Wednesday, November 10, 2010

Retailing

As a result of growing competition, every firm is trying for greater visibility for its products in the market place as well as premier shelf space at the showrooms or point-of-purchase (POP). So, retail management is also becoming a complex task to a marketing manager because retailers are all engaged in marketing their shelf-space. To avoid over dependence on retailers, some producers in the consumer goods market have set up their own retail outlets.

Another significant trend in recent years is that many marketing service agencies have Marketing Environment come up in the areas of financial services, marketing of consumer products etc. For example, Adishwar Marketing, a Bangalore based marketing agency, markets more than 100 consumer products under its own brand ‘Worldstar’. 

The agency has entered into agreements with 45 industries to procure and market products in its own brand name. The agency is, at present, operating in the southern states – Andhra Pradesh, Karnataka, Kerala and Tamil Nadu.



Marketing Research Firms

Modern business is very complex. Managers require data for decision making on marketing issues or to plan a marketing programme. Like the advertising agencies, marketing research agencies also provide specialised services to marketing firms. Medium and small sized firms utilise the services of marketing research agencies. Large sized firms, like Hindustan Lever, own their research divisions.

There are many marketing research agencies in India. Some of the leading ones are given below:

1. Operations Research Group (ORG). It was set up in 1960 at Baroda as an in-house research agency and it is the oldest market research agency in India. ORG’s retail audit covers 75 consumer products. It has three major divisions— marketing research, public system and social research system – to deal with different research areas.
 
2. Marketing and Research Group (MARG), Kolkata.
 
3. Marketing Research Centre and Advisory Services (MRAS).
 
4. Indian Market Research Bureau (IMRB), Mumbai.

In India, the marketing research industry has a short history and all research agencies have come to exist only in the last four decades. However, they have improved their client services keeping abreast with the changing environment and they serve up to the expectations of client companies. 

In a changed environment, marketing research has become a part of the marketing function of many companies and marketing research agencies play the role of consultant to many companies in India. The marketing manager of a firm has to decide his marketing programme according to the consultant’s advice.



Advertising Agencies

No product is sold without advertising backup. Advertising is a powerful tool in the hands of a marketer. In developing the marketing communication strategy of a marketing firm, an advertising agency plays a vital role. Marketing firms which are small and medium in size cannot afford to set up their own advertising departments or divisions.

Moreover, advertising is increasingly becoming the job of specialists—copy writing, art- directing,  cinematography, film shooting, editing, sound effect, animation, media planning, scheduling etc. Hence, marketing firms use the services of advertising agencies. Even large sized companies such as MNCs, nowadays, use the services of advertising agencies for the advertising campaigns. 

As a result, advertising has emerged as a major industry and at present, there are more than 430 agencies in India. As an industry, advertising has grown and developed phenomenally since independence. In the 1960’s, the number of agencies had shot up to 280 with a total turnover of Rs 35 crores. The 1970’s witnessed the birth of Vividh Bharati, a commercial programme on the All India Radio, and, at the turn of the same decade, Doordarshan came to exist. 

Television became a major medium for commercial advertisements. At the end of 1980, the press medium had a 80 per cent share and Radio and Television had a share of 15 per cent in advertising. The 1990’s saw further growth in the advertising industry. Many periodicals and a lot of magazines made their appearance both in English and in many other regional languages. 

Technology in advertising has brought sophistication in the field of creativity. In order to retain clients, advertising agencies have dedicated service-cum-creative groups which are made available to a marketing firm (client) at call and they fully participate in all aspects of the firm’s product— planning, product research, test marketing and advertising campaign planning.



Modern Complex Marketing System

Before the industrial revolution, single individual produces – farmers, artisans, family based cottage or small enterprises — dominated the exchange process. They produced goods for nearby customers and secured orders for making ornaments, furniture etc. Further, producers and their customers were generally known to each other because they were all living in the same village or town. Therefore, selling was not a problem for
producers.

