Principles of Marketing BBA-FY (2024-2027) PDF

Principles of Marketing BBA-FY (2024-2027 batch) Dr. Pranati Dash, MIT WPU Dr. Pranati Dash, MIT WPU  Classroom ground rules What you can expect from me What I expect you to follow 1. I like meaningful interactions and d...

Principles of Marketing BBA-FY (2024-2027 batch) Dr. Pranati Dash, MIT WPU Dr. Pranati Dash, MIT WPU  Classroom ground rules What you can expect from me What I expect you to follow 1. I like meaningful interactions and discussion in Put your hand up if you want to speak / answer. class. 2. I will arrive at the class on time. Please be on time as well. 3. I will come to class prepared. Please read the relevant book chapters and cases before coming to class. 4. My cell phone or other sounds will not distract. Please maintain decorum in class. 5. I will not look at my cell phone while teaching, no Please avoid distractions while you are in the class. matter how attractive that new email or message is to me. Dr. Pranati Dash, MIT WPU Why learn Marketing? Money, well literally Dynamic Nature of the Field All Industries Need It Understanding Consumer Behavior Entrepreneurial Advantage Dr. Pranati Dash, MIT WPU Introduction of Marketing Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is ―meeting needs profitably. The objective of all business enterprises is to satisfy the needs and wants of the society. Marketing is, therefore, a basic function of all business firms. The ultimate goal of all marketing activity is to earn profit through maximization of sales. Dr. Pranati Dash, MIT WPU Definition of Marketing According to Philip Kotler, "Marketing Management is the analysis, planning, implementation and control of programs designed to bring about desired exchanges with target audiences for the purpose of personal and mutual gain. It relies heavily on the adoption and coordination of product, price, promotion and place for achieving responses.". Dr. Pranati Dash, MIT WPU Scope of Marketing The scope of marketing is getting bigger day be day. Marketers are involved in marketing several types of entities; Goods Services Experiences Event Person Place Properties Organization Information Ideas Dr. Pranati Dash, MIT WPU Evolution of Marketing: Production concept Product Concept Selling Concept Marketing Concept Societal Marketing Concept Dr. Pranati Dash, MIT WPU Production Concept is a concept where goods are produced without taking into consideration the choices or tastes of the customers. It is one of the earliest marketing concepts where goods were just produced on the belief that they will be sold because consumers need them. Concentration on achieving high production efficiency, low costs, and mass distribution. It is assumed that consumers are primarily interested in product availability and low prices. This orientation makes sense in underdeveloped & few developing countries, where consumers are more interested in obtaining the product than in its features. In a production-orientated business, the needs of customers are secondary compared with the need to increase output. It is natural that the companies cannot deliver quality products and suffer from problems arising out of impersonal behavior with the customers. Example: Ford in USA Dr. Pranati Dash, MIT WPU Product concept proposes that consumers will prefer products that have better quality, performance and features as opposed to a normal product. A company should therefore focus on its product development and invest in continuous product improvements. The concept is truly applicable in some niches such as electronics and mobile handsets. Managers focusing on this concept concentrate on making superior products and improving them over time. They assume that buyers admire well-made products and can appraise quality and performance. However, these managers are sometimes so proud of their product that they do not realize what the market needs Example: Google, Apple Dr. Pranati Dash, MIT WPU The Selling Concept proposes that customers (individual or organizations) will not buy enough of the organization‘s products unless they are persuaded to do so through selling effort. The consumers typically are inert and they need to be forced to purchase by converting their inert need into a buying motive through persuasion and selling action. The aim is to sell what they make rather than make what the markets wants. Such marketing carries high risks as it focuses on creating sales transactions rather than on building long term, profitable relationships with customers. This approach is applicable in the cases of unsought goods like life insurance, vacuum cleaner, fire fighting equipment including fire extinguishers. Usually they have a strong network of sales force. The selling philosophy assumes that a well-trained and motivated sales force can sell any product. However, soon companies began to realize that it is easier to sell a product that the customer wants, than to sell a product the customer does not want. Dr. Pranati Dash, MIT WPU Marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating customer value to its selected target customers. The marketing concept is the most followed ideology by top companies. With rise of economy, consumers have become more knowledgeable and choosy as a result of which the organization cannot concentrate on what it sells but rather it has to concentrate on what the customer wants to buy. The market concept thus relies on three key aspects: What is the target market? What are the needs wants and demands of the target market? How best can we deliver a value proposition? Dr. Pranati Dash, MIT WPU Societal Marketing Concept: This concept holds that the organization‘s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors (Marketing Concept). Additionally, it holds that this all must be done in a way that preserves or enhances the consumer’s and the society’s well-being. The organization believes in giving back to the society by producing better products targeted towards society welfare. The societal marketing concept calls upon marketers to balance three considerations in setting their marketing policies, viz. Company