Module 1 Defining Marketing for the 21st Century

1.1: Define Marketing:

Marketing is the process by which companies create value for customers and build strong customer
relationships to capture value from customers in return.
Marketing is a social and managerial process by which individuals and groups obtain what they
need and want, through creating, offering and exchanging products (goods and services) of value
with others.

1.2: Marketing Management:

Marketing Management is the art and science of choosing target markets and getting, keeping, and
growing customers through creating, delivering, and communicating superior customer value.

1.3: Customer Needs, Wants and Demands

✔ Needs are states of deprivation, the states of mind

Physical - food, clothing, warmth, safety
Social - belonging and affection
Individual - knowledge and self-expression Example: I need Food/ Cloth.

✔ Wants are the form that needs to take as they are shaped by culture and individual
personality.
Wants are shaped by one’s society and are described in terms of objects that will satisfy needs.
Example:
As a Bangladeshi I want rice and fish as food whereas an American wants a sandwich or burger as
food.

✔ Demands are wants that are backed by buying power. To fulfill demand the affordability
of the customers and willingness to pay for any product is important.
Example: Mr. Ayaan is a business tycoon and his demand is having rice and fish from Radisson
hotel and clothes from a designer house. On the contrary, Ayaat is a student and his demand is
having rice and fish from EUB canteen and clothes from New market. If Ayaat demands Food
from Radisson and Clothes from designer house that will be considered as his want. He does not
have the ability to buy it, unless it’s backed by someone.

1.4: Ten market offerings which can be marketed:

Goods; for example: burger, television etc.

Services; as example: cleaning service, ATM booth etc.
Event; as example: ICC Cricket World Cup, FIFA etc
Experience; as example: Fantasy Kingdom, Cineplex etc.
Idea; as example: architectures, engineers, interior designing etc.
Information; for example: Wikipedia, dictionary, newspapers etc.
Places; for example: Paris, Disney Land etc.
Properties; as example: Lands, Flats etc.
Persons; for example: Bill Gates, Mark Zuckerberg etc.
Organizations; for example: Microsoft, Google, Unilever etc.

1.5: Basic Three Pillars of Marketing:

1. Value: Value is the inner strength or capability of a product that can solve the problem of a
consumer. Customer perceived value is the customer’s evaluation of the difference between
total customer benefits and total customer costs of a market offering relative to those of
competing offers.
Customer’s Perceived Value (CPV) = Total Customer’s Benefit (TCB) / Total Customer’s Cost
(TCC)
Total Customer’s Benefit (TCB): Refers to the perceived monetary value of the bundle of
economic, functional and psychological benefits customers expect from a given market
offering. Total Customer’s Cost (TCC): the bundle of costs customers expect to incur in
evaluating, obtaining, using and disposing of the given market offering.

2. Satisfaction: Satisfaction a person’s feelings of pleasure or disappointment resulting from

comparing a product’s perceived performance (outcome) in relation to his or her expectations.
The customer’s satisfaction mainly depends on the product’s actual delivery/ performance (P)
in relation to the customer’s expectation (E). If P < E => Dissatisfied If P = E => Satisfied If P
> E => Highly Satisfied/Delighted

3. Customer Retention is the activity that a selling organization undertakes in order to reduce
customer defections and keep them with the organization for a long possible time. It is more
than giving the customer what they expect, it’s about exceeding their expectations so that they
become loyal advocates for the organization and its products. Customer retention can be ensued
by:
1) Customer Relationship Management (CRM): Customer Relationship Management is
the overall process of building and maintaining profitable customer relationships by delivering
superior customer value and satisfaction.
It deals with acquiring, keeping and growing customers and building a long-term connection
between the company and the consumer.
2) Partner Relationship Management (PRM): Partner Relationship Management refers to
the process of maintaining a profitable relationship through a win-win deal with all the partners
working within the organization and outside in order to deliver superior customer value.

1.6: Needs and Types of Needs:

I. Stated Needs: A customer wants to buy a car. When a consumer says he wants something,
like an Expensive car, that is his stated need.
II. Real Needs: When the consumer wants a car for rational, genuine need, like he wants a car
whose operating costs are low over a time, and not just a low initial price, this is his real
need.
III. Unstated Needs: In buying this car, the consumer also expects good service from the
dealer. This is the unstated need.
IV. Delight Needs: When the consumer doesn’t explicitly express that he would want
something but would like to have it anyway, say for example he would like the car dealer
to include an onboard GPS navigation system too; this becomes a delight for him.
V. Secret Needs: There is a desire seldom shown, this may be a secondary benefit of obtaining
the product, yet equally important or might as well be the main reason, but not expressed
so readily. For example, here the consumer wants a car for the status symbol so that he can
show his friends that he is a savvy consumer. This is when he has a secret need to appear
to fit in.

1.7: Demand States:

I. Negative Demand: A major part of the market dislikes the product and may even pay a
price to avoid it. For example: Vaccinations, Dental work, Blood donations and Operations,
for instance. Marketer’s task is to analyze why it is happening and need to offer marketing
programs like – product redesign, lower prices and positive promotions that can change the
a itude. Make it into their likings, etc.
II. Nonexistent Demand: Target consumers may be unaware of or uninterested in the product.
Farmers may not be interested in a new farming method, and college students may not be
interested in foreign-language courses. For example, insurance policy, new ideas/
technology etc. Marketer’s task is to find out ways to connect the benefits of the product
with the person’s natural needs and interests.
III. Latent Demand: Many consumers may share a strong need that cannot be satisfied by any
existing product. As example: Web portal for the Tourism Industry of Bangladesh,
Medicine for Cancer. Marketer’s task is to measure the size of the potential market and
develop a product / service to fulfill this need.
IV. Declining Demand: Consumers begin to buy the products less frequently or not at all.
Every organization faces declining demand for one or more of its products or services. As
example: Typewriter compared to Computer. The Marketer must analyze the reason for
decline and must find a way (which can be redesigning the product or service or even
offering a completely new product or service) to reverse the declining demand.
V. Irregular Demand: Consumers purchases vary on a seasonal, monthly, weekly, daily or
even hourly basis. Many organizations face demand causing problems of idle or
overworked capacity. As example, Cold drinks companies, ice cream manufacturers, and
Water Kingdom during the Winter Season. Umbrella, Raincoats, etc. Marketing task called
Synch-marketing, is to find ways to alter the pattern of demand through flexible pricing,
promotion, and other incentives.
VI. Full Demand: Consumers are adequately buying all the products put in the marketplace.
Organizations face full demand when they are pleased with their volume of business. For
example: Cell phones – Nokia/ Samsung. Marketing task is to maintain the current level of
demand in the face of changing consumer preferences and increasing competition. The
organization must maintain or improve quality and continually measure consumer
satisfaction.
VII. Overfull Demand: More consumers would like to buy the product that can be satisfied.
Some organizations face a demand level that is higher than they can or want to handle. For
example, Utilities services in Bangladesh. Marketing task called De-marketing (Which
includes raising prices or stopping sales promotion) is sometimes required for these
organizations. Selective de-marketing can also be done, the aim of which is to reduce
demand for those parts of the market which are less profitable or less in need of the product
or service.
VIII. Unwholesome Demand: Sometimes consumers may be a reacted to products that have
undesirable social consequences. For example, Cigarettes, Alcohol, Hard drugs. The
marketing task is to get people who like something to give up, using such tools as spreading
fear messages, price hikes, and reduced availability.

1.8: Key Customer Markets:

I. Consumer Markets: Consumer markets are those who purchase products for their
personal consumption and household use. Consumer marketers decide on the product’s
features, quality level, distribution coverage, and Ads and sales promotion expenditures
that will help their brand achieve number – one or – strong position in the market.
II. Business Markets: Business markets are those who buy goods in order to reproduce or
resell a product to others at a profit. They are well-trained and well-informed professional
buyers who are skilled at evaluating competitive offerings. Business marketers must
demonstrate how their products will help these buyers achieve higher revenue or lower
costs. Advertising can play a role, but the sales force, price and the company’s reputation
for reliability and quality may play a stronger one.
III. Global Markets: Global market refers to selling goods & services in different places
outside the national boundaries (targeting the international market places). Marketers must
decide first which countries to enter, how to enter each country (Export, Licenser, Joint
venture partner, contract manufacturer, or solo manufacturer, etc.); how to price their
products in different countries; and how to adapt their communications to fit different
cultures.
IV. Nonprofit and Government Markets: Companies selling their goods to nonprofit
organizations such as mosques, churches, temples, charitable organizations, and
government agencies need to price carefully, because these buyers have limited purchasing
power. Lower selling prices affect the features and the quality the seller can build into the
offering. Much government purchasing calls for bids and the buyers often favors the lowest
bid in the absence of justifying factors.

1.9: Company Marketing Orientations - Concepts of Marketing

1. Production concept is the idea that consumers will favor products that are widely available or
highly affordable. Efficient production and an effective distribution channel is important to achieve
the goal.
- Price of the products remains relatively low so that the potential customers can afford it.
- Countries with inexpensive labor and efficient technology; like China, mostly follow this concept
to expand and dominate the market. As example: pen, marker, match box etc.

2. Product concept is the idea that consumers will favor products that offer the most quality,
performance, and features for which the organization should therefore devote its energy for making
continuous improvements. Followers of this concept, focus on making superior products and
improving them over time. - Research& Development activities for innovation and putting
emphasis on customer preference is essential for following this concept. For example: BMW,
Aarong etc.

3. Selling concept is the idea that consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion effort. Communicating with the customers properly
and creating strong appeal about the products or services among them.
Purpose of following this concept is to sell more stuff to more people to make more profit.
The selling concept is practiced most aggressively with unsought goods. For example: Metlife
alico, asian sky shop etc.

4. Marketing concept is the idea that achieving organizational goals depends on knowing the
needs and wants of the target markets and delivering the desired satisfactions be er than competitors
do. Customer is the boss – yesterday, today and tomorrow. Instead of a product-centered, “make
and sell” philosophy, business shifted to a customer-centered,“sense and respond” philosophy by
this concept. For example: KFC, GrameenPhone, Nokia etc.

