Advantages: This strategy is suitable for and popular among the small firms, with lesserresources. The major advantages of concentrated marketing strategy are as follows :

1. It provides best possible satisfaction to the consumers of selected segments.2. It makes full exploitation of the resources of the enterprise.3. It reduces the cost of production and administration substantially. The firm may enjoy

operating economies related with production distribution and promotion.4. It makes it possible to earn the maximum profit with limited resources of the enterprise.5. The enterprise can become a specialist in the needs of its selected market segment.

Therefore, the firm achieves a strong market position in a particular segment or segments itserves.

Disadvantages: The disadvantages of concentrated marketing strategy are as follows:1. This marketing strategy is very risky because if a wrong segment is selected, the very

existence of the firm is endangered.2. It increases the possibilities of competition. Putting all the eggs in a single basket restricts

the growth opportunities and makes vulnerable particularly to a successful competitiveattack. A firm should, therefore, diversify in more than one market segment.

Alternative marketing strategies may be illustrated with the help of diagrams given below:


UndifferentiatedMarketing

DifferentiatedMarketing

ConcentratedMarketing

Selecting a Viable Marketing Strategy: There are the above three alternative marketingstrategies and a firm can select any one of these strategies. Every strategy has its own merits anddemerits, and the selection of a particular strategy depends upon the size, nature and requirements ofthe firm. However, there are some factors which must be considered while selecting a particularmarketing strategy. These factors are as follows:

1. Financial Resources of the Firm: The financial resources at the command of the firm dictatethe choice of marketing strategy. Where the firm has limited financial resources, it is forced to go infor concentrated marketing as the realistic choice. On the other hand, availability of finance permitsthe firm to go in for either differentiated or undifferentiated marketing. Thus, it is the extent to whichthe firm enjoys financial resources that decides the choice.

2. Product Homogeneity: Most consumers do not perceive differences in basic commoditiessuch as salt, grapes, steel, gasoline and the like. Undifferentiated marketing strategy for such productsis more natural than differentiated or concentrated strategies. On the other hand, products which arecapable of great variations like sound gadgets, cameras, automobiles are more suited to concentratedor differentiated marketing strategies. Hence, the marketers should take into account the homogeneityor heterogeneity of their products while choosing an appropriate strategy for them.

3. Position of the Products in the Product-life Cycle: The various stages of a product-life cycle,namely, introduction, growth, maturity, saturation, decline and obsolescence have to be taken intoconsideration. In the first and last stages market segmentation is meaningless. Therefore,undifferentiated marketing strategy should be selected. The product is at the stage of growth ordevelopment, concentrated marketing strategy should be selected, and differentiated strategy would bein the interest of the firm at the stages of maturity and saturation. At the stage of obsolescence, itwould be better to stop production of the product. Thus, products in different stages of life-cycle needdifferent strategies.

4. Market Homogeneity: Market homogeneity refers to the degree to which the consumers arealike in their needs, preference and other characteristics. In such homogeneous markets,undifferentiated marketing strategy works well. On the other hand, heterogeneous markets warranteither concentrated or differentiated marketing strategy.

5. Competitor's Marketing Strategies: This refers to what the firm’'s competitors are doing.Marketing strategies of the competitors affect the selection of marketing strategy in the enterprise to avery great extent. If the competitors of an enterprise have selected differentiated marketing strategy,the enterprise should also select the same type of strategy. Otherwise, it cannot be successful.

6. Policy of the Government: Government policy also affects the decision of adoptingmarketing strategy. When government interferes, it is better to adopt the strategy which suitsgovernment orders. For example, if government orders to produce Janata cloth or cheap variety ofcloth, it will be better for the enterprise to select concentrated marketing strategy. If there is no


interference of the government in the affairs of the enterprise, differentiated or undifferentiatedmarketing strategy may be selected.

Thus no particular strategy is superior to others always. So a shrewd marketer cannot rely on aparticular strategy. As marketing is a dynamic activity, it is the changing conditions that warrantadopting of a particular strategy.

Classification of MarketsTypes of markets are determined by the nature of commodity time and nature of business,

importance of the products. Major classification of market is as under.(I) On the Basis of Area: The Markets can be categorised on the bases of area into 3 types

namely, (i) Local market, (ii) National market, (iii) International market(i) Local Market:The buyers and sellers of this market belong to a small local area such as a

town or a village. Their requirement are limited and fulfilled in that area itself.Eg:- perishable goods such as fruits, vegetables etc.