profits Consumer satisfaction Public interest Societal Marketing concept focuses on: Less Toxic Products More Durable Products Products with Reusable or Recyclable Material Dr. Pranati Dash, MIT WPU  Societal Marketing : Dr. Pranati Dash, MIT WPU Basic Objectives of Marketing: a. Satisfaction of Customers: In the modern era, the customer is the focus of the organization. The organization should aim at producing those goods and services, which will lead to satisfaction of customers. b. Integrated marketing: The functions of production, finance, operations and marketing should be integrated to satisfy the needs and expectations of customers. c. Profitable sales volume: Marketing is successful only when it is capable of maximizing profitable sales and achieves long-run customer satisfaction. Dr. Pranati Dash, MIT WPU Dr. Pranati Dash, MIT WPU Core Marketing Concepts: Dr. Pranati Dash, MIT WPU  Need: Needs are requirements which human beings require for their life. It is a difficult task for a marketer to identify the needs of the customers since costumers may not be conscious of their needs, and even if they are, then they might be unable to put forth their needs clearly. The needs can be further classified into 5 types as; Stated Needs : Clearly defined needs of the customer Real Needs: These are the actual needs of the customers which he may not be able to pinpoint to the salesperson. Unstated Needs: These are the benefits which are not asked by the consumers but they expect them naturally with the products/services offered. Delight Needs: When a customer gets more than what he needs and if that makes him happy, then it is called as delight needs Secret Needs: These are the needs which customer does not want to disclose but still gives indication to have it from the seller. Dr. Pranati Dash, MIT WPU  Wants The wants are a step ahead of needs and are largely dependent on the human needs. A need becomes a want when a need is directed to a specific object. Wants are designed according to the taste and preferences of the society. Needs already exists in the market; however, wants may be created by the marketers. It can also be said that Need and Want are relative terms because a product may be considered to be a need by someone but it may also be perceived as a want by others. E.g. To have food is a basic need of human beings but to have pizza/vada pav/… for food is a want created by the marketers. Dr. Pranati Dash, MIT WPU  Demand A demand is generated when a customer is willing to buy a particular product and has an ability to pay for it. A company should study not only how many people want their product but also how many would actually afford to buy the product. E.g. Many people would be desirous to buy Ferrari car; however, there is only a small segment which can afford to buy it which reflects the demand for Ferrari car in the market. Demand = Willingness to pay + Ability to pay Dr. Pranati Dash, MIT WPU  :Customer Value: Value reflects the sum of the perceived tangible and intangible benefits and costs to customers. Here the costs include both economic and non-economic costs whereas benefits include both tangible as well as intangible ones. A product or services is successful when it delivers value and satisfaction to the buyers. Value is usually a combination of quality, service, and price. Value is a relative term as perceived benefit for one person may be different for others. Value changes based on time, place, and people in relation to changing environmental factors. Companies try to figure out the list of add-on benefits that they can provide based on the taste and preferences of the customers. Dr. Pranati Dash, MIT WPU  Exchange It is act of obtaining an object which one needs from another by offering some other thing in return. Marketing helps to create a business environment where exchange of value can take place. For an exchange to happen: (i) There should be at least two parties involved for any kind of exchange. (ii) Each party must have something or other that interests the other party. (iii) Each party must be willing to have an exchange with other party and must have a desirable or at least acceptable opinion about the other party. (iv) Each party must be totally free from any obligation regarding accepting or denying the offer. (v) Each party must be able to communicate and deliver the product as per the requirement of the other. Dr. Pranati Dash, MIT WPU  Customer Satisfaction: Satisfaction reflects a person’s judgment of product’s perceived performance in relationship to expectations. Performance < Expectation → Dissatisfied Customer Performance = Expectations → Satisfied Customer Performance > Expectations → Delighted Customer Marketers should be careful while setting the expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough customers. If they raise expectations too high, customer might be disappointed. Dr. Pranati Dash, MIT WPU Customer Delight: Customer delight can be defined as the effect of delivering a product or service that surpasses customer expectations in a favorable experience. Performance > Expectations → Delighted Customer In most cases delighted customers tend to come back again because of the great services they have received from the company. Customer Delight directly affects sales and profitability of a company as it distinguishes the company and its products and services from the competition. The front line employees may be able to develop a relationship between the customer and the brand. Eg. A restaurant presenting a free cake to the customer during a birthday party bash thrown in that restaurant. Dr. Pranati Dash, MIT WPU Customer Loyalty: Loyalty can be defined as a customer’s strong continuing belief that a particular organization’s products/services offer remains their best option. Customers are said to be loyal when they consistently purchase a certain product or brand over an extended period of time. Loyalty also means customers hanging in there, even when there may be a problem with the company’s products or services, It also means customer being willing to spend the time and effort to