5. Societal marketing concept is the idea that a company should make good marketing decisions
by considering consumers’ wants, the company’s requirements, consumers’ long-term interests,
and society’s long-run interests. Thinking and acting as a member/part of the society (participating
in Corporate Social Responsibilities [CSR] activities). As example: British American Tobacco in
planting trees.

6. The Holistic Marketing concept is based on the development, design and implementation of
marketing programs, processes and activities that recognizes that “everything ma ers” in marketing
– and that a broad, integrated perspective is often necessary.

Four broad components characterizing holistic marketing: Relationship marketing, Integrated

marketing, Internal marketing & performance marketing or socially responsible marketing.
As example: Dutch Bangla Bank Limited, Unilever etc.
 Module 2 (Developing Marketing Strategies and Plans)

2.1: Marketing Mix:

The company’s marketing strategy outlines which customers the company will serve and how it
will create value for these customers. And for developing effective marketing programs marketers
depend on the marketing mix.
Marketing mix is the set of tools the firm uses to implement its marketing strategies;

4P (Seller’s Perspective) 4C (Customer’s/Consumer’s

Perspective)
Product Customer solution

Price Customer cost

Place Convenience

Promotion Communication

i) Product is the goods and services in combination that the company offers to the target market.

ii) Price is the amount of money customers have to pay to get the product.

iii) Place (distribution) is the company activities that make the product available to target
customers at their convenience.

iv) Promotion is the activities that communicate the merits of the product and persuade target
customers to buy it.

v) People: All human actors who play a part in service development & delivery, and thus influence
the buyer’s perceptions. For examples: Doctors for the Hospitals, Call center agents for
Telecommunications and Beauticians for Personal care service providers.

vi) Process: The actual procedures, mechanisms, instruments, and flow of activities by which the
service is delivered to the ultimate customers/ beneficiaries. For examples: Bank’s ATM Booths
for money withdrawal, online shopping, Home delivery from restaurants etc.

vii) Physical Evidence: The environment in which the service is produced & delivered and where
the firm & customer interact with each other. In other ways, physical evidence refers to any tangible
components that facilitate performance or communication of the service.
For example: Infrastructural benefits and Logistics facilities like Bank premise, Hotel lobby,
Customer care offices, Hospital’s operation theaters etc.
2.2: Marketing Plan:
Marketing plan is a road map for the marketing activities of an organization for a specific future
period of time.
- It is the central instrument for directing and coordinating all the marketing efforts. The marketing
plan operates at two levels:
i) Strategic Marketing plan
ii) Tactical Marketing plan

Planning Activities includes,

1) Defining a corporate mission:
A mission statement refers to a written declaration of an organization's core purpose for existing
and focus that normally remains unchanged over time.
It gives employees and stakeholders of the firm a clear sense of direction and purpose A Corporate
Mission Answers 5 questions:
What is our business?
Who is the customer?
What is of value to the customer?
What will our business be?
What business should we be in?

2) Establishing strategic business unit:

● Strategic Business Unit (SBU) refers to a single unit of the company that has a separate
mission and objectives and that can be planned independently from other company
businesses. - Each individual Product, Brand or Subsidiary business of an organization can
be considered as Strategic Business Units (SBU).
3) Assigning resources to each SBU: Analyzing the Current Business Portfolio is the process by
which management evaluates the products and businesses (SBUs) making up the company..
Steps in Analyzing the Current Business Portfolio:
✔ Identifying the key businesses units (SBUs)
✔ Assessing the a reactiveness of its various SBUs
✔ Deciding how much support each SBU deserves
4) Assessing growth opportunities: Assessing the potential growth and threat also depth analysis
is made in this part. Beyond evaluating current business, designing the business portfolio
involves finding businesses and products the company should consider in future.

2.3: BCG Matrix/ the Boston Group Matrix:

BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position
of the business brand portfolio and it’s potential. It classifies a business portfolio into four
categories based on industry reactiveness (growth rate of that industry) and competitive position
(relative market share).

❖ Stars: Stars are high-growth, high-share businesses or products. They often need heavy
investments to finance their rapid growth. Eventually their growth will slow down, and they
will turn into cash cows.
 ❖ Cash Cows: Cash cows are low-growth, high-share businesses or products. These
established and successful SBUs need less investment to hold their market share. Thus,
they produce a lot of the cash that the company uses to pay its bills and support other SBUs
that need investment

❖ Question Marks: Question marks are low-share business units in high-growth markets.
They require a lot of cash to hold their share, let alone increase it. Management has to think
hard about which question marks it should try to build into stars and which should be phased
out.

❖ Dogs: Dogs are low-growth, low-share businesses and products. They may generate
enough cash to maintain themselves but do not promise to be large sources of cash.

2.4: Product/Market Expansion Grid Strategies:

❖ Market penetration: A strategy for company growth by increasing sales of current

products to current market segments without changing the product. Companies go for
market penetration by adding new stores in current market areas to make it easier for more
customers to visit, improve advertising, prices, service or store design. Examples: SMC
Oral saline, COSCO soap – they are operating in the same market with unchanged or
undifferentiated.
❖ Market development: A strategy for company growth by identifying and developing new
market segments for current company products. Companies follow this strategy by
identifying and targeting new demographic or geographic markets. And increasing sales of
current products to those market segments without changing basic products.
Examples: SQUARE Group is creating new markets for their Ruchi and Radhuni branded products
and is newly packed to be exported to Dubai and other middle-east countries.
❖ Product development: A strategy for company growth by offering new or modified
products to current market segments. Companies follow product development strategy by
adding and offering new designs, styles, flavors, colors, sizes or modified products to the
existing customers. Examples: Unilever has changed the color, fragrance, size of their
recognized brand “Lifebuoy” and same is for Lux, Sun Silk and Fair & Lovely.
❖ Diversification: A strategy for company growth through starting up or acquiring
businesses outside the company’s current products and current markets. Companies follow
this strategy by establishing or buying new businesses and ventures for adding completely
new categories of products to serve new customer segments.
Examples: From the flagship business ‘Tea & Jute’, Transcom Group diversified their business to
Food & Beverage, Pharmaceuticals, Electronics, Media etc.

2.5: Marketing Analysis: SWOT Analysis

SWOT refers to a formal framework for identifying and framing organizational growth
opportunities. The SWOT analysis (alternatively SWOT matrix) is a structured planning method
used to evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a
business venture. A SWOT analysis can be carried out for a product, place, industry or person.
Strengths include internal capabilities, resources, and positive situational factors of a company that
may help to serve customers and achieve company objectives.
Weaknesses include internal limitations and negative situational factors of a company that may
interfere/hamper (create barriers) with company performance.

Opportunities are favorable factors or trends in the external environment that the company may be
able to exploit to its advantage.
Threats are unfavorable factors or trends that may present challenges to organizational
performance.

2.6: Strategic Alliances:

i) Product or Service alliances: When one company licenses another to produce and sell its
products under some specific terms and conditions, or two companies jointly market their
complementary products or a new product.

Transcom Group
ii) Promotional Alliances: When one company agrees to carry a promotion for another company’s
goods or services. And under this situation both companies are benefited; manufacturer for be er
promotion and promoter for special price.

iii) Logistic Alliances: When one company offers logistical services for another company’s
product for a long-term basis under mutual agreement.

Using ; made agreement with

iv) Pricing Alliances: When two or more companies join in a special pricing collaboration. And
in this situation not only the business houses, the ultimate customers are also benefited.
 Module 3 Analyzing Consumer Markets

3.1: Consumer Market:

Consumer market refers to all the individuals and households who buy or acquire goods and
services for personal consumption. While purchasing and using, Consumer market prefers products
that offer high features, be er quality, massive distribution and a reactive communications.

3.2: Consumer Buying Behavior:

Consumer buying behavior is defined as the behavior that consumers display in searching for,
purchasing, using, evaluating, and disposing of products and services that they expect will satisfy
their needs.
Consumer behavior focuses on how individuals make decisions to spend their available resources
(time, money, effort) on consumption related items. That includes what they buy (what type of
products, what brand), why they buy it, when they buy it, where they buy it, how often they buy it,
how often they use it, from where they buy it, how they evaluate it after the purchase, and the
impact of such evaluations on future purchases and how they dispose it.

3.4: Types of Buying Decision Behavior:

● Complex buying behavior occurs when consumers are highly involved with an expensive
or risky purchase, and see the difference among brands strongly.
● Dissonance-reducing buying behavior occurs when consumers are highly involved with
an expensive, infrequent, or risky purchase, but see li le difference among brands.
● Habitual buying behavior occurs when consumers have low involvement and there is li
le significant brand difference.
● Variety-seeking buying behavior occurs when consumers have low involvement and
there are significant brand differences.

3.5: Factors Influencing Consumer Behavior:

A consumer’s buying behavior is influenced by:

1) Cultural Factors:
Culture is the set of basic values, perceptions, wants, and behavior learned by a member of society
from family and other important institutions. Culture includes Language, knowledge, laws,
religion, food, customs, music, art, work pa ern, products and other articles that give a society a
distinctive nature from others.
Subculture refers to a group of people within a culture with shared value systems based on their
common life experiences and situations. Subcultures include nationalities, religious groups, racial
groups, geographic regions.
Social classes are relatively homogeneous and long-term division in the society, which is
hierarchically ordered and whose members share similar values, interests, and behaviors. The
different social classes are; Upper Classes, Middle Classes, Lower Classes
Classifications of Social Classes-
 Upper classes:
Upper Uppers (Company chairman, Industrialists)
Lower Uppers (Company CEO, MD, Vice President)
 Middle classes:
Upper Middles (Professionals, Businessmen)
Middles (Not so rich nor Poor) Lower Middles (Clerks, CNG drivers)
 Lower classes:
Working Class (Garment workers, Day laborers)
Extreme Poor (Beggars)
 Characteristics of Social Classes:
Within a class, people tend to behave alike. Social classes differ in dress, speech pa erns,
recreational preferences and others.
Social class conveys perceptions of inferior or superior position.
Class may be indicated by a cluster of variables like occupation, income, wealth, education and
other orientation rather than a single variable.
Class designation is mobile over time. Individuals can move up or down the social class ladder
during their lifetime.
2) Social Factors
i) Reference Groups:
A person’s reference groups consist of all the groups that have a direct (face-to face) or indirect
influence on his/ her a bit under or behavior.
a) Types of Reference Groups:

i. Membership Groups: Group having direct influence on a person. Some membership groups are:
Primary Membership Groups (Continuous and informal interactions; like family, friends,
neighbors and co-workers)
Secondary Membership Groups (Less continuous and formal interactions; like religious and
professional groups and trade unions)

ii. Aspirational Groups: Groups where a person hopes to join, they are also called the desired
groups. (Need some preparation to join with them) Example: Professional Forum/Social Clubs
(Dhaka club, Doctor’s Association).