The situation began to change fast as industrial revolution broke out in the last quarter of the eighteenth century. The invention of steam engine, electricity, telephone etc. propelled further development of human society. Newly built factories came up and they produced goods at cheaper costs in larger quantities. Factory production resulted in the emergence of towns and cities. 

People who lived in the villages hitherto migrated to towns and their way of living underwent dramatic transformation. They started buying factory made products. Companies and business enterprises came in all shapes and sizes in the last quarter of the nineteenth century. For instance, most of the multinational companies (MNCs) of today were born during the beginning of the 20th century. In India, many companies were founded during the second and third quarters of the twentieth century. 

For example, Birla group of companies came to exist during 1937-38 and they entered in many businesses after 1947-48. The TATA’s ventured into three major Industries – Tata electric companies, Tata Steel companies and Indian Institute of Science – at the beginning of the last century.

Companies were organised as single proprietorships, partnerships, family owned companies and large corporations. They were either owned privately or publicly and were operated for making profits or providing service to the public. At the same time, companies also began to feel that the administration of all phases of a business operation was beyond the capabilities of a few individuals in the company. 

Therefore, authority was delegated to others and separate departments were created for different functions of a business operation. The sales department, for example, looked after sales and market expansion. Companies also shifted a portion of their marketing functions to middlemen – retailers, wholesales, agents and brokers came to exist. 

The marketing activities conducted by the producers’ sales department grew in importance as competition increased in the market and the task of sales department became increasingly complex. Marketing research, planning of advertising campaign, personnel selling, sales promotion etc. became inevitable functions of the sales and marketing division of a company. Companies also obtained specialised services from agencies for advertisement planning or marketing research. In this way, marketing research agencies, advertising agencies and media agencies came to exist.

Today, marketing is a complex activity. The single most reason that can be attributed for this complexity is rapid advancements in science and technology. The revolution in telecommunication and computer technology has changed the whole facet of the market exchange process. In order to generate and maintain demand, companies employ novel and sophisticated communication techniques to reach the target customers. 

In certain sectors, for example in the service sector, there is no face-to-face interaction between the service providers and the customers. The Internet medium has created digital relationships between customers and sellers. Online shopping is gaining momentum in recent times. Shopping complexes, supermarket chains, franchise retail chain outlets are emerging as important institutions in the marketing exchange process.

The model of the modern complex marketing system outlines that many institutions participate and facilitate a firm’s marketing function. For example, institutions such as advertising agencies, marketing research firms, retailing channels, banking and insurance companies, transport organisations and other innumerable service providers all play vital roles in the marketing efforts of a firm.

In fact, today’s marketing manager has to coordinate several jobs before putting his company’s products in the target market place. Let us consider a brief discussion on how the above said institutions make up the complex marketing system.


COMPANY ANALYSIS

The organization's performance in the marketplace is significantly influenced by the following three factors:
* The organization's current market position, how well it has positioned itself
* The nature of environmental opportunities and threats
* The organisation's resource capability to capitalize on the opportunities and its ability to guard itself against threats.
Faced with a constantly changing environment, each business unit needs to develop a marketing information system to track trends and developments, which can be categorised as either opportunities or threats. The company has to review its strength and weakness against the backdrop of environmental opportunities and threats, i.e., to perform a SWOT analysis for the organisation.

SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)


MARKET ANALYSIS

Market Analysis is generally done on the following dimensions:

* Actual and potential market size: Important sub-markets, their size; the potential market includes the usage gap.

* Market growth rate: The driving forces behind sales, and forecasting of growth rate.

* Market profitability: The intensity of competition depends on five factors : existing competitors, supplier power, customer power, substitute products and potential entrants.

* Cost structure: To analyse the value added by the production stage and observe how it is changing and also the effect of learning curve.

* Distribution system

* Trends and developments

* Key success factors: What skills and competencies are needed to compete now and in the future

* The competitive nature of the market: The nature of competition among existing firms, if there is any potential threat from new entrants or the availability of substitute products, how powerful the customer and supplier groups are.