communicate with the organization so as to build on past successes and overcome any weaknesses. True loyalty requires both share-of-wallet and share-of-heart. Dr. Pranati Dash, MIT WPU Marketing V/s Market: Marketing is the process of trying to get group of people interested in buying company’s products or services. It is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing is all those activities that facilitate trade. These include activities that identify consumers’ needs such as market research and those activities that satisfy consumers’ needs e.g., packaging and distribution. Marketing activities therefore support the marketing of goods and services. Market is a collection of buyers and sellers. A market, colloquially, is a group of people who are willing to buy something. It is a public gathering held for buying and selling merchandise. It is a place where goods are offered for sale. It is a set of individuals or institutions that have similar needs and that can be met by a particular product. Therefore, a market is the set of all actual and potential buyers of a market offer. A market is any space within which trade takes place between buyers and sellers for a well-defined product. This space can be a produce market, a shop, internationally between countries, or over the internet. Eg. There is a “market” for detergent soap. Dr. Pranati Dash, MIT WPU  Role of Marketing Manager Setting goals and objectives The main responsibility of a marketing manager is to set out marketing goals and objectives for the company. Objectives which are clearly defined enhance the efficiency of the employees as well as the organisation. These objectives should be set in terms that are quantifiable. Segmentation It is challenging for a company to respond the demands of the market. Thus, another function that marketing managers take on is to divide the market into segments in order to select a target audience. This process is set to be the basis of modern marketing. Strategic marketing management – regarding marketing techniques and campaigns – should be done while making sure that you keep the target audience in mind. Coordinating with other departments In order to respond to consumers’ demands, marketing managers need to cooperate with other departments such as finance and HR. This coordination is required for the smoother functioning of the company. Dr. Pranati Dash, MIT WPU Role of Marketing Manager Developing and maintaining relationships with third parties It is vital for marketing managers to build as well as maintain relationships with third parties such as suppliers, government agencies and other consultants such as graphic designers and copywriters. This can ensure that marketing strategies as well as planning run without trouble. Market research This is one of the most significant responsibilities of marketing managers. This form of research involves the collection, analysis as well as interpretation of data, and it provides marketing managers with important information that help them in making key decisions. Market research helps in identifying the needs and preferences of consumers. Controlling marketing activities Marketing managers must successfully control marketing activities in order to ensure the success of marketing campaigns. This involves setting standards, assessing campaign performance and taking corrective measures if necessary. Dr. Pranati Dash, MIT WPU Difference in Selling and Marketing 1.Marketing is about customer satisfaction. It starts with customer needs and demand and ends with customer satisfaction. It is a customer oriented approach. Sales, on the other hand, is about selling what the company produces. It doesn’t care about the need of the customer but about the profits. 2.Marketing is about providing quality products and consumer satisfaction. Selling is about generating by maximising sales and is a money oriented approach. 3.In marketing, emphasis is given on the wants of the consumer. Whereas in selling, emphasis is on the company’s products. 4.Marketing is different from selling because here the company first determines customers’ needs and wants and then decides how to deliver a product to satisfy these wants. In selling, it is the other way round. 5.In marketing the emphasis is on innovation in existing technology and providing better value to the customer by adopting a superior technology. Selling emphasizes on staying with existing technology and reducing costs. 6.Marketing views the customer as the very purpose of the business. Selling views customer as a last link in business. Dr. Pranati Dash, MIT WPU  Traditional vs Modern Marketing Traditional Marketing Concept : Traditional marketing concept focuses on products only and it aims in production and marketing of products and gaining more profit. Traditional marketing is profit oriented. It is based on old marketing concept and refers to a narrow concept. Traditional marketing concept is based on push marketing. It is one dimensional as the only target of it is to sell the product and get the profit. Most commonly used traditional marketing strategies are : Business cards TV and Radio ads Billboards and signage Flyers and brochures Telephone marketing Advantages : Opportunity for powerful creative efforts Easy to understand Easier reach to local target audience Disadvantages : Little interaction Targeted customer is minimal Dr. Pranati Dash, MIT WPU  Traditional vs Modern Marketing Modern Marketing Concept : Modern marketing concept focuses on customer’s need and wants and it aims in meeting the customer’s satisfaction. Modern marketing is customer oriented. It is based on new marketing concept and refers to a broader concept. Modern marketing concept is based on pull marketing. It is multidimensional as along with selling product and getting profit it also gives emphasis on customer satisfaction, planning, after sales service and many other variables. Most commonly used modern marketing strategies are : Internet ads E-mail marketing E-commerce website Use of social media Marketing automation Advantages : Higher ROI Deeper levels of customer engagement and targeting Cost