iii. Dissociative Groups: Groups whose values and behaviors are rejected by the common people.
And a person wishes to maintain a distance from them. (Need some preparation to protect us from
them) Example: Terrorist groups, Special interest groups.

iv. Family is the most important consumer-buying organization in society. Family members can
strongly influence buyer behavior.
3) Personal Factors
Age and life-cycle stage: People buy different goods and services over a lifetime. Tastes in food,
clothes, furniture, recreation & entertainment are often age related. Example: Kids look at the
packaging rather than the actual product, while adults actually read the nutrition labeling.
Different life cycle stages:
Youth: younger than 18
Getting started: 18-35
Builders: 35-50
Accumulators: 50-60
Preservers: over 60
Occupation: Occupation affects the goods and services bought by consumers. And Occupation
influences consumption patterns also. Because purchasing patterns vary between people of
different occupations & classes in the society. Marketers try to identify the occupational groups
that have above average interest in their products and services.
Example: Professionals prefer to wear plain clothes or formal dresses, but Students may prefer
casual dress materials.
Economic Situation: A person’s economic situation (purchasing power) will affect product choice
and consumption habits. Economic situation includes trends in: Personal income, Savings rates,
Credit & Interest rates Example: Mercedes Car for people with lots of money, power and resources.
But Regular Toyota & Maruti – more affordable for the middle-class customers.
Personality & Self-concept refers to the unique psychological characteristics of a person that
influences his or her buying behavior. Personality can be useful in analyzing consumer behavior
for certain product or brand choices.
For Example: The consumption of perfumes and preferences for fashion, entertainment &
recreation can vary from person to person, even gender to gender.
Lifestyle: Lifestyle is a person’s pa ern of living as expressed in his or her psychographics. People
from the same subculture, social class and occupation may lead quite different lifestyles because
of different situations. A person’s Lifestyle is measured by AIOs theory - Activities, Interest and
Opinion in the environment.
Activities (work, shopping, social events)
Interests (food, fashion, recreation)
Opinions (about themselves, business & social issues)
4) Psychological Factors
i) Motivation relates to our desire to achieve a certain outcome.
- A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction
(fulfilling needs).
● Maslow’s hierarchy of needs
Psychologist Abraham Maslow introduced a concept of a hierarchy of needs. His hierarchy
proposes that people are motivated to fulfill basic needs before moving on to meet higher level
growth needs. Maslow’s Theory of Motivation categorizes needs into five stages, with the bo om-
most need demanding the most immediate satisfaction. The stages include:

Physiological Needs: These are the most basic of survival needs for a human, and since they
require the most immediate satisfaction, they are situated at the most bo om of the pyramid. A
person stuck in this stage of needs will only be motivated to satisfy his physiological needs, rather
than worrying about the satisfaction of the needs existing in the other stages. Example: Air, food,
water, shelter.
Safety Needs: The second level is a person’s need for safety. A person stuck on this level of needs
will be entirely motivated to fulfill or satisfy his safety needs, rather than giving thought to the
satisfaction of the needs on other levels. Example: safety, shelter, security etc.
Social Needs: We humans are programmed to live together while being the only species with the
ability to effectively communicate. Thus, we have Social Needs as well, including: the need to
make and maintain strong bonds with other humans, develop relationships along with romantic
relationships, etc. A person stuck on this level will be motivated to find bonds and relations which
will satisfy his social needs. Example: Belongingness, love, affection etc.
Esteem Needs: Esteem needs are ego needs or status needs. People develop a concern with going
recognition, status, importance, and respect from others. Most humans have a need to feel
respected; this includes the need to have self-esteem and self-respect. Example: self-esteem, self-
confidence, achievements etc.
Self-actualization Needs: This level of need refers to what a person's full potential is and the
realization of that potential. Maslow describes this level as the desire to accomplish everything that
one can, to become the most that one can be. Example: personal growth, self-fulfillment, peak
experiences, creativity etc.
● Herzberg’s two-factor theory
Fredrick Herzberg developed a two-factor theory that distinguishes dissatisfies and satisfiers of the
customers.
Dissatisfies: Factors that cause dissatisfaction like not offering proper quality, less features, lack
of warranty and after sales services.
Satisfiers: Factors that cause satisfaction like quality product, more options, simplicity and user-
friendly mode of use and operations.
✓ Implication of Herzberg’s Theory:
Herzberg’s theory has two implications:
First, sellers should do their best to avoid dissatisfaction. For example – Reducing defective
products, avoiding manual or poor service policy etc.
Second, the seller should identify the major satisfiers or motivators of purchase in the market and
supply them. For example – Beer quality, innovation and new features of products, ensuring proper
after sales services.
ii) Perception is the process by which an individual selects, organizes, and interprets information
inputs to create a meaningful picture of the world. (How we see ourselves and the world we live
in) a Perceptual Process:
Selective a enation is the tendency for people to screen out most of the information to which they
are exposed (a reactiveness of stimuli).
Selective distortion is the tendency for people to interpret information in a way that will support
what they already believe.
Selective retention is the tendency to remember good points made about a brand they favor and to
forget good points about competing brands.
iii) Learning is the changes in an individual’s behavior arising from experience and occurs through
interplay of: Drives, Stimuli, Cues, Responses, Reinforcement.
 Module 4 Analyzing Business Markets

4.1: Organizational Buying:

Decision-making process, by which formal organizations establish the need for purchased products
and services, and identify, evaluate, and choose among alternative brands and suppliers. For
instance: Buying procedures and behaviors of Corporate/Institutional purchase and Governmental
purchase.

4.2: Business Market:

The Business Market consists of all the organizations that acquire goods and services used in the
production of other products or services that are sold, rented or supplied to others.
The major industries making up the business market are agriculture, forestry, fisheries, mining,
manufacturing, construction, transportation, communication, public utilities, banking, finance,
insurance, distribution and other services.

4.3: Characteristics of Business Markets:

❖ Fewer, Larger Buyers: The business marketer normally deals with fewer but larger buyers
than the consumer marketer does. Example: B2B Marketing – Dunlop Tires to Automobile
Manufacturers, Aircraft Engines to BOEING, etc.
❖ Close Supplier-Customer Relationships: Because of the smaller customer base and the
importance and power of the larger customer, suppliers are frequently expected to
customize their offerings to individual business customer needs. Business buyers often
select suppliers who also buy from them. Example: Paper manufacturer that buys chemicals
from a chemical company that buys a considerable amount of its paper.
❖ Professional Purchasing: Business goods are often purchased by trained purchasing
agents who must follow their organization’s purchasing policies, constraints and
requirements. Many of the buying instruments- for example requests for quotations,
proposals and purchase contracts--- are not typically found in consumer buying. Example:
Buying Houses for the Garments Sector. They send requests for quotations, invite
proposals, evaluate offerings then issue purchase orders.
❖ Multiple Buying Influences: More people typically influence business buying decisions.
Buying committees consisting of technical experts and others are common in the purchase
of major goods. Business marketers have to send well trained sales representatives and sales
teams to deal with the well trained buyers. Example: People from different departments try
to influence the buying process to serve their interest.
And some special interest groups outside the company can also interfere in business buying.
Multiple Sales Calls: Because more people are involved in the selling process, it takes multiple
sales calls to win most business orders. Example: In case of selling furniture, Otobi would have
had to visit EUB first to introduce their products, and if the management was interested in a
purchase, Otobi would have to come again with quotations, catalogs, and other relevant details,
and a final time to take the order.
❖ Derived Demand: The demand for business goods is ultimately derived from the demand
for consumer goods. For this reason, the business marketer must closely monitor the buying
patterns of ultimate consumers. Example: TOYOTA buys steel because consumers buy
 cars. If consumer demand for cars drops, so will the demand for steel and all other products
used to make cars.
❖ Inelastic Demand: Sometimes demand of some business goods & services are not highly
affected by price changes. Consumers will show similar types of demand almost all the
time. That is why marketers of those products will demand one standard quantity of raw
materials. Example: Demand for Raw materials of salt and medicine manufacturers. No
ma er how the final price (Increase/decrease) of products is; Consumer will use these
products according to their regular needs. So the manufacturers need a consistent level of
supply all the time.
❖ Fluctuating Demand: Though business buyers demand products according to consumer’s
need; but sometimes the demand for business goods and services tends to become unstable
than the demand of consumer goods & services. Example: A given percentage increase in
consumer demand can lead to a much larger percentage increase in the demand for plant
and equipment necessary to produce the additional output.
❖ Geographically Concentrated Buyers: The geographical concentration of producers
helps to reduce selling costs. At the same time, business marketers need to monitor regional
shifts of certain industries. Example: Motijheel is prominent for corporate offices, again
Dhanmondi & Banani areas are for private universities. So it is profitable for marketers to
send their sales representatives to the respective areas.
❖ Direct Purchasing: Business buyers often buy directly from the manufacturers rather than
through intermediaries, especially items that are technically complex or expensive.
Example: Singapore Airlines buying aircrafts from AIRBUS or BOEING, etc. Developer
Company (Asset Developments) purchases building materials like steel, cement and others
directly from the manufacturer (Bashundhara Group).

4.4: Major Types of Buying Situations:

The business buyer faces many decisions in making a purchase. The number of decisions depends
on the buying situations like:
a) Straight Rebuy: The buyer reorders something without any modifications. It is usually handled
on a routine basis (e.g. Office supplies, bulk chemicals) by the purchasing department. Based on
past buying satisfaction, the buyer simply chooses from the various suppliers on its list.
The suppliers make an effort to maintain product and service quality and often propose automatic
reordering systems to save time.
b) Modified Rebuy: The buyer wants to modify product specifications, prices, delivery
requirements or other terms. The modified rebuy usually involves more decision participants than
does the straight rebuy. The in-suppliers may become nervous and have to protect their account.
The out suppliers see an opportunity to propose a be er offer to gain some business.
c) New Task: It is a purchase decision by the customers that requires thorough research. The
greater the cost or risk, the larger the number of decision participants and greater their efforts to
collect information and therefore the longer the time to make a decision. When a purchaser buys
the product or service for the first time. For example, a new security system. Over time, new buy
situations become straight rebuy and routine purchase behavior.