(ii) National Market: When the whole nation could be regarded as one market for a particularcommodity, then it is termed as a national market. Eg:- Fast Moving Consumers Goods[FMCG] such as soaps, toothpaste, shampoo etc.

(iii) International Market: Certain commodities cover the whole world or some countries andare termed as international products. Therefore, the market is termed as international marketEg:- Electronic goods, petroleum products etc.

Geographical classification of markets, developed means of communication and transport whichenabled even the most perishable goods to travel long distances. Grading and durability are alsofacilitating to extend the area of the market.

(II) On the Basis of Time: It is classified into 3 types: (i) very short period (ii) short period(iii) Long period.

(i) Very Short Period Markets: Markets for highly perishable goods such as fruits andvegetables are of very short period. No attention is generally paid to increase or decrease thesupplies. Prices are charged according to the intensity of demand.

(ii) Short Period Markets: Here some consideration is paid on the supply to meet the demandin sufficient time is not available. Therefore, demand stands still. Such markets are calledshort period markets.

(iii) Long Period Markets: In case of any increase or decrease in demand it effects productionsimmediately and sufficient time is available to do it. It is said to be a long period -market.Under such circumstances supply governs the demand and in the long run price covers themarginal cost of production.

(III) On the Bases of Commodity(i) Commodity Markets: Different goods are bought and sold in different markets. They may

be either industrial goods (or) consumer goods. Basing on the consumption pattern (Hired orindirect) the classification is given. Eg:- Agriculture products include forest produce, fieldcrops, fishing etc. Mineral product includes metals, clay, petroleum, gas, coal, etc.Manufactured or semi finished goods include cloth machinery, tea, sugar, leather etc.


Commodity markets are divided into:(a) Produce Exchange: Well organised markets for raw produce such as wheat, cotton,

jute are known as produce exchange and are found in cities or in industrial centres of acountry.

(b) Manufactured Goods Market: The markets of manufactured and semi-finished goodsare known as manufactured goods market. Eg:- cotton, jute, machinery etc.

(c) Bullion Markets: Such markets are concerned with the purchase and sale of gold,silver and precious stones. Bullion markets of New York, London, Kolkata, Delhi,Mumbai are some of the examples.

(ii) Capital Markets: Financial requirement of big industrial and commercial concerns are metby money markets, Capital market includes money market, foreign exchange market andstock exchange.(a) Money Market: It includes a number of agencies providing finance to business

organisations. They help the public to invest in industrial concerns or in banks and alsofacilitate the public to take loans through banks for, a reasonable remuneration. Thesemarkets are affiliated to large trading centres like Mumbai, Delhi, Chennai, etc.

(b) Foreign Exchange Market: It is a market where buying and selling of foreigncurrency takes place. It is an international market, which is largely concerned with theexport and import trade of a country.

(c) Stock Exchange: It is a market where stocks, bonds, debentures, shares, and, Industrialsecurities are purchased and sold in different parts of the country.Examples: National Stock Exchange (NSE) Bombay stock exchange (BSE).

(IV) Nature of BusinessAccording to this markets are divided into 2 types namely: (i) whole sale; and (ii) Retail;(i) Wholesale: A wholesaler is one who gets the goods from the manufacturer in bulk quantities

and gives them to retailers and sometimes to customers for a small margin,(ii) Retail: A Retailer is one who gets the goods from the wholesalers and offers to the customers

- with a large margin.Wholesalers and retailers serve as the middlemen between the manufacturers and the customers.

They inform the manufacturers regarding the changes in preferences of the customers. The wholesalermaintains large stock of the goods to meet the contingencies.

Marketing Mix

Marketing is a process of creating and delivering value. What is the mechanism through which amarketer carries out the value delivery process? The marketer delivers value to the customer basicallythrough his market offer. He takes care to see that the offer fulfils the needs of the customers. He alsoensures that the customer perceives the terms and conditions of the offer as more attractive, vis-a-visother competing offer.