effective Opened to larger and bigger markets Disadvantages : Requires technical skill to be active in digital marketing and in use of internet More costly in implementing. Dr. Pranati Dash, MIT WPU Dr. Pranati Dash, MIT WPU Marketing Environment & Market Segment Facilitator: Dr. Pranati Dash Meaning of Marketing Environment Marketing Environment is the combination of external and internal factors and forces which affect the company’s ability to establish a relationship and serve its customers. The internal environment is company specific and includes owners, workers, machines, materials, financial resources etc. Internal factors are mostly within the control of an organization. External factors do not fall within its control, and include government, technological, economical, social, and competitive forces. Importance of Marketing Environment study: Marketers have to predict the changes, which might take place in future to develop proper strategy & planning. It is possible by monitoring the marketing environment. Similarly the changes in environment may create ‘opportunities’ or ‘threats’ for the business. Keeping these information in mind, marketers continue to modify their strategies and plans to take advantage of beneficial situation or overcome challenges.  Features of Marketing Environment: Today’s marketing environment is characterized by numerous features, which are mentioned as follows: Specific and General Forces: Specific forces include those forces which directly affect the activities of the organization (customers and investors). General forces indirectly affect the organization (social, political, legal, and technological factors). Complexity: Marketing environment include number of factors, conditions, and influences, which may interact with each other. This makes the marketing environment complex in nature. Vibrancy: Marketing environment does not remain stable and changes over time. Marketers may have the ability to control some of the forces; but they fail to control all the forces. However, understanding the vibrant nature of marketing environment may give an opportunity to marketers to gain edge over competitors. Features of Marketing Environment: Uncertainty: At times it may be difficult to predict some of the changes, which occurs frequently. For example, customer tastes for clothes change frequently. Thus, fashion industry suffers a great uncertainty. The fashion may live for few days or may be years. Relativity: It explains the reasons for differences in demand in different countries/locations. The product demand of any particular industry, organization, or product may vary depending upon the country, region, or culture. For example, sarees are the traditional wear of women in India. Thus, it is always in demand. However, in any other western country the demand of saree may be zero/occasional. Types of Marketing Environment: A marketing environment mostly comprises of the following types of environment: Internal Environment External Environment, which is again classified as; 1. Micro Environment 2. Macro Environment Internal Environment The internal marketing environment of a business refers to the conditions, factors, and dynamics that exist within the organization itself and directly influence its marketing efforts. Some key components are; Organizational Goals and Objectives Marketing Strategy and Planning Leadership and Management Resources and Budget Allocation Collaboration and Communication Innovation and Adaptability, etc. Some authors also depict it as 5M (mind, money, minutes, machinery, material), organizational assets + Organization culture Contd..: The internal marketing environment is helpful in successful marketing activities by providing the necessary infrastructure, support, and alignment with the organization's overall objectives. By cultivating a positive internal environment, organizations can create a strong foundation for their marketing efforts, fostering creativity, innovation, and effective collaboration among teams. External Environment The external environment constitutes factors and forces which are external to the business and on which the marketer has little or no control. The external environment is of two types: Micro Environment Macro Environment Micro Environment This encompasses factors that are directly linked to the company's operations, and with which it engages in ongoing interactions. Key components include: Customers: Understanding their needs, preferences, and behaviors is central to developing effective marketing strategies. Suppliers: Reliable and efficient suppliers are essential for maintaining product quality and consistency. Competitors: Analyzing competitors' strengths and weaknesses helps identify opportunities and threats in the market. Intermediaries: Distributors, wholesalers, and retailers influence how products reach the end consumers. Public: These are groups that have an interest in or impact on the company, such as media, government, and local communities. Macro Environment: This consists of broader societal forces that shape the microenvironment and impact the industry as a whole. The macroenvironment is often analyzed using the PESTEL framework: Political: Government regulations, stability, and policies etc. Economic: Economic indicators (e.g., GDP, inflation, unemployment) Social: Cultural trends, demographics, and social attitudes Technological: Advances in technology that create new opportunities, change industries, and influence product development. Environmental: Concerns about sustainability, climate change, and environmental regulations affecting business practices. Legal: Laws and regulations that impact how companies operate, market their products, and interact with consumers. Significance of Understanding the Marketing Environment: 1.Strategic Decision-Making: An awareness of the marketing environment empowers companies to adapt their strategies based on changing market conditions, ensuring long-term success. 2.Opportunity Identification: Recognizing trends and shifts in the environment helps companies identify untapped market segments and innovative product opportunities. 