4.5: Participants in the Business Buying Process:

Buying Center is all of the individuals and units that participate in the business decision-making
process such as:
i. Initiators: Those who request that something needs to be purchased. They may be users or others
in the organization. For example, a request for purchasing desktop computers for NUBTK.

ii. Users: Those who will use the product or service. In many cases, the users initiate the buying
proposal and help define the product requirements. For example, Teachers and Office Staff.

iii. Influencers: People who influence the buying decision. They often define specifications and
also provide information for evaluating alternatives. Technical personnel particularly are important
influencers. For example: IT Department of NUBTK.

iv. Deciders: People who decide on product requirements or on suppliers. For example, the
Department of Procurement with the Department of Accounts and Finance.

v. Approvers: People who authorize the proposed actions of deciders or buyers. For example,
Management of NUBTK.

vi. Buyers: People who have formal authority to select the suppliers and arrange the purchase
terms. Buyers may help shape product specifications, but they play their major role in selecting
vendors and negotiating. As example, Director of Procurement.

vii. Gatekeepers: People who have the power to prevent sellers or information from reaching
members of the buying center. As example, Receptionists, Office Executives, Telephone operators
may prevent salespersons from contacting users or deciders.

4.6: Types of Business Customers:

A. Price-oriented Customer: Price is everything for them. They always wait and look for the
lowest possible price. It is also called Transactional selling (single dealings) like purchasing
any product from auction, exhibitions and trade fairs etc.

B. Solution-oriented Customers: They want low prices but will respond to arguments about
more dependable supply or service. It is also called Consultative selling like buyer for
computer and technology related products.

C. Gold-standard Customers: They want the best performance in terms of product quality,
assistance, delivery reliability and so on. It is also called Quality selling like selling to Brand
Cars, Brand Watches manufacturers.

D. Strategic-value Customers: They want a fairly permanent and sole-supplier relationship

with their supplier companies. It is also called Enterprise selling like strategic partnership
between customer and supplier; Partnership between NUBTK and Hatil.

4.7: Types of Products in Business Purchasing Processes:

1. Routine products: These products have low value and cost to the customer and involve li
le risk of supply. So Business customers will seek the lowest price and emphasize routine
 ordering. Suppliers will offer to standardize products. Example: Office Supplies – Paper,
File Folders, Clips.
2. Leverage products: These products have high value and cost to the customer but involve
li le risk of supply because many companies make them. The supplier knows that the
customer will compare market offerings and costs with other sellers. Example: Tier for car,
Computer accessories, building materials and office furniture.

3. Strategic products: These products have high value and the cost to the customer also
involves high risk of supply. The customer will want a well-known and trusted supplier and
be willing to pay more than the average price. The supplier should seek strategic alliances.
Example: Complex Computer software and Security Systems, Special technical support for
operation etc.

4. Bowl neck products: These products have low value and cost to the customer but they
involve some risk of supply. The customer will want a supplier who can guarantee a stable
supply of reliable products. Example: Spare parts for Automobile and Electronic product
producers.
 Module 5
(Identifying Market Segments, Market Targeting and Market Positioning)

5.1: Mass Marketing: In Mass Marketing, the seller engages in the mass production, standard
price, mass distribution and mass promotion for one product for all the buyers.

5.2: Market Segmentation: - Dividing a whole market into different smaller groups of buyers
with distinct needs, characteristics or behaviors who might require separate products or marketing
mixes. The company identifies different ways to segment the market and develop profiles of the
resulting market segments.

5.3: Levels of Market Segmentation:

Segment Marketing: Targeting a group of customers from different available groups who share a
similar set of needs and wants as opposed to mass marketing. The company can often be er design,
price, disclose and deliver the product or service to the selected group and also can fine tune the
marketing program and activities to be er reflect competitors’ marketing.
Market segments can be built in many ways. One way is to identify preference segments. Three
different patterns can emerge.
Homogeneous preferences: Consumers have roughly the same preference. The market shows no
natural segments.
Diffused preferences: Consumer preferences may be scared, indicating that consumers vary
greatly in their preferences.
Clustered preferences: Result when natural market (distinct preference clusters) segments
emerge from groups of consumers with shared preference.
Niche Marketing: A niche is a more narrowly defined specific group seeking a distinctive mix of
benefits. Marketers usually identify niches by dividing a segment into sub-segments. To a ract the
customers; marketers can go for either differentiation or cost leadership. For example, Hallmark-
Cards with special message, Nike- Sportswear, Nokia phones- Bengali Versions for less educated
people.
Local Marketing: Marketing programs tailored to the needs and wants of local customer groups.
For example, Local Newspapers, Global bank’s local operations, Movies dubbed in local
languages.
Individual Marketing: The ultimate level of segmentation. Segments of one customized
marketing, one-to-one marketing etc. For example, Special cars, Tailors, Beauty salon, Interior
design, Event management firms.

5.4: Bases for Market Segmentation:

The first step in developing a segmentation strategy is to select the most appropriate bases on which
to segment the market. Nine major categories of consumer characteristics provide the most popular
bases for market segmentation. These categories are described below:
❖ Geographic Segmentation: In Geographic Segmentation, the market is divided by
location. The theory behind this strategy is that people who live in the same area share some
similar needs and wants and that these needs and wants differ from those of people living
in other areas.
 Segmentation base Selected segmentation variables

Region Southeast, Hill Tracks, North Bengal, Sundarbans

City Size Major Metropolitan Areas, Small Towns, Cities

Density of Area Urban, Suburban, Exurban, Rural

Climate Temperate, Hot, Humid, Rainy

The company can operate in one or few areas or it can operate in all but pay a mention to local
variations.
Geographical markets also vary in their product preferences and requirements.
❖ Demographic Segmentation:
Demographic segmentation is the process of segmenting the market based on demographic
characteristics. Demography refers to the vital and measurable statistics of a population. Age, sex,
marital status, income, occupation, and education, are most often used as the basis for demographic
market segmentation.
Demographics help to locate a target market. It is the most accessible and cost effective way to
identify a target market. These characteristics are easy to measure. Demographic variables reveal
trends, such as shifts in age, gender, and income distributions that signal business opportunities to
alert marketers.
Segmentation base Selected segmentation variables

Age Under 12, 12-17, 18-34, 35-49, 50-64, 65+

Sex Male, female

Marital Status Single, Married, Divorced, Widowed

Family Life Cycle Bachelorhood, honeymooners, parenthood, post-parenthood and

dissolution
Income Under Tk. 10,000, Tk 10,000 - Tk. 25,000, Tk. 25,000 - Tk. 50,000,
Tk. 50,000 -
Tk. 75,000, Tk. 75,000 - Tk.100,000, Tk. 100,000 and over
Education Illiterate, Primary School, High School, College, University, Graduate
Studies

Professional, Blue-collar, White-collar, Agricultural, Military, Daily

Occupation
Laborers
 ❖ Psychological Segmentation:
Psychological segmentation (characteristics) refers to the inner or intrinsic qualities of the
individual consumer as a basis for segmentation. Consumers can be segmented in terms of their
needs and motivation, personality, perceptions, learning, level of involvement, and a itudes.

Segmentation base Selected segmentation variables

Needs – Motivation Shelter, Safety, Security, Affection, Sense of Self Worth

Personality Extroverts, Introvert, Novelty (Innovation) Seekers, Aggressive

Perception Low-risk, Moderate-risk, High-risk

Learning Involvement Low-involvement, High-involvement

Attitudes Positive attitude, negative attitude

❖ Psychographic Segmentation:
Psychographic segmentation (segmenting based on personality and a itude measures) is closely
aligned with psychological research, especially personality and a itude measurement.
Commonly referred to as lifestyle analysis, psychographic segmentation has proven to be a
valuable marketing tool to help identify promising consumer segments that are likely to be
responsive to specific marketing messages. Psychographic profiles of consumer segments can be
thought of as being composed of a composite of consumers’ measured activities, interests, and
opinions (i.e., AIOs).
Segmentation base Selected segmentation variables

Lifestyle Economy Minded, Couch Potatoes, Outdoors Enthusiasts, Status

Segmentation Seekers

❖ Socio-cultural Segmentation:
Socio-cultural segmentation studies sociological and anthropological group characteristics, as
opposed to individual characteristics. Socio-cultural variables provide further bases for market
segmentation. Consumer markets have been subdivided into segments on the basis of stages in the
family life cycle, social class, core cultural values, sub-cultural memberships, and cross-cultural
affiliation.
Segmentation base Selected segmentation variables

Culture Bangladeshi, Indian, African, European, Chinese, American

Religion Muslim, Hindu, Christianity, Buddhist, Jews

Sub-cultures Tribal, Chakma, Marma, Garo

 Social Class Lower, Middle, Upper

Family Life Cycle Bachelors, Young Marrieds, Full Nesters, Empty Nesters

❖ Use-Related Segmentation:
Use-related segmentation categorizes consumers in terms of product-service, or brand usage
characteristics such as usage rate, awareness status, and degree of brand loyalty. Rate of usage
segmentation differentiates among heavy users, medium users, light users, and nonusers of a
specific product, service, or brand. Brand loyalty identifies those customers who continually
purchase the same brands, as opposed to those consumers who continually switch brands.
Awareness status encompasses the notion of buyer readiness, consumer awareness, or interest
level. Marketers need to determine whether potential customers are aware of the product, interested
in the product, or need to be informed about the product.
Segmentation base Selected segmentation variables