COMPETITOR ANALYSIS

"Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off that map" said Wayne Calloway, former CEO of Pepsi Co.

“Who really are our competitors?"
 
Is a tour operator is competing with a male outfit supplier? Is a business school competing with an insurance company? May be, the answer is yes, if we consider all of them to be fighting for a share of the consumer's purse.

So, the competitor analysis is the second phase of external analysis, in order to gain insights that will influence the product- market investment decision. The analysis is focused on identifying threats, opportunities or strategic uncertainties created by emerging or potential competitor moves. Competitor analysis starts with identifying current and potential competitors. After competitors are identified, the task is to understand them and their strategies, i.e., to analyse their strengths and weaknesses and strategic groups of competitors.


CUSTOMER ANALYSIS

The important question for a firm is "Who are our customers?"

* Existing
* Potential
 
Hence, the first logical step in strategic market planning is to analyse the customer, i.e., to understand customer motivation, their unmet needs and how they can be segmented.

>> Customer Segmentation
      * Who are the biggest customers?
      * Who are the most profitable customers?
      * Who are the potential customers?
       * How could we segment the customers into unique strategic business groups?

 
>> Customer Motivation
        * What benefit offered by the product/service do customers value most?
        * What are the customer's actual buying objectives, i.e., what needs do they want to satisfy?
        * What are the customer's motivational priorities?
        * What changes are taking place in the customer's taste and preferences? Why?

Customer motivation analysis starts with the task of identifying motivations for a given segment and then to determine the relative importance of the motivations. Ultimately we have to identify the motivations that will play a role in defining the strategy of the business.

 
>> Price Sensitivity of Customers
There is a well-defined breakdown between those customers who are first concerned about price and others who are willing to pay extra for higher quality, better features and superior performance. Automobiles span the spectrum from Maruti to Mercedes. Airline service is partitioned into first class, business class and economy class. In each case, the segment dictates the strategy.


>> Unmet Needs
An unmet need is a customer need that is not being met by the existing product offering. Unmet needs are strategically important because they represent opportunities for firms to increase their market share, break into a market, or create new markets. Sometimes customers may not be aware of their unmet needs because they are so accustomed to the implicit limitation of the existing equipment. 

Unmet needs that are not obvious may be more difficult to identify, but they can also represent a greater opportunity for an aggressive business because there will be little pressure on the established firms to be responsive. The key is to stretch the technology or apply new technologies in order to expose unmet needs. For example Palm-top computers, blood-less operation, and commercial space travel are some of the examples of once unmet needs that have been met.


MICRO ENVIRONMENTAL ANALYSIS

This is also known as the task environment and affects business and marketing at the daily operating level. While the changes in the macro environment affect business in the long run, the effect of micro environmental changes are noticed almost immediately. Organizations have to closely analyse and monitor all the elements of microenvironment in order to adapt to rapid change and stay competitive.

 
>> Consumer
According to Peter Drucker, the aim of business is to create and retain the customer. Hence consumer occupies the central position in the marketing environment. The marketer has to closely monitor and analyse changes in consumer tastes and preferences and cater to (if not try and anticipate) their buying habits.
 

>> Competitors
Competition shapes business. A study of the competitive scenario is essential for the marketer, particularly threats from competition.
 

>> Company
Nothing can be as important as self-analysis by the organization itself. "We have met the enemy, and he is us" - Pogo.
Understanding its own strengths and capabilities in a particular business, that is, understanding a business in depth should be the goal of a firm's internal analysis. The objectives, goals and resource availabilities of a firm occupy a critical position in the microenvironment of marketing. The company with its resources and capabilities surrounds the consumer in the microenvironment.

 
2.5.4 Market
The market is to be studied in terms of its actual and potential size, its growth prospect and also its attractiveness. The marketer should study the trends and development and the key success factors of the market he is operating.


>> Suppliers
Suppliers form an important component of the microenvironment. With their own bargaining power they affect the cost structure of the industry. They constitute a major force, which shapes competition in the industry. Also organizations have to take a major Marketing Environment decision on "outsourcing" or "in-house" production depending on this supplier environment.