3.Risk Mitigation: Understanding potential threats allows companies to proactively develop strategies to minimize negative impacts. Significance of Understanding the Marketing Environment: 4.Customer-Centric Approach: Insights gained from the marketing environment aid in tailoring products and marketing messages to match customer needs and preferences. 5.Sustainable Practices: Awareness of environmental and social factors encourages responsible business practices that resonate with conscious consumers. Defining Market Segmentation Segmentation is referred to as grouping people according to their similarity related to a particular product category. Or the process of dividing the prospective market into smaller, more precisely defined groups of consumers or organizations who have common needs and are expected to respond similarly to a marketing action. Understanding Market Segmentation The member of each segment share similar characteristics and usually have one or more than one aspect common among them which makes it easier for the marketer to craft marketing communication messages for the entire group. One of the major reasons marketers segment market is because they can create a custom marketing mix for each segment and cater them accordingly.  Types of Market Segmentation Several types of marketing segments can be created. However we’ll focus on four major types: ∙ Geographic segmentation: the “where” ∙ Demographic segmentation: the “who” ∙ Behavioral segmentation: the “how” ∙ Psychographic segmentation: the “why” Geographic Segmentation Geographic segmentation divides the market on the basis of geography, i.e the location where your customers & potential customers live. The parameters considered may be location, cultural preferences, climate, language, and population type and density etc. This type of market segmentation is important for marketers as people belonging to different regions may have different requirements. People belonging to different regions may have different reasons to use the same product as well.  Demographic Segmentation Demographic segmentation divides the market on the basis of demographic variables like age, gender, marital status, family size, income, religion, race, occupation, nationality, etc. This is one of the most common segmentation practice among marketers. This type of segmentation is seen almost in many industries like automobiles, beauty products, mobile phones, apparels, etc. It is set on a premise that the customers’ buying behavior is hugely influenced by their demographics. Behavioural Segmentation Behavioural segmentation divides consumers into market segments depending on their behaviour patterns when interacting with a product or service The segments are usually divided based on their knowledge of the features of the product, occasion of purchase and usage of the product. People can be labelled as brand loyal, brand-neutral, or competitor loyal. They can also be labelled according to their usage. For example, a sports person may prefer an energy drink as elementary (heavy user) and a not so sporty person may buy it just because he likes the taste (light/medium user). Psychographic Segmentation Psychographic segmentation breaks down consumer groups into segments that influence buying behaviors, such as lifestyle, personality variables, and values. This segmentation process works on a premise that consumer buying behaviour can be influenced by his personality and lifestyle. Personality is the combination of characteristics that form an individual’s distinctive character and includes habits, traits, attitude, temperament, etc. Lifestyle is how a person lives his life. Personality and lifestyle influence the buying decision and habits of a person to a great extent Criteria for market segmentation There’s an acronym you can remember for the essential factors in effective and successful market segmentation—ADAMS. The acronym stands for five criteria: Accessible Differentiable Actionable Measurable Substantial *We also know the success criteria of customer segmentation Different Accessible Substantial Measurable Worth it! And Lasting too (sustainable) Benefits of Market Segmentation Improved Focus on the “Important” Customers : It enables marketers to focus their efforts and resources on those customers who will likely result in revenue for the company. Improved Product Development: It allows marketers to better understand what consumers want in a product or service and enables the marketer to make recommendations for refinements to existing products and services. Improved Brand Loyalty: When customers feel that your company’s products or services are a good fit for them, they are more likely to stick with your brand and recommend it to others Increased Market Share: Through market segmentation and targeted communication, a competitive advantage can be built which results in increased market share. Examples of Market Segmentation Market segmentation is a common practice among all the industries. It is not possible for a marketer to address the mass with same marketing strategy. Here are some examples of market segmentation to prove this point. Beauty Products While marketing beauty products, marketers often segment the target market according to the age of the users, the skin type, and also the occasion. A perfect example of this is ‘Olay’ The company developed its ‘Age Defying’ product range to cater to mature adults and ‘Clearly Clean’ range to cater to young adults and teens. Fast Food Fast food chains like McDonald’s often segment their target audience into kids and working adults and develop different marketing plans for both. Marketing efforts like distributing a toy with every meal works well for kids and providing the food within 10 minutes, free WiFi, and unlimited refills work well for working adults. Sports Sports brands like Nike, Adidas, Reebok, etc. often segment the market based on the sports they play which help them market the sports-specific products to the right audience.  