Usage Rate Heavy users, Medium Users, Light Users, Nonusers

Awareness Status Unaware, Aware, Interested, Enthusiastic

Brand Loyalty Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers
A market can be segmented by consumers’ loyalty level. Consumers can be loyal to brands (Coke/
Pepsi), stores (Agora/ Nandan), companies (Unilever/ Square Toiletries), restaurants (KFC/ BFC),
hospitals (United/ Apollo) etc. Buyers can be divided into four groups according to brand loyalty
status:
Hard-core Loyals: Consumers who buy only one brand all the time for different types of products
under a particular category. They are the people who never change the brand at any cost. Extremely
brand loyal consumers.
Split Loyals: Consumers who are loyal to different brands for different types of products under a
particular category. These consumers split their choice for different types of products & brands;
though a single brand has different types of products.
Shifting Loyals: Consumers who shift loyalty from one brand to another (within the selective
brands) for a single type of product. Sometimes the post purchase experience can force the
consumer to shift the brand.
Switchers: Consumers who show no respect to any single brand. They can change the brand any
time. These consumers are frequent switchers, and they are not brand loyal at all.
❖ Usage Situation Segmentation:
The occasion or usage situation often determines what consumers will purchase or consume. Some
marketers try to install the idea of suitability for a particular occasion. Many products are promoted
for special usage occasions.
Segmentation base Selected segmentation variables

Time Leisure, Work, Rush, Morning, Night

 Objective Personal, Gift, Snack, Fun, Achievement

Location Home, Work, Friend’s Home, In-store

Person Self, Family Members, Friends, Boss, Peers

❖ Benefit Segmentation:
Marketers and advertisers seek to isolate one particular benefit that they should communicate to
the consumer. Changes in lifestyle play a major role in determining the key product benefits to
promote. Benefit segmentation can be used to position various brands within the same product line.
Examples of benefits that are commonly used include: financial security (Prudential Financial),
reduced calories (Amstel Light), comfort (Bausch & Lomb disposable contact lenses), good health
(Egg Beaters egg substitute), proper fit (Wrangler women’s jeans), and backache relief (Advil).
Segmentation base Selected segmentation variables

Benefit Segmentation Convenience, Social Acceptance, Long Lasting, Economy,

Value-for the-money

5.5: Market Targeting: Target marketing is the process of evaluating each market segment’s
reactiveness and selecting one or more segments to enter.

5.6: Market Targeting Strategies:

Undifferentiated marketing targets the whole market with one standard offer. And it’s
characteristics are;

1. Mass marketing: Focuses on common needs (basic buyer need) rather than what’s different
Relying on mass production, distribution and communication.

2. Differentiated marketing targets several different market segments and designs separate offers
for each segment. And it’s characteristics are; Goal is to achieve higher sales and stronger position
in the market within the segments - Developing separate marketing mix (product, price, place &
promotion) strategies for each segment More expensive than undifferentiated marketing

3. Concentrated marketing targets a small share (niche: narrowly defined market) of a large
market of those who deal with specific needs and problems. And it’s characteristics are; Expertise
about the product or services Have proper knowledge of the market Use more effective and
efficient marketing tools to a ract the customers

4. Micromarketing is the practice of tailoring (customizing) products and marketing programs to

suit the tastes of specific individuals and locations. And the types are: Local marketing (HSBC,
Amanah bank account) for Bangladesh market Individual marketing (Tailor’s shop)

5.7: Market Positioning: Seeing the competitive positioning for the product and creating a
detailed marketing mix. Use of 4p’s in a way that creates better value for the customers, and creates
a unique identity for the company.
 Module 6
(Setting Product and Branding Strategy)

6.1: Product: A Product is anything that can be offered to a market to satisfy a want or need,
including physical goods, services, experiences, events, persons, places, properties, organizations,
information, and ideas etc.

6.2: Product Classification: We can classify products mainly by two ways;

1. Non-durable goods: Non-durable Goods are the tangible goods that are frequently purchased
and consumed quickly. They are normally consumed in one or few uses. Because these goods
are purchased frequently, the appropriate strategy is to make them available in many locations,
charge a small markup and advertise heavily to induce trial and build preference. As Example:
Soft drinks, Biscuits, Soap, etc.
2. Durable goods: Durable Goods are the tangible goods that normally survive many uses. And
consumers do not purchase these products frequently. Durable goods normally require selective
distribution, more personal selling and customization, command a higher margin and demand
more quality, seller guarantee and after sales services. As Example: Clothing, Home
Appliances and Electronics items etc.

6.3: Services: Service is a form of product that consists of activities, benefits or experiences
offered for sale that are essentially intangible. As Example: Hotel, Hospital and Banking service
etc.

6.4: The Characteristics of Services are;

❖ Intangibility: Intangibility refers to the fact that services cannot be seen, tasted, felt, heard,
or smelled before they are purchased and used. As Example: Services of Hospitals, Air
lines, Hotel and Restaurants etc.
❖ Inseparability: Inseparability refers to the fact that services cannot be separated from their
providers. As Example: Services from Doctors, Lawyers or any other Consultants cannot
be separated.
❖ Variability: Variability refers to the fact that service quality depends on who provides it
as well as when, where, and how it is provided. As Example: Because of different person,
place & time services may vary from the same organization.
❖ Perishability: Perishability refers to the fact that services cannot be stored for later sale or
use. Example: When a concert or any cultural event is finished, the organizer can not sell
the empty seats. b) Use of Product:

6.5: Classifications of Consumer Products:

Consumer products: Consumer Products are offered to the market for personal consumption of
the ultimate customers and they are classified based on how the consumer buys them (buyer’s
attitude).
A. Convenience Products: Convenience Products refers to the consumer goods that the customer
usually buys frequently, immediately, and with a minimum comparison and buying effort.
Examples: FMCGs, Grocery items etc.
❖ Shopping Products: Shopping Products refers to the consumer goods that the customer
carefully compares on suitability, quality, price and style in the process of selection and
final purchase. Consumers do not buy regularly and they spend time choosing what to
choose. The products may be of higher price than the convenience goods. As Example:
Furniture, Personal Computer, Camera, Mobile phone, Home Appliances etc.
❖ Specialty Products: Specialty Products refers to the consumer goods with unique
characteristics or brand identification for which a significant group of buyers is willing to
make a special purchase effort. It can also be referred to as Life Changing Products or
Egoistic products. The prices charged to this type of product are higher than the other types.
Marketers sell their products through selective outlets or distributors. As Example: Special
Medical services, Exclusive branded products like dress, car and others.
❖ Unsought Products: Unsought Products refers to the consumer goods that the consumer
either does not know about or does not normally think of buying. Consumers do not usually
buy this type of product until and unless it is required. So huge Advertisements and
promotional activities are necessary to make them interested in the products. As Example:
Life Insurance policy, Encyclopedia etc.
B) Industrial products:
All Business Products and Services can be classified in three major categories.
● Entering Goods
● Become part of the finished product
● Cost assigned to the manufacturing process
● Foundation Goods
● Capital Items
● Typically depreciated over time
● Facilitating Products
● Support organizational operations
● Handled as overhead expenses

6.6: Levels of Product:

❖ Core benefit represents the fundamental value; what the buyer is really buying while
purchasing any physical goods or services. This is basically the principal benefit of that
particular product and it may vary depending on the nature of the product. Example: A
hotel guest is buying “secure & comfortable rest and sleep” from a hotel room.
❖ Basic product refers to transformation or representation of the core benefit of a product by
physical objects or services. Customers will look for the Packaging, Brand Name, Quality,
Features and Design for any product. Example: Hotel room includes a bed, furniture, fresh-
room and other internal arrangements.
❖ Expected product refers to a set of rebuts and conditions buyers normally expect when
they purchase any product. The expectation of the customer depends on the nature and price
of the product. Example: A hotel guest may expect a clean bed, fresh towels, quiet
environment and other facilities like laundry and room services.
 ❖ Augmented product represents the additional services or benefits of the actual product
that exceeds customer expectations. Customers will look for the Installation, Delivery and
Credit, After sales service, Warranty, etc. Example: Offering music system (entertainment
services), gym facilities and special menus in food for the guests of a hotel.
❖ Potential product refers to all the possible augmentations and transformations the product
or offering might go through in the future. Example: Hotel management can offer
completely customized internal room arrangement and supporting facilities to the
customers based on their individual preferences.

6.7: New Product Development (NDP) Stages:

New product development (NPD) is a process of taking a product or service from conception to
market. The process sets out a series of stages that new products typically go through, beginning
with ideation and concept generation, and ending with the product's introduction to the market.
Occasionally, some of the stages overlap or vary depending on the nature of the business.

The NPD process involves eight key stages:

1. Idea generation - brainstorming and coming up with innovative new ideas.

2. Idea screening - filtering out any ideas not worth taking forward.

3. Concept development and testing- considering specifications such as technical feasibility,

product design, and market potential.

4. Marketing strategy development - ensuring your ideas fit into your business' strategic plans
and determining the demand, the costs, and the profit margin considering different logic of
marketing.

5. Business analysis - review of the sales, costs, and profit projections for the new product to
find out whether these factors satisfy the company’s objectives.

6. Product development - creating a prototype product or pilot service.

7. Test marketing - modifying the product or service according to customer, manufacturer, and
support organizations’ feedback. This involves deciding the best timing and process for piloting
your new product or service.

8. Commercialization - determining the pricing for your product or service and finalizing
marketing plans.
 Module 7
(Brand and Branding Decisions)
7.1: Brand:
According to the American Marketing Association (AMA), a brand is a “name, term, sign, symbol,
or design, or a combination of them, intended to identify the goods and services of one seller or
group of sellers and to differentiate them from those of competition.” Technically speaking, then,
whenever a marketer creates a new name, logo, or symbol for a new product, he or she has created
a brand. Many practicing managers refer to a brand as more than that—as something that has
actually created a certain amount of awareness, reputation, prominence, and so on in the
marketplace.

7.2: Brand Elements:

Thus, the key to creating a brand, according to the AMA definition, is to be able to choose a name,
logo, symbol, package design, or other characteristic that identifies a product and distinguishes it
from others. These different components of a brand that identify and differentiate it are brand
elements. Brand elements can be based on people, places, things, and abstract images.
For example, consider the variety of brand name strategies. Some companies, like General Electric
and Samsung, use their names for essentially all their products. Other manufacturers assign new
products individual brand names that are unrelated to the company name, like Procter & Gamble’s
Tide, Pampers, and Pantene product brands.