 
>> Intermediaries
Intermediaries exert a considerable influence in the marketing environment. They can also be considered as the major determining force in the business. In many cases the consumers are not aware of the manufacturer and buy the product from the renowned intermediaries as for example Wal-Mart in US, Pantaloons in India.

 
>> Public
Public constitute a major force in the micro environment and marketers have to very carefully study their opinion, values, beliefs and attitudes in order to design a proper marketing strategy for goods carefully tailored to meet the needs of the target consumer segment. In a sort of reverse engineering, marketers also use the media to shape consumer tastes and preferences.


MACRO ENVIRONMENTAL ANALYSIS

>>  Demographic Environment
Factors relating to population, such as size, growth rate, age distribution, religious composition and literacy levels and aspects like composition of workforce, household patterns, regional characteristics, population shifts etc., need to be studied as they are all part of the demographic environment. 


>> Economic Environment
Economic environment determines the strength and size of the market. The purchasing power in an economy depends on current income, prices, savings, circulation of money, debt and credit availability. Income distribution pattern determines the marketing possibilities. The important point to consider is to find out the effect of economic prospects and inflation on the operations of the firms.

 
>>Government Environment
Business is highly guided and controlled by government policies. Hence the type of government running a country is a powerful influence on business and marketing gets affected.


>> Legal Environment
Firms prefer to operate in a country where there is a sound legal system such as in US. Marketers must have a good working knowledge of the major laws protecting consumers, competitions and organizations. Laws like MRTP, Consumer Protection Act, Intellectual Property Right, FEMA, Labour Laws etc., can considerably affect business operations.

 
>> Political Environment
Political pressure groups influence and limit organizations e.g., the case of Enron in Maharastra and KFC in Karnataka. Special interest groups and political action committees put pressure on business organizations to pay more attention to consumer's rights, minority rights, and women’s rights.

 
>> Cultural Environment
The beliefs, values and norms of a society determine how individuals and organizations relate to each other. The core beliefs of a particular society tend to be persistent, as the American value system of work, charity and honesty. It is difficult for marketers to change these core values, which have a major bearing on marketing operations in as much as they set the stage for marketing activity and consumer response.

 
>> Technological Environment
The most important factor, which is controlling and changing the human society and even impacting the future, is technology. Technology has literally transformed the way people think, work and relax. Man could realise his dream of putting an astronaut on the lunar surface, the moon, going to the other side of the globe within a few hours, and even exploring the mysteries of the solar system.


>> Global Environment
The global environment is also rapidly changing. The new concept of global village has changed how individuals and organizations relate to each other. The advent of worldwide terrorism has the power to turn a booming economy into a stagnant one within no time.


ENVIRONMENTAL SCANNING

Environmental scanning – also known as Environmental Monitoring – is the process of gathering information regarding a company's environment, analysing it and forecasting the impact of all predictable environmental changes. Successful marketing depends largely on how a company can synchronise its marketing programmes with its environmental changes.

 
The major components of environmental scanning are:
 
* External Environmental analysis
* Customer Analysis
* Competitor analysis
* Market analysis
* Company analysis



The Micro and Macro Environment

There are two types of environmental forces, which influence an organization's marketing activities. Some of these forces are external to the firm and the organization has little control over them. 

The other type of forces comes from within the organization and can be controlled by it. Hence, the marketing environment can be divided into two major components:

* Macro Environment: 
consists of demographics and economic conditions, sociocultural factors, political and legal systems, technological developments, etc. 

These constitute the general environment, which affects the working of all the firms.

 

* Micro environment : 
consist of suppliers, consumers, marketing intermediaries, etc. 

These are specific to the said business or firm and affect its working on short term basis.



The Structure of the Marketing Environment

The consumer occupies the core/central position of all business activities and hence occupies the centre of the marketing environment. 

The organization with its resources and having a policy and structure surrounds the consumer with its particular market offering as do its competitors, suppliers and other intermediaries. 