A few issues associated with Market Segmentation Even though there are many advantages of market segmentations, there are some disadvantages and limitations as well. The process of market segmentation requires the business to do extensive research which is not feasible for some of the businesses. It is an expensive process, both in terms of time and money. It requires the business to spend a lot to identify different groups and market to them differently according to their needs. Thank You! Marketing Mix Elements of marketing mix What is a marketing mix? The marketing mix, often referred to as the 4Ps, is a fundamental concept in marketing that comprises of various elements a business can control to influence its customers' buying decisions. The 4Ps stand for Product, Price, Place, and Promotion. These are known as the elements of marketing mix. Elements of Marketing Mix Product: Product means the combination of goods and services that the company offers to the target market. Price: Price is the amount of money customers have to pay to obtain the product. Place: Place includes company activities that make the product available to target consumers. Promotion: Promotion means the activities that communicate the merits of the product and persuade target customers to buy it. Extended Marketing Mix Now a day’s three more Ps have been added to the marketing mix namely People, Process and Physical Evidence, especially in case of service offering. This is known as extended marketing mix. People:- All the people involved with consumption of a service are important. Process:- Procedure, mechanism and flow of activities by which services are used. Physical Evidence:- The environment in which the service or product is delivered. The Customer PoV: From a buyer’s point of view, each marketing tool is designed to deliver a customer benefit. Robert Lauterbom suggested that the seller’s four P’s corresponds to the customer’s four C’s. Four P’s Four C’s Product -------------- Customer solution Price -------------- Customer cost Place -------------- Convenience Promotion ---------- Communication PRODUCT MIX Product: Product refers to the tangible or intangible goods or services that a company offers to meet the needs and wants of its target market. Organisation should try to differentiate their product from competitors in terms of any or more attributes; Design Technology Usefulness Convenience Quality Packaging Accessories Warranty etc. Product Characteristics: There are two different attributes of the product, Intrinsic: Fundamental attributes of a product that are inherent to the product itself, and are typically related to its physical or functional aspects. Like colour, flavour, design, material and appearance etc. Extrinsic: These are not inherent to the product itself but are external factors that influence how the product is perceived or experienced by consumers. E.g. brand name, stamp of quality, country of origin, store, packaging etc. Few aspects of Product Mix: It basically refers to the range of products or product lines that a company offers to its customers. Some key aspects are; Product Lines Product line depth Product mix width/breadth Product life cycle Brand portfolio etc. PRODUCT LIFE CYCLE Concept of Product Life Cycle A new product passes through a set of stages known as product life cycle (PLC). PLC may apply to both brand and category of products. Its time period varies from product to product. Modern product life cycles are becoming shorter and shorter as products in mature stages are being renewed by market segmentation and product differentiation. Companies always attempt to maximize the profit and revenues over the entire lifecycle of a product Stages of Product Life Cycle Product life cycle comprises four stages; 1. Introduction stage 2. Growth stage 3. Maturity stage 4. Decline stage The graph shows change in sales volume over all the stages of PLC, under normal conditions.  Introduction Stage The product is unknown to customers. Branding, Quality level etc. are critically maintained to stimulate consumers for the product category. Product is under more observation & consideration. The price may be kept high (skimming) to earn more profit & cover the initial cost over a short period of time. It can also be kept low (market penetration) to gain more market share. The pricing strategy depends on the goal of the company. The placement or distribution system is generally selective and scattered. The promotion is informative and personalized. Samples/trials may be provided to attract early adopters and potential customers. Promotional programs are very essential in this phase. Growth Stage At this stage the product is more widely known and consumed. So other than maintaining the existing quality, new features and improvements in product quality may be done (if needed) to have competitive advantage. The pricing may be maintained or increased if company gets high demand at low competition. However it may have to be decreased to maintain market share, if new players enter. The placement becomes more widely spread, and more distribution channels have to be added to meet increasing demand. The promotion is focused on brand development and product image formation. When product acceptability increases, effort should be made to gain brand loyalty and preference.  Maturity Stage The product is competing with alternatives, so company needs to add features and modify the product in order to compete in market and differentiate it from competition. The price may reach to its lowest point because of intense competition. Hence mostly needs to be reduced to attract price conscious segment. The placement is intense. So new channels are added to face serious competition and incentives should be offered to retailers to get shelf preference over competitors. The promotion is focused on repeat purchasing, to create image of product differentiation and loyalty. Incentives may also be offered to attract more customers Decline Stage At this stage market becomes saturated, so sales decline. It may also be due to technical obsolescence or change in customer taste/preferences. At decline stage company has three options: Maintain the product, reduce cost and/or find new uses of product. Harvest the product by reducing marketing cost,(promotion/ distribution etc.) and continue offering the product to loyal niche customer segment till the time it is feasible (in terms of profitability). Discontinue the product when there’s no profit or a successor is available. Decision may also be taken on selling out to competitors who want to keep the product. Limitations of Product Life Cycle (PLC) It has no empirical support. It may hold good in case of larger organisations, but it may not be accurate in all the cases. It is not the best tool to predict sales volume. Different products have different properties, hence they may follow varied life cycle pattern. Many a times managerial decision plays a crucial role and affect the life of product.  