7.3: Branding:

Branding is the process of creating and disseminating the brand name. Branding can be applied to
the entire corporate identity as well as to individual product and service names.

7.4: Brands vs. Products:

Brand Product

a) A product is anything we can offer to a

a) A product may be a physical good, a
market for a ention, acquisition, use, or
service, a retail outlet, a person, an
consumption that might satisfy a need or
organization, a place, or even an idea.
want.

b) A brand has a distinguished identity that b) A product can be easily copied.

cannot be copied.

c) Has dimensions that differentiate it in c) Anything available in the market for use
some way from other products designed to or consumption, that may satisfy a need or
satisfy the same need want

d) Created by consumers in their mind d) Produced by manufacturers

e) Brand remains forever e) A product can be replaced with time.

7.5: Brand Sponsorship Decisions:

a) Manufacturer Brand: Branding done by the manufacturer, under its own brand name.

b) Distributor Brand: Branding done by the distributor/ retailer/ store under a private label.

c) Licensed Brand: Some companies license names or symbols previously created by other
manufactures.

d) Co Brands: Co-branding occurs when two established brand names of different companies are
used on the same product.

7.6: Brand Strategy Decisions:

✔ Line Extension: Line extensions occur when a company extends existing brand names to
new
forms, colors, sizes, ingredients, or flavors of an existing product category.
As example: Under LUX – Lux Aqua Sparkle, Lux Strawberry and Cream, Lux Peach and Cream
etc.
✔ Brand Extension: Brand Extensions extend an existing brand name to a new or modified
product
in a new category.
As example: Under Pepsodent- Pepsodent toothpaste, Pepsodent tooth powder, Pepsodent
Toothbrush etc.
✔ Multi Brands: Multi-brands are additional brands in the same category. Company is
offering the
same products or services to the existing market but in a new name. Multi-branding offers a way
to establish different features and appeal to different buying motives. It allows a company to lock
up more retailer shelf space.
As example: Unilever company offering Dove, Lux and Lifebuoy – three different product
categories.
✔ New Brands: New Brands are used when existing brands are inappropriate for new
products in new product categories or markets. The products are new to the market. As
example: Unilever – PureIt; Rahimafrooz – Agora
 Module 8
(Pricing Strategies)

8.1: Price:
Price is the amount of money charged for a product or service. It is the sum of all the values that
consumers give up in order to gain the benefits of having or using a product or service. Price is the
only element in the marketing mix that produces revenue; all other elements represent costs.

8.2: New Product Pricing Strategies:

a) Market Skimming Pricing is a strategy with high initial prices to “skim” revenue layers from
the market. Example: Sony - Bravia, LCD, LED, Nokia N, & E series; very high price for their
new products.
✔ Characteristics for charging skimming price:
i) Product quality and image must support the price.
ii) Buyers must want (Demand) the product at the price.
iii) Competitors should not be able to enter the market easily.

b) Market Penetration Pricing sets a low initial price in order to penetrate the market quickly and
deeply to react to a large number of buyers quickly to gain market share. Example: Banglalink,
Airtel telecom etc; their price for introduction.
✔ Characteristics for charging penetration price:
i) Price sensitive market.
ii) Inverse relationship of production and distribution cost to sales growth.
iii) Low prices must keep competition out of the market

c) Product Line Pricing refers to seeing the price steps between various products in a product line
based on cost differences between the products, customer evaluation of different features and
competitors’ price. To target different segments of customer; companies offer several products
with quality variation from a specific product line and charge different ranges of price. Example:
Nokia charges differently for their different models of cellular mobile set, Grameenphone charges
different prices for different categories of SIM cards.
d) Optional Product Pricing involves pricing of optional or accessory products that are sold with
the main product (Segmented pricing). Companies offer different additional items with the
principal products to add more value to it. But customers can buy these additional products or
simply the main product. Example: Ice maker with refrigerator, special sound system (home
theater) with Television or Personal computer.
e) Captive Product Pricing involves pricing of products that must be used along with the main
product. Sometimes companies sell the main product at a lower cost and make money by selling
the additional logistics. Example: Replacement blade cartridge of Gille e razors, printer cartridge
of Lexmark, HP, Epson, etc.
f) By-product Pricing refers to pricing of products with li le or no value to the manufacturer that
are produced as a result of producing the main product. This is an additional income for the
company. So, producers will seek li le or no profit other than the cost to cover storage and delivery.
Example: Cut pieces of readymade garments and waste papers of publisher houses.
 Two-part Pricing refers to pricing of the products keeping two parts in the price. It consists of a
fixed cost plus a variable usage fee. The fixed fee should be low enough to encourage purchase of
the product and the profit can be made on the usage fees. Example: Telephone and electricity
providers charge such types of prices to their customers.
g) Product Bundle Pricing refers to combining several products and offering the bundle at a
reduced price than their individual list prices. Bundle pricing increases the profit of the
organization through a large volume of sales and the customers are also getting reduced prices.
Example: Bundle price for tours package and set menu of fast-food and restaurants.
Psychological Pricing refers to seeing the price of products in a way that can convince the buyer
by psychological or emotional impact.
Example: By using odd-even pricing (Tk: 999 instead of Tk: 1000), or Down payment and
Installment based pricing (5000+), shortening the price of products (Tk: ‘24’ instead of Tk: ‘24.00’)
and offering special promotion price etc.

8.3 Different adjustment pricing strategies that can be employed to attract

customers and gain profit.

Price
Adjustment Description
Strategy

Discount and
Reducing prices to reward customer responses such as paying early or promoting the
allowance
product
pricing

Segmented
Adjusting prices to allow for differences in customers, products or locations
pricing

Psychological
Adjusting prices for psychological effect
pricing

Promotional
Temporarily reducing prices to increase short-run sales
pricing

Geographical
Adjusting prices to account for the geographic location of customers
pricing

Dynamic Adjusting prices continually to meet the characteristics and needs of individual customers
pricing and situations

International
Adjusting prices for international markets
pricing
 Module 9: Designing and Managing Integrated Marketing
Channels

9.1 Developing distribution system for the brands

A distribution channel refers to the flow of business that occurs between a manufacturer
and a consumer. It is the path that a transaction follows. Distributors are the intermediaries
that deliver and house products for producers to sell to retailers. When looking to expand
into new markets or switch up your distribution strategy, you need to know the different
levels of distribution.

✔ Level Zero: A level zero distribution channel is the simplest. It involves a direct
sale from manufacturers to consumers with no intermediary.
✔ Level One: A level one channel has one intermediary as the middleman between
the producer and consumer. An example is a retailer between manufacturer and
consumer.
✔ Level Two: When thinking about levels, associate the number to the number of
intermediaries. In this case, a level two channel involves two intermediaries
between producer and consumer. An example here would be a wholesaler selling
to a retailer who then sells to the consumer.
✔ Level Three: Here’s where an agent or broker comes in. Agents work on behalf
of companies and deal primarily with wholesalers. From here, the wholesalers sell
to retailers who then sell to consumers.

9.2: Types of Distribution

Distribution strategies depend on the type of product being sold. The trick is knowing
what type of distribution you will need to achieve your growth goals. There are three
methods of distribution that outline how manufacturers choose how they want their goods
to be dispersed in the market.
✔ Intensive Distribution: As many outlets as possible. The goal of intensive
distribution is to penetrate as much of the market as possible.

✔ Selective Distribution: Select outlets in specific locations. This is often based on

a particular good and its fit within a store. Doing this allows manufacturers to pick
a price point that targets a specific market of consumer, therefore providing a more
customized shopping experience. Selective distribution caps the number of
locations in a particular area.
✔ Exclusive Distribution: Limited outlets. This can mean anything from luxury
brands that are exclusive to special collections available only in particular
locations or stores.
 This method helps maintain a brand’s image and product exclusivity. Some
examples of companies that enact exclusive distribution would be high-end
designers like Chanel or even an automotive company like Ferrari.

9.3 Channel Conflict

Channel conflict occurs when manufacturers (brands) disintermediate their channel partners, such
as distributors, retailers, dealers, and sales representatives, by selling their products directly
to consumers through general marketing methods and/or over the Internet.

9.4 Types of Conflict and Competition

Suppose a manufacturer sets up a vertical channel consisting of wholesalers and retailers hoping for
channel cooperation and greater profits for each member. Yet horizontal, vertical, and multichannel
conflict can occur.

• Horizontal channel conflict occurs between channel members at the same level. Some Pizza Inn
franchisees complained about others cheating on ingredients, providing poor service, and hurting
the overall brand image.

• Vertical channel conflict occurs between different levels of the channel. When Estée Lauder set
up a Website to sell its Clinique and Bobbi Brown brands, the department store Dayton Hudson
reduced its space for Estée Lauder products.58 Greater retailer consolidation—the 10 largest U.S.
retailers account for over 80 percent of the average manufacturer’s business—has led to increased
price pressure and influence from retailers. Walmart, for example, is the principal buyer for many
manufacturers, including Disney, Procter & Gamble, and Revlon, and is able to command reduced
prices or quantity discounts from these and other suppliers.

• Multichannel conflict exists when the manufacturer has established two or more channels that
sell to the same market.61 It’s likely to be especially intense when the members of one channel get
a lower price (based on larger-volume purchases) or work with a lower margin. When Goodyear
began selling its popular tire brands through Sears,Walmart, and Discount Tire, it angered its
independent dealers and eventually placated them by offering exclusive tire models not sold in other
retail outlets.

9.5 Causes of Channel Conflict

Some causes of channel conflict are easy to resolve, others are not. Conflict may arise from:

• Goal incompatibility. The manufacturer may want to achieve rapid market penetration through a
low-price policy. Dealers, in contrast, may prefer to work with high margins and pursue short-run
profitability.

• Unclear roles and rights. HP may sell personal computers to large accounts through its own sales
force, but its licensed dealers may also be trying to sell to large accounts. Territory boundaries and
credit for sales often produce conflict.
• Differences in perception. The manufacturer may be optimistic about the short-term economic
outlook and want dealers to carry higher inventory. Dealers may be pessimistic. In the beverage
category, it is not uncommon for disputes to arise between manufacturers and their distributors
about the optimal advertising strategy.