This microenvironment of marketing is again affected by the macro environment, which consists of the government, technical, political, social, economic factors.



ENVIRONMENT ANALYSIS

Environment plays a critical role in business, especially in marketing. The marketing environment is constantly changing and thus presenting new opportunities and threats. A marketer's task is to correctly analyse the environment and design a marketing mix, which will fit the environment. 

The ultimate purpose of the environmental analysis is to facilitate the firm's strategic response to the environmental changes. The firm can attain its objective with strategic planning in order to encash on environmental opportunities.

Marketing environment includes all the forces that directly or indirectly influence marketing operations by affecting an organisation acquisition of inputs/creation of outputs such as human, financial and natural resources and raw material, information, goods, services or ideas. Sometimes a distinction is more between macro and micro factors of environment.



DELIVERY NETWORK

The process consists of three parts. The first phase, choosing the value, represents the “homework” marketing must do before any product exists. The marketing staff must segment the market, select the appropriate market target, and develop the offering’s value positioning. 

The formula “Segmentation, Targeting, Positioning (STP)” is the essence of strategic marketing. Once the business unit has chosen the value, the second phase is providing the value. Marketing must determine specific product features, prices, and distribution. 

The task in the third phase is communicating the value by utilizing the sales force, sales promotion, advertising, and other communication tools to announce and promote the product. Each of these value phases has cost implications.


BENCHMARKING

The firm examines its costs and performance in each value creating activity and finds out ways of improving it. The firm should estimate the leading competitor's cost and performances and install them as benchmarks against which to compare its own cost and performances. It should also study the 'best of class' practices of the world's best companies, in order to learn from them and improve their own performance.

The firm's success depends not only on how well each department performs its work but how well it manages the core business processes. The core business processes include: 

* the market sensing process: activities related to market intelligence

* the new offering realisation process: activities related to developing and launching new high-quality offerings

* customer acquisition process: activities related to segmenting, targeting and prospecting of new customers.
 
* the customer relationship management process: activities related to building deeper understandings and close relationships with individual customers.
 
* the fulfillment management process: activities related to ordering, shipping and payment collection. To be successful, firms need to look beyond their own operations and create a superior value-delivery network (also called a supply chain) by partnering with specific suppliers and distributors.


VALUE CHAIN

The way to generate high customer loyalty is to deliver high customer value by designing a competitively superior value proposition aimed at a specific market segment backed by a superior value-delivery system. 

The value proposition consists of the whole cluster of benefits the company promises to deliver and is basically a statement about the resulting experience customers will gain from the company's market offering. The brand must present a promise which can only be kept depending on how the company can manage its value-delivery system. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering.

In a hyper-competitive economy, a company's success depends on how it can create and deliver superior value. In order to do so, the company must develop the following five capabilities:

1. Understanding customer value
2. Creating customer value
3. Delivering customer value
4. Capturing customer value
5. Sustaining customer value

In order to succeed, therefore, the company needs to use the concept of value and a value-delivery network. The value chain is a tool developed by Michael Porter for identifying ways to create more customer value. The value chain considers nine strategically important activities among the various activities of a firm; they  create value and cost in a specific business.

The primary value activities represent the sequence of bringing materials into the business, converting them into final products, shipping out the final products, marketing them and servicing them, apart from support activities such as procurement, technology development, human resource management and firm infrastructure, that are required for supporting the primary activities.

Primary value activities
Inbound logistics : material handling and warehousing.
Operations : transforming inputs into the final product.
Outbound logistics : order processing and distribution.
Marketing and sales : communication, pricing and channel management.
Service : installation, repair and parts supply.

Support Activities
The support activities are handled in certain specialized departments.
Procurement : procedures and information systems.
Technology development : improving the product and process or system.
Human resource management : hiring, training and compensation.
Firm infrastructure : general management, finance, accounting, government relations and quality management.