Few more concepts: Product Elimination: Also known as product discontinuation or product phase-out, is the strategic decision by a company to remove one or more of its products or product lines from the market. Major reasons: Low Sales or Declining Demand/obsolete technology/changing customer preference/profitability concern/strategic repositioning/compliance issue Major Benefits: Cost Saving/more efficient resource allocation Product Simplification: It is a strategic approach employed by companies to streamline their product offerings by reducing complexity and focusing on core, high- performing products. Major Reasons: Elimination of Redundancy/Standardization/Focus on Core Competencies/Cost Reduction/Enhanced Quality Control/Improved Customer Experience Major Benefits: Cost Saving/ efficiency/improved focus/enhanced quality/customer satisfaction/ Product Diversification: Expanding the range of products or services offered to reach new customer segments or capitalize on emerging trends. Key Aspects: New Product Categories/Related Products/Unrelated product/Market Research Benefits: Risk mitigation/revenue growth/market expansion/customer retention/competitive advantage/cross-selling opportunity  New Product Development New product development (NPD) is a comprehensive process that businesses undertake to bring new products or services to the market. This process involves various stages, from idea generation to commercialization. It is crucial for companies looking to innovate, stay competitive, and meet changing customer needs Stages of NPD: 1. Idea Generation: Internal Sources: From within the organization, such as employees, research and development (R&D) teams, or brainstorming sessions. External Sources: From customers, suppliers, competitors, and market trends. 2. Idea Screening: Evaluate and filter ideas based on criteria such as feasibility, market potential, alignment with organizational goals, and resource requirements. Identify the most promising concepts and eliminate those that are less likely to succeed. Stages of NPD: 3. Concept Development and Testing: Develop detailed product concepts, including features, specifications, and design. Test these concepts with a target audience (or experts) to gather feedback and assess potential market acceptance. 4. Business Analysis: Conduct a thorough analysis of the proposed product's business viability. Assess market size, pricing strategies, cost projections, potential revenue, and return on investment. Stages of NPD: 5. Prototype Development: Create a prototype or a minimum viable product (MVP) to test the product's design, functionality, and feasibility. Iteratively refine the prototype based on testing and feedback. 6. Market Testing: Conduct a small-scale launch or market test to assess consumer response and gather real-world data on the product's performance. Adjust marketing strategies based on the test results. Stages of NPD: 7. Commercialization: Scale up production and plan to launch the product on a broader scale. Implement marketing plans, distribution strategies, and promotional campaigns to support the product launch. 8. Launch and Distribution: Full-scale launch, including marketing communications, distribution to retailers, and online availability. Monitor and manage initial customer reactions and feedback. Further course of action: Post-Launch Evaluation: Assess the product's performance in the market. Gather customer feedback, evaluate sales data, and make adjustments to marketing or product features as needed. Product Life Cycle Management: Continuously monitor the product's life cycle, and plan for updates, improvements, or potential phase-out. Requisites for successful NPD: Successful new product development requires collaboration among various departments, market research, innovation (R&D), and should also have a customer-centric approach. Companies that effectively navigate this process can gain a competitive edge, satisfy customer needs, and drive growth in dynamic markets. PRICE MIX Price, as a concept Price refers to the exchange of something of value between a buyer and a seller. It determines how much revenue the company will earn and drives the financial health of the organization. However, marketers cannot simply price products and services based on the expected revenue of the organization. It must be set so that the buyer sees value in the product offering and is willing to pay the price for it. In other words, marketers must put the perception of value (for the customers) at the forefront while also considering the financial impact to the organization. Price as an Indicator of Value The price-value equation is a subjective assessment by consumers based on what they feel as value. When a customer’s expectations are met at (what they consider) an acceptable price, value is realized. Perceived value increases with increase in product quality and decreases with increase in price. Perceived Value & Perceived cost The perceived values/benefits are directly related to the price-value equation. These may include status, convenience, brand, quality, etc. and can vary from buyer to buyer or even situation to situation. Similarly, Perceived costs can also include a number of criteria in addition to the price printed on the price tag. These may include travelling to the PoS, time taken to complete the process, ease of purchase