• Intermediaries’ dependence on the manufacturer. The fortunes of exclusive dealers, such as

auto dealers, are profoundly affected by the manufacturer’s product and pricing decisions. This
situation creates a high potential for conflict.

9.6 Strategies to Manage Channel Conflict

It is impossible, but to manage it better. There are a number of mechanisms for effective conflict
management.
1. Strategic Justification
In some cases, a convincing strategic justification that they serve distinctive segments and do not
compete as much as they might think can reduce potential for conflict among channel members.
Developing special versions of products for different channel members—branded variants is a clear
way to demonstrate that distinctiveness.

2. Dual Compensation
Dual compensation pays existing channels for sales made through new channels. When Allstate
started selling insurance online, it agreed to pay agents a 2 percent commission for face-to-face
service to customers who got their quotes on the Web. Although lower than the agents’ typical 10
percent commission for offline transactions, it did reduce tensions.

3. Superordinate Goals
Channel members can come to an agreement on the fundamental or superordinate goal they are
jointly seeking, whether it is survival, market share, high quality, or customer satisfaction. They
usually do this when the channel faces an outside threat, such as a more efficient competing channel,
an adverse piece of legislation, or a shift in consumer desires.

4. Employee Exchange
A useful step is to exchange persons between two or more channel levels. GM’s executives might
agree to work for a short time in some dealerships, and some dealership owners might work in GM’s
dealer policy department. Thus participants can grow to appreciate each other’s point of view.

5. Joint Memberships
Similarly, marketers can encourage joint memberships in trade associations. Good cooperation
between the Grocery Manufacturers of America and the Food Marketing Institute, which represents
most of the food chains, led to the development of the universal product code (UPC). The
associations can consider issues between food manufacturers and retailers and resolve them in an
orderly way.

6. Co-option
Co-optation is an effort by one organization to win the support of the leaders of another by including
them in advisory councils, boards of directors, and the like. If the organization treats invited leaders
seriously and listens to their opinions, co-optation can reduce conflict, but the initiator may need to
compromise its policies and plans to win outsiders’ support.

7. Diplomacy, Mediation, and Arbitration

When conflict is chronic or acute, the parties may need to resort to stronger means. Diplomacy takes
place when each side sends a person or group to meet with its counterpart to resolve the
conflict.Mediation relies on a neutral third party skilled in conciliating the two parties’ interests. In
arbitration two parties agree to present their arguments to one or more arbitrators and accept their
decision.

8. Legal Recourse
If nothing else proves effective, a channel partner may choose to file a lawsuit. When Coca-Cola
decided to distribute Powerade thirst quencher directly to Walmart’s regional warehouses, 60
bottlers complained the practice would undermine their core direct-store distribution (DSD) duties
and filed a lawsuit. A settlement allowed for the mutual exploration of new service and distribution
systems to supplement the DSD system.
Module: 10: Managing Retailing, Wholesaling, and Logistics
10.1: Retailing
Retailing includes all the activities in selling goods or services directly to final consumers for
personal, nonbusiness use. A retailer or retail store is any business enterprise whose sales volume
comes primarily from retailing. Any organization selling to final consumers—whether it is a
manufacturer, wholesaler, or retailer—is doing retailing. It doesn’t matter how the goods or services
are sold (in person, by mail, telephone, vending machine, or on the Internet) or where (in a store,
on the street, or in the consumer’s home). After reviewing the different types of retailers and the
new retail marketing environment, we examine the marketing decisions retailers make. The
following are four examples of innovative retail organizations that have experienced market success
in recent years.

10.2: Levels of service offered by retail store

1. Self-service—Self-service is the cornerstone of all discount operations. Many customers are
willing to carry out their own “locate-compare-select” process to save money.

2. Self-selection—Customers find their own goods, although they can ask for assistance.

3. Limited service—These retailers carry more shopping goods and services such as credit and
merchandise-return privileges. Customers need more information and assistance.

4. Full service—Salespeople are ready to assist in every phase of the “locate-compare-select”

process. Customers who like to be waited on prefer this type of store. The high staffing cost, along
with the higher proportion of specialty goods and slower-moving items and the many services, result
in high-cost retailing.

10.3: Levels/ Categories of Non store Retailing

Although the overwhelming bulk of goods and services—97 percent—is sold through stores, non
store retailing has been growing much faster than store retailing. Non store retailing falls into four
major categories: direct selling, direct marketing (which includes telemarketing and Internet
selling), automatic vending, and buying services:

1. Direct selling, also called multilevel selling and network marketing, is a multibillion-dollar
industry, with hundreds of companies selling door-to-door or at home sales parties. Well-known in
one-to-one selling are Avon, Electrolux, and Southwestern Company of Nashville (Bibles).
Tupperware and Mary Kay Cosmetics are sold one-to-many: A salesperson goes to the home of a
host who has invited friends; the salesperson demonstrates the products and takes orders. Pioneered
by Amway, the multilevel (network) marketing sales system works by recruiting independent
businesspeople who act as distributors. The distributor’s compensation includes a percentage of
sales made by those he or she recruits, as well as earnings on direct sales to customers. These direct-
selling firms, now finding fewer consumers at home, are developing multi distribution strategies.

2. Direct marketing has roots in direct-mail and catalog marketing (Lands’ End, L.L.Bean); it
includes telemarketing (1-800-FLOWERS), television direct-response marketing (HSN, QVC), and
electronic shopping (Amazon.com, Autobytel.com). As people become more accustomed to
shopping on the Internet, they are ordering a greater variety of goods and services from a wider
range of Web sites. In the United States, online sales were estimated to be $210 billion in 2009,
with travel being the biggest category ($80 billion).

3. Automatic vending offers a variety of merchandise, including impulse goods such as soft drinks,
coffee, candy, newspapers, magazines, and other products such as hosiery, cosmetics, hot food, and
paperbacks. Vending machines are found in factories, offices, large retail stores, gasoline stations,
hotels, restaurants, and many other places. They offer 24-hour selling, self-service, and merchandise
that is stocked to be fresh. Japan has the most vending machines per person—Coca-Cola has over
1 million machines there and annual vending sales of $50 billion—twice its U.S. figures.

4. Buying service is a store less retailer serving a specific clientele—usually employees of large
organizations—who are entitled to buy from a list of retailers that have agreed to give discounts in
return for membership.

10.4: Define Wholesaling

Wholesaling includes all the activities in selling goods or services to those who buy for resale or
business use. It excludes manufacturers and farmers because they are engaged primarily in
production, and it excludes retailers. Wholesalers (also called distributors) differ from retailers in
a number of ways. First, wholesalers pay less attention to promotion, atmosphere, and location
because they are dealing with business customers rather than final consumers. Second, wholesale
transactions are usually larger than retail.

10.5: Major Wholesaler Types

1. Merchant wholesalers: Independently owned businesses that take title to the merchandise they
handle. They are full-service and limited-service jobbers, distributors, and mill supply houses.

2. Full-service wholesalers: Carry stock, maintain a sales force, offer credit, make deliveries,
provide management assistance. Wholesale merchants sell primarily to retailers: Some carry several
merchandise lines, some carry one or two lines, others carry only part of a line. Industrial
distributors sell to manufacturers and also provide services such as credit and delivery.

3. Limited-service wholesalers: Cash and carry wholesalers sell a limited line of fast-moving
goods to small retailers for cash. Truck wholesalers sell and deliver a limited line of semi perishable
goods to supermarkets, grocery stores, hospitals, restaurants, hotels. Drop shippers serve bulk
industries such as coal, lumber, and heavy equipment. They assume title and risk from the time an
order is accepted to its delivery. Rack jobbers serve grocery retailers in nonfood items. Delivery
people set up displays, price goods, and keep inventory records; they retain title to goods and bill
retailers only for goods sold to the end of the year. Producers’ cooperatives assemble farm produce
to sell in local markets. Mail-order wholesalers send catalogs to retail, industrial, and institutional
customers; orders are filled and sent by mail, rail, plane, or truck.

4. Brokers and agents: Facilitate buying and selling, on commission of 2 percent to 6 percent of
the selling price; limited functions; generally specialize by product line or customer type. Brokers
bring buyers and sellers together and assist in negotiation; they are paid by the party hiring them—
food brokers, real estate brokers, insurance brokers. Agents represent buyers or sellers on a more
permanent basis. Most manufacturers’ agents are small businesses with a few skilled salespeople:
Selling agents have contractual authority to sell a manufacturer’s entire output; purchasing agents
make purchases for buyers and often receive, inspect, warehouse, and ship merchandise;
commission merchants take physical possession of products and negotiate sales.

5. Manufacturers’ and retailers’ branches and offices: Wholesaling operations conducted by

sellers or buyers themselves rather than through independent wholesalers. Separate branches and
offices are dedicated to sales or purchasing. Many retailers set up purchasing offices in major market
centers.

6. Specialized wholesalers: Agricultural assemblers (buy the agricultural output of many farms),
petroleum bulk plants and terminals (consolidate the output of many wells), and auction companies
(auction cars, equipment, etc., to dealers and other businesses). transactions, and wholesalers
usually cover a larger trade area than retailers. Third, the government deals with wholesalers and
retailers differently in terms of legal regulations and taxes.

10.6: Why do manufacturers not sell directly to retailers or final consumers?

Why are wholesalers used at all?/ Functions of wholesaler
In general, wholesalers are more efficient in performing one or more of the following functions:

• Selling and promoting. Wholesalers’ sales forces help manufacturers reach many small business
customers at a relatively low cost. They have more contacts, and buyers often trust them more than
they trust a distant manufacturer.

• Buying and assortment building. Wholesalers are able to select items and build the assortments
their customers need, saving them considerable work.

• Bulk breaking. Wholesalers achieve savings for their customers by buying large carload lots and
breaking the bulk into smaller units.

• Warehousing. Wholesalers hold inventories, thereby reducing inventory costs and risks to
suppliers and customers.

• Transportation. Wholesalers can often provide quicker delivery to buyers because they are closer
to the buyers.
• Financing. Wholesalers finance customers by granting credit, and finance suppliers by ordering
early and paying bills on time.

• Risk bearing. Wholesalers absorb some risk by taking title and bearing the cost of theft, damage,
spoilage, and obsolescence.