Customer Value and Satisfaction

In developed and developing economies, consumers have several products or brands to choose from to satisfy a given need or a group of needs. Much depends on what consumers’ perceptions are about the value that different products or services are expected to deliver. The sources that build customer expectations include experience with products, friends, family members, neighbours, associates, consumer reports, and marketing communications. 

Customer value is the ratio of perceived benefits and costs that the customer has to incur in acquiring that product or service. The emphasis here is on customers’ perceptions and not the accurate, objective evaluation of value and costs, as customers often do not judge values and costs accurately. Value indicates that a certain product or service is perceived as having the kinds and amounts of benefits (economic, functional, and emotional) that customers expect from that product or service at a certain cost (monetary costs, time costs, psychic, and energy costs). 

Thus, value is primarily determined by a combination of quality, service, and cost. The value to the customer can be made favourable either by increasing the total benefits at the same cost, maintaining the same benefit level and decreasing the cost, or increasing both the benefits and the costs, but the proportion of benefits is higher than the increase in costs.

Customers generally experience satisfaction when the performance level meets or exceeds the minimum performance expectation levels. Similarly, when the performance level far exceeds the desired performance level, the customer will not only be satisfied but will also most likely be delighted. Therefore, rewarding experience with a given product or service encourages customers to repeat the same behaviour in future (buying the same brand). 

A delighted customer is likely to be committed and enthusiastic about a particular brand is usually unlikely to be influenced by a competitor’s actions and is an asset to the marketer, being inclined to spread favourable word-of-mouth information or opinions. When a customer’s perceived performance level is below expectations, it definitely causes dissatisfaction and the brand (product or service) will probably not be purchased on any future occasion. 

In extreme cases of dissatisfaction, the customer might even completely abandon the company and bad-mouth its products or services, a process over which a marketer has no control. In the true sense, marketing starts with the customer and ends with customer.

The key to inducing brand loyalty among customers can only be achieved by delivering higher value to delight customers than competitors. Satisfaction is basically a feeling of pleasure, and marketers should be aware of satisfaction delivered by competitors and try surpass that level in an attempt to delight customers. 

Delivering higher value can lead to delighting customers which, in turn, seems to be the key factor in developing loyalty, more so if the brand generates emotional bonding. This emotional bonding is not just a preference based on rational content but is largely feeling-based.


Mix Coherency - Mix Dynamics

The Marketing Mix Coherency :

Refers to how well the different elements of the mix blend together to accomplish the desired impact. For example, to sell an expensive luxury item in discount or bargain stores would show poor coherency between distribution and product offering.
 


The Marketing Mix Dynamics :

Focuses on how the mix must be adapted to suit the changing business environment, changes in company resources, and the changes in product life cycle stages.


Price (Customer Cost)

Pricing decisions are almost always made in consultation with marketing management. Price is the only marketing mix variable that can be altered quickly. Price variable such as dealer price, retail price, discounts, allowances, credit terms, etc., directly influence the development of marketing strategy, as price is a major factor that influences the assessment of value obtained by customers. 

Price can be kept as high or low, or at any level in between these two extremes. Too high would be the point at which any meaningful sales are not possible because the target customers won’t accept the product, and too low would be the point at which company would incur losses instead of profits. Price is said to be an important competitive tool, and intense price competition between rival companies often culminates in a price war and the contestants generally end up gaining nothing. 

The customers, however, enjoy the benefit of low prices till such time that good sense prevails between contestants and prices are brought back to normal. In case of certain products, price becomes the indicator of product quality and helps impart an image to the product.



Distribution (Customer Convenience)

Decisions with respect to distribution channel focus on making the product available in adequate quantities at places where customers are normally expected to shop for them to satisfy their needs. The aim of the management is also to keep the physical distribution costs (that would include inventory, transportation, and storage) as low as possible. 

Depending on the nature of the product, marketing management decides to put into place an exclusive, selective, or intensive network of distribution, while selecting the appropriate dealers or wholesalers. The right choice of these factors can give a company some competitive advantage. For example, a low-priced product consumed regularly on an ongoing basis should be available at as many outlets as possible (intensive distribution) otherwise consumers would buy any other substitutes that are more conveniently available. 