etc. The Profit Equation The price marketers set for goods and services offered will have a direct impact on the company’s profit-making ability. Therefore, the price set should achieve value not only for the buyer but also for the company. So it is in the company’s interest to set prices that create value for the buyer and maximize profit for the company, The Profit Equation Profit is the financial gain of a company, or the difference between the amount earned and the amount spent in buying, operating, or producing something. It is the difference between total revenue and total costs and is calculated with the profit equation. Profit = Total Revenue – Total Cost Where; Total Cost = Fixed Cost + Variable Cost The Psychology of Pricing Price Anchoring: A buyer relies on the first piece of information that he sees. This acts as an anchor, or a frame of reference for what the buyer expects a price to be. Artificial Time Constraints : Trigger a sense of urgency in the buyer to purchase, or miss an opportunity. Price Appearance: The longer it takes to read and pronounce, the more impact the buyer believes it has on their wallet. Price Gouging : when companies or individuals take advantage of a situation, typically an emergency or natural disaster, and charge exceptionally high prices for products or services. Five critical C’s of Pricing Establishing pricing policy: The Five-Step Process for Establishing Pricing Policies (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license) Pricing objectives can be; Objective Description Customer value Based on a product’s added value proposition Cost Based on the cost to produce a product Developed to boost sales volume(s) of a Sales orientation product Market share Focused on increasing market share Focused on a specific profit at a specific Target return time Competition Developed based on competitors’ prices Customer driven Focus on what the customer is willing to pay  Estimate Demand: The relationship between price and demand shown in the demand curve is negatively sloped. (if certain conditions like substitute goods, personal income, and consumer tastes, remain unchanged) The supply curve is positively sloped, as with increasing price, the organisation wants to supply more. Demand Curve (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license) Demand elasticity is a measure of the change in the quantity demanded in relation to the change in its price. Mathematically, it is derived from the percent change in quantity demanded divided by the percent change in price. Estimate Costs The next step in determining a pricing policy is to estimate the total cost of producing a product or service. When estimating total costs, it is important to divide costs into fixed and variable costs. Fixed costs are those expenses that do not change regardless of the number of units sold. Alternatively, variable costs do change based on the number of units produced. Analyse the External Environment PESTLE Few other factors affecting pricing decision: Competitors’ Costs, Prices, and Products Stage in the Product Life Cycle Select Pricing Strategies or Tactics After gathering all the data explained previously, marketers should set specific pricing strategies or tactics. The strategies and tactics chosen for a product or service should align with; ⮚ the other marketing mix elements, ⮚create value for the customer, and ⮚maximize profits for the company. Pricing Strategy Pricing strategy refers to the overall approach or plan that a business adopts to set the prices of its products or services. It involves making strategic decisions to achieve specific business objectives. Research, Market conditions, consumers’ willingness to pay, competition, trade margins, expenditures incurred, etc., all these are considered while developing a pricing strategy. Commonly used Pricing Strategies: Premium Pricing: This strategy involves using high pricing, where there is a uniqueness about the product or service and/or a substantial competitive advantage exists. Penetration Pricing: It is the strategy of entering the market with a low initial price to capture greater market share. Dynamic Pricing: A dynamic pricing strategy in marketing involves changing the price of the items based on the present market demand. Price Skimming: It involves charging a relatively higher price for a short period of time when a new, innovative, or much-improved product is launched in the market. Economy pricing: The strategy targets customers who prefer to save money. One/more category of product/s may be offered at a reasonable price. Bundle pricing: As the name suggests, it is a strategy where a business sells a bundle of goods together. Typically, the total price of the goods is lower than the individual products sold separately. This helps in moving the inventory and selling the stocks that are left over. Pricing Method Pricing method refers to the specific approach or calculation used to determine the actual price of a product or service. It involves the mechanics of setting a numerical value for the product or service, often based on certain criteria. Pricing methods are the practical techniques used to implement the broader pricing strategy Commonly used pricing methods: Cost-Plus Method: Adding a specific percentage markup to the production or acquisition cost to determine the selling price. Competitive Pricing: Setting prices based on the prices charged by competitors, either at a similar level or at a discount. Auction-type Pricing Method: Here the product is auctioned and the highest bidder gets the product based on the bid price, under normal circumstances. Target Return Pricing: Setting prices to achieve a specific target return on investment or profit margin. Dynamic Pricing Algorithms: Using automated algorithms to adjust prices in real-time based on factors like demand, competitor pricing, and market conditions. Markup Pricing: Determining the selling price by adding a predetermined percentage of profit to the cost of goods. Ethical issues involved: Price Fixing Deceptive/Illegal Price Advertising Predatory Pricing Monopoly Gouging Price Discrimination