• Market information. Wholesalers supply information to suppliers and customers regarding

competitors’ activities, new products, price developments, and so on.

• Management services and counseling. Wholesalers often help retailers improve their operations
by training sales clerks, helping with store layouts and displays, and setting up accounting and
inventory-control systems. They may help industrial customers by offering training and technical
services. Market logistics includes planning the infrastructure to meet demand, then implementing
and controlling the physical flows of materials and final goods from points of origin to points of
use, to meet customer requirements at a profit.

10.7: Differences between retailing and wholesaling

BASIS FOR
WHOLESALE RETAIL
COMPARISON
Meaning Wholesale is a business in which goods When the goods are sold to the final
are sold in large quantities to the consumer in small lots, then this
retailers, industries and other type of business is termed as retail.
businesses.
Creates link Manufacturer and Retailer Wholesaler and Customer
between
Price Lower Comparatively higher
Competition Less Very high
Volume of Large Small
transaction
Capital Huge Little
Requirement
 Module: 11: Managing Mass Communications: Advertising,
Sales Promotions, Events and Experiences, and Public
Relations
11.1: Modes of marketing communication
Marketing Communications Mix The marketing communications mix consists of eight major modes
of communication:

1. Advertising—Any paid form of nonpersonal presentation and promotion of ideas, goods, or

services by an identified sponsor via print media (newspapers and magazines), broadcast media
(radio and television), network media (telephone, cable, satellite, wireless), electronic media
(audiotape, videotape, videodisk, CD-ROM,Web page), and display media (billboards, signs,
posters).

2. Sales promotion—A variety of short-term incentives to encourage trial or purchase of a product

or service including consumer promotions (such as samples, coupons, and premiums), trade
promotions (such as advertising and display allowances), and business and sales force promotions
(contests for sales reps).

3. Events and experiences—Company-sponsored activities and programs designed to create daily

or special brand-related interactions with consumers, including sports, arts, entertainment, and
cause events as well as less formal activities.

4. Public relations and publicity—A variety of programs directed internally to employees of the
company or externally to consumers, other firms, the government, and media to promote or protect
a company’s image or its individual product communications.

5. Direct marketing—Use of mail, telephone, fax, e-mail, or Internet to communicate directly with
or solicit response or dialogue from specific customers and prospects.

6. Interactive marketing—Online activities and programs designed to engage customers or

prospects and directly or indirectly raise awareness, improve image, or elicit sales of products and
services.

7. Word-of-mouth marketing—People-to-people oral, written, or electronic communications that

relate to the merits or experiences of purchasing or using products or services.

8. Personal selling—Face-to-face interaction with one or more prospective purchasers for the
purpose of making presentations, answering questions, and procuring orders.
11.2 Business Communication Process:

⮚ A communication process is a series of interrelated steps taken one after another with a
view to obtain a desired goal.

⮚ In other words, communication process states the steps between sender and a receiver that
result in the transfer of a message through any medium and understanding of meaning of
the message and response made inters of feedback.

1. Sender/Source: The sender is the person who transmits a message. He is the

communicator. He is the one who gets the entire process of communication started. He
wants to get his opinions, ideas, facts, thoughts or information across to the receiver.
2. Message: A message is the actual information that has to be shared. Messages can broadly
be divided into verbal and non-verbal. The message must be clear, complete, unambiguous
and courteous.
3. Encoding: Sender’s thoughts have to be converted into suitable words, pictures, charts or
symbols so that they can be delivered to the receiver. This process of converting thoughts
into suitable words, charts, symbols or any other form in which they can be understood by
the receiver is called encoding.
4. Channel: How does one communicate? This is what a channel deals with. Communication
is achieved through a channel. The channel can be a letter, an email, a fax, a telephone or
memos, reports, bulletins, posters and manuals.
5. Receiver: The person who receives the message, decodes it and understands it or attaches
The Modern Communication model has evolved from Shanon and Weaver’s information
Theory Model. Some meaning to it is the receiver. The receiver has to perform three functions:
 (i) Reception of the message: This is the stage when a message sent by the sender is
sensorial taken in by the receiver.
(ii) Decoding the message: After receiving the message, the receiver has to attach some
meaning to it.
(iii)Understanding the message: He then has to interpret it in the same way and
in the same sense as the sender meant it.
5. Feedback: The return of communication from the receiver to the sender is known as
feedback. It is the response, reaction or reply to the communication. Thus, in feedback, the
receiver sends his reply or response to the sender, indicating that he has understood the
message received.

11.3: Promotional Budget:

When a company decides to introduce or promote a new product or try hard to move an old product
off the shelves, it has a budget for doing so. A promotional budget refers to money earmarked for
the marketing, advertisement, or sales of a product or brand. The amount to budget to promote a
new or existing product will depend on business analytics, market research, and the anticipated
return on investment.

11.4: Methods of Determining the Total Promotion Budget.

Firms expend considerable amounts on promotional activities. Four methods are employed
in determining the budget for promotional expenditures. They are detailed as follows.

1. An affordable method
Many companies employ the affordable method for determining the promotion budget. The
promotion budget is set in a manner that the company can afford. This method is a subjective
assessment, as it pays little attention to the long-term promotional needs of a service. This
method does not consider the role of promotion in sales volume. Employment of affordable
methods very often results in an uncertain annual budget, making long-range planning
difficult.
2. Percentage of sales method

Under this method, promotion expenditure is determined as a percentage of sales. The

advantages of the percentage of sales method are —
1. First, expenditure on advertising is closely related to sales. So, the company can easily
afford to spend a specified percentage of sales on promotion.
2. Second, this method facilitates an analysis of the relationship between promotion cost and
selling price per unit. Third, this method ensures stability when competitors are also spending
the same percentage of sales on promotion.

3. Competitive-parity method

Under this method, the advertising expenditure of the firm is equal to the amount spent by
competitors. This method follows the policy of the competitors in respect of promotion budget.
It is based on the assumption that a competitor's expenditure represents the prudence of the
industry.
Since the promotion budget of one firm is in parity with the competitor's, a promotion war is
avoided. However, this method has certain limitations. There is no assurance that competitors’
promotion budget represents collective wisdom of the industry. Companies vary in reputation,
resources, objectives and opportunities. So, the promotion budget appropriate to one firm may
not be appropriate to the other.

4. Objective and task method

Under this method, marketers determine promotion budget by defining specific objectives,
determining tasks to be performed to accomplish the objectives and estimating the cost of
performing these tasks. This method is rational as it sets the promotion budget at a cost which
is required to realize the objective of the company.
 Module: 12: Managing Personal Communications
12.1 Public and Ethical Issues in Direct Marketing
Direct marketers and their customers usually enjoy mutually rewarding relationships. Occasionally,
however, a darker side emerges:

• Irritation. Many people don’t like hard-sell, direct marketing solicitations.

• Unfairness. Some direct marketers take advantage of impulsive or less sophisticated buyers or
prey on the vulnerable, especially the elderly.15

• Deception and fraud. Some direct marketers design mailers and write copy intended to mislead
or exaggerate product size, performance claims, or the “retail price.”The Federal Trade Commission
receives thousands of complaints each year about fraudulent investment scams and phony charities.

• Invasion of privacy. It seems that almost every time consumers order products by mail or
telephone, apply for a credit card, or take out a magazine subscription, their names, addresses, and
purchasing behavior may be added to several company databases. Critics worry that marketers may
know too much about consumers’ lives, and that they may use this knowledge to take unfair
advantage. People in the direct marketing industry know that, left unattended, such problems will
lead to increasingly negative consumer attitudes, lower response rates, and calls for greater state
and federal regulation. Most direct marketers want the same thing consumers want: honest and well
designed marketing offers targeted only to those who appreciate hearing about them.

12.2: Why companies use sales reprentitive

1. Deliverer—A salesperson whose major task is the delivery of a product (water, fuel, oil).

2. Order taker—An inside order taker (standing behind the counter) or outside order taker (calling
on the supermarket manager).

3. Missionary—A salesperson not permitted to take an order but expected rather to build goodwill
or educate the actual or potential user (the medical “detailer” representing an ethical pharmaceutical
house).

4. Technician—A salesperson with a high level of technical knowledge (the engineering

salesperson who is primarily a consultant to client companies).

5. Demand creator—A salesperson who relies on creative methods for selling tangible products
(vacuum cleaners, cleaning brushes, household products) or intangibles (insurance, advertising
services, or education).

6. Solution vendor—A salesperson whose expertise is solving a customer’s problem, often with a
system of the company’s products and services (for example, computer and communications
systems).
12.3: Principles of Personal Selling
Personal selling is an ancient art. Effective salespeople today have more than instinct, however.
Companies now spend hundreds of millions of dollars each year to train them in methods of analysis
and customer management and to transform them from passive order takers into active order getters.
Reps are taught the SPIN method to build long-term relationships, with questions such as:

1. Situation questions—These ask about facts or explore the buyer’s present situation. For
example, “What system are you using to invoice your customers?”

2. Problem questions—These deal with problems, difficulties, and dissatisfactions the buyer is
experiencing. For example, “What parts of the system create errors?”

3. Implication questions—These ask about the consequences or effects of a buyer’s problems,

difficulties, or dissatisfactions. For example, “How does this problem affect your people’s
productivity?”

4. Need-payoff questions—These ask about the value or usefulness of a proposed solution. For
example, “How much would you save if our company could help reduce errors by 80 percent?”

12.4: Relationship Marketing

The principles of personal selling and negotiation are largely transaction-oriented because their
purpose is to close a specific sale. But in many cases the company seeks not an immediate sale but
rather a long-term supplier–customer relationship. Today’s customers prefer suppliers who can sell
and deliver a coordinated set of products and services to many locations, who can quickly solve
problems in different locations, and who can work closely with customer teams to improve products
and processes. Salespeople working with key customers must do more than call only when they
think customers might be ready to place orders. They should call or visit at other times and make
useful suggestions about the business. They should monitor key accounts, know customers’
problems, and be ready to serve them in a number of ways, adapting and responding to different
customer needs or situations.

Relationship marketing is not effective in all situations. But when it is the right strategy and is
properly implemented, the organization will focus as much on managing its customers as on
managing its products.