On the other hand, for purchasing products such as CTV, washing machine, computer, or other similar durable items, consumers don’t mind visiting some selected dealers (selective distribution), and for high-end, very expensive items such as Mercedes Benz cars, expensive and exclusive jewellery status watches and accessories, etc., customers are quite willing to visit exclusive dealerships, even if there are just one or two in the city (exclusive distribution).


Promotion (Marketing Communications)

Promotion is a key element of marketing programme and is concerned with effectively and efficiently communicating the decisions of marketing strategy, to favourably influence target customers’ perceptions to facilitate exchange between the marketer and the customer that may satisfy the objectives of both customers and the company. 

In reality, everything that a company does has the potential to communicate something to the target customers. For instance, the price of a product has the potential to communicate to target customers a certain image of the product. For example, a low-priced designer dress is unlikely to attract high-profit, well-heeled target customers, while less affluent buyers may find the designs too avant garde for comfort. The major elements of promotion mix include advertising, personal selling, sales promotion, direct marketing, and publicity. 

A company’s promotion efforts are the only controllable means to create awareness among publics about itself, the products and services it offers, their features, and influence their attitudes favourably. It is critically important for marketing managers to create a strong marketing mix, because any weak element not complementing others can adversely affect the chances of a product’s success in the market-place. 

All the marketing mix elements should complement others to communicate effectively with target market. The best products and high class promotional efforts would not sell it if they products are not available at distribution outlets.



Product (Customer Benefit)

In the marketing mix, the product or service is the most important element. There is an old saying in marketing: “Without a good product, you have nothing.” Product is directly related to satisfying the customer needs and wants in the target market. Customers acquire products for the singular reason that they are perceived as the means to satisfying their needs and wants. 

According to Philip Kotler, “A products anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.” In effect, according to this definition products include physical products, services, persons, places, organisations and ideas. Various product attributes such as quality, variety, design, brand, packaging, services, and warranties,  etc., can be manipulated depending on what the target market wants. 

This may ultimately affect the product quality that can be kept high or low. Marketers also develop other product aspects such as service, packaging, labelling, instruction manual, warranties, and after sales service. Customers always look for new and improved things, which is why marketers should improve existing products, develop new ones, and discontinue old ones that are no longer needed or wanted by customers.


Marketing Mix

Marketing mix is a major concept in modern marketing and involves practically everything that a marketing company can use to influence consumer perceptions favourably towards its products or services so that consumer and organisational objectives are attained. 

Marketing mix is a model of crafting and implementing marketing strategy. Prof. Neil H. Borden first used the term “marketing mix” in 1949 to include in the marketing process factors such as distribution, advertising, personal selling, and pricing. Borden claims that the phrase came to him while reading James Culliton’s description of the activities of a business executive: (An executive) “a mixer of ingredients, who sometimes follows a recipe as he goes along, sometimes adapts a recipe to the ingredients immediately available, and sometimes experiments with or invents ingredients no one else has tried.” [Wikipedia: James Culliton, The Management of Marketing Costs, Research Division, Harvard University (1948)]. 

There are virtually dozens of marketing mix tools. However, Prof. E. Jerome McCarthy classified the “Marketing Mix Variables” in terms of 4 Ps: Product, Price, Place (distribution) and Promotion. These 4 Ps represent the tactical  controllable factors and vary in case of different products and target markets. This classification is believed to  be quite popular in marketing circles across the world.



Holistic Marketing Approach

There have been major changes in almost every sphere of human activity over the last decade, like implication being that this requires fresh marketing thinking, a fresh approach to business, and this calls for a holistic marketing approach. 

This new thinking relies upon marketing research to define market segments, their size, and their needs. To more completely satisfy those needs, marketers need to have a more complete and cohesive approach to internal marketing, targeted marketing, relationship marketing, be visibly socially responsible, and make decisions about the controllable elements of the marketing mix.



The Societal Marketing Concept

Marketing concept was accepted widely among companies in developed and some developing countries and continued to evolve and take on new meanings. Not long after this, criticism started about the nature of its social responsibility. The emphasis shifted to how marketing affected society as a whole in an age of depleting and increasingly scarce resources, environmental deterioration, etc. 

It was good enough to produce what customers needed or wanted, and for achieving organisational objectives, but in certain cases the concept could be in conflict with customers’ and society’s best long-run interests. Societal marketing concept is a management philosophy that takes into account the welfare of society, the organisation, and its customers.

Adoption of this concept requires that marketing decisions be made in an ethical and socially responsible manner. Companies must pay attention not only to the short-term needs of customers but also to their long-term well being. This includes, for instance, excess fat content in ready-to-eat foods, toxic wastes, and environmental issues. 

The need is to strike a balance between the interest of customers, the company itself, and the society in which operations are conducted. Some responsible firms have started using recyclable packaging materials and products that do not harm the environment. Among the marketing tasks, demarketing is an approach that reflects the societal marketing philosophy.

Many companies encounter several hurdles in adopting the marketing concept. For some firms, it is simply too difficult to understand the underlying philosophy and they fail to implement it. Other companies face a conflict between short-term and long-term objectives and have no inclination to sacrifice short-term gains for the sake of customer satisfaction, simply because the customer is not the major priority of top management.


Major differences between selling concept and marketing concept

1. The selling concept starts with the seller and its focus is on existing products, it being seller-oriented. The company believes in aggressive selling and other promotions. Customer value and satisfaction are no concern for the seller. The firm produces the products first and then figures out ways to sell and make profits. Different company departments operate without coordination.

2. Marketing orientation starts with the customer and the company strives to learn customer needs and wants, develops appropriate products or services to satisfy the customer. Business is viewed as a customer need satisfying activity. All departments coordinate their activities and the focus is on customer needs. Profits are an outcome of doing the job well by the company. It requires reliable companywide information system and maintains it. All departments are responsive to informational inputs. Everybody understands the critical role played by marketing, a fact visibly demonstrable when the head of marketing is part of top management.



Acquiring New Customers vs. Retaining Old Customers

The telecom paradigm is perceptibly changing. As the focus shifts from increasing the customer base to growing the share of revenue, mobile phone service providers are focusing on a model where customer retention becomes the key focus area. In India, significant changes in the telecom scenario have influenced the strategy shift. 

To start with, we had two operators in every circle. Now six or even seven operators compete in the same service area. Then, telecom costs have been consistently sliding, leading to the cheapest telecom rates in the world. All this has led to an explosion in subscriber numbers. But they also increased customer churn.

Even acquisition costs per subscriber were going down (from between Rs. 5,000 and Rs 10,000 in the late 1990s, it is now about Rs 1,000 per customer). But break-even on new customers still takes 18 to 24 months. Given these dynamics, it is more profitable to retain an existing customer than fighting for a new customer. 

Today, non-portability of numbers in India acts as one of the biggest retention devices but this could be a temporary benefit. During the early stages of mobile telephony, customer retention typically meant providing basic customer services. 

But when new entrants were actively wooing our customers, we recognised the need to focus on customer retention. We formed the Customer Asset Management (CAM) team, the business division parallel to our sales business unit. This team has a singleminded focus on retention activities with a direct say in all aspects of the business.

We also started to focus on attracting the right quality of customers. Towards this, we fine-tuned our acquisition strategy. We are exploring alternative channels for selling. It is important for a service brand to create differentiation, which is an experiential sum of all its interactions with the customer.

The total experience is our ability to deliver advanced products first in the market, providing an impeccable network quality and rounding off the product experience with a memorable service experience every time the customer interacts with us.(Krishna Angara, Executive Vice President, BPL Mobiles, Business Standard,
June 19, 2005).

According to Steve Schriver, research indicates that consumers are less loyal now than in the past due to the following reasons:

1. The abundance of choice.
2. Availability of information.
3. Customers ask, “What have you done for me lately