In order to deliver the value to the customers, marketers have to a select a target market and theydirect their activities towards profitably satisfying the target segment. Although they must manipulatemany variables to reach this goal, marketing decision-making can be divided into four areas: product,


price, place (distribution) and promotion (marketing communication). These 4 Ps of marketing arereferred to as the marketing mix. The 4 Ps blends to fit the needs and preferences of a specific targetmarket. These are the four variables that marketer can use and control in different combinations tocreate value for customers.

James Culliton, a noted marketing expert, is the first person who coined the expression marketingmix and described the marketing manager as a mixer of ingredients. In his words the marketing man isa decider and an artistic mixer of ingredients, who, sometimes follows a recipe developed by othersand sometimes prepares his own recipe. And, sometimes he adapts his recipe to the ingredients that arereadily available and sometimes invents some new ingredients, or, experiments with ingredients as noone else has tried before. The dynamics of the marketing process and the versatility of the marketingmix tool cannot be described any better.

In other words Marketing mix is the set of marketing tools that the firm uses to pursue itsmarketing objectives in the target market. Marketing-mix decisions must be made for influencing thetrade channels as well as the final consumers.

1st P: ProductProduct: A good, service, or idea that offers a bundle of tangible and intangible attributes to

satisfy consumers of marketing, because they can be controlled and manipulated by the market.The term product refers to what the business or non-profit organisation offers to its prospective

customers or clients. The offering may be a tangible good, such as a car; a service, such as aninsurance plan; or an intangible idea, such as the importance of donating eyes after the death.

Because customers often expect more from an organisation than a simple, tangible product, thetask of marketing management is to provide a complete offering. A total product that includes not onlythe basic good or service but also the extras that go with it.

2nd P: PricePrice: The amount of money or other consideration that is, something of value given in exchange

for a product. ReorganiseThe money or something else of value given in exchange for something is its price. In other

words, price is what is exchanged for a product. The customer typically buys a product with cash orcredit, but the price may be a good or service that is traded. In not-for-profit situations, price may beexpressed in terms of volunteered time or effort, votes, or donations. Marketers must determine thebest price for their products. To do so, they must ascertain a products value, or what it is worth toconsumers. Once the value of a product is established, the marketer knows what price to charge.However, because consumer’s evaluations of a product is worth change over time, prices are subject torapid change.

According to economists view prices are always on trial. Pricing strategies and decisions requireestablishing appropriate prices and carefully monitoring the competitive marketplace.

3rd P: PlacePlace (distribution): The element of the marketing mix that encompasses all aspects of getting

products to the consumer in the right location at the right time.


Place, or distribution, activities involve bridging the physical separation between buyers/sellers toassure that products are available at the right place. Determining how goods get to the customer, howquickly, and in what condition are decisions that are made to place products where and when buyerswant them.

A channel of distribution is the complete sequence of marketing organisations involved inbringing a product from the producer to the consumer. Its purpose is to make possible transfer ofownership and/or possession of the product.

4th P: PromotionPromotion: The element of the marketing mix that includes all forms of marketing

communciation.Marketers need to communicate with consumers. Promotion is the means by which marketers

talk to existing customers and potential buyers. Promotion may convey a message about theorganisation, a product, or some other element of the marketing mix, such as the new low price beingoffered during a sale period. Simply put, promotion is marketing communication. Advertising,personal selling, publicity and sales promotion are all forms of promotion. Each offers unique benefits,but all are forms of communication that inform, remind, or persuade.

REVIEW QUESTIONSShort Answer Questions:

1. Scope of Marketing2. Marketing Mix3. Traditional Vs Modern Marketing4. Indian Marketing Environment5. Objects of Market Segmentation6. Importance of Market Segmentation

Essay Answer Questions:1. Define Marketing? Explain the functions of marketing.2. Explain various concepts of Marketing.3. Distinguish between Marketing and Selling.4. Explain the need of marketing for various sectors.5. Discuss the bases of segmentation for consumer and Industrial goods.6. Discuss the significance of Marketing in the context of Indian Economy.7. Explain the nature of marketing environment.8. Explain the conditions for effective market segmentation.

Documents

Marketing · Marketing Management [As PerNew CBCS Syllabus for Fourth Semester, BBA of All Universities in Andhra Pradesh, w.e.f. 2015-2016] Dr. V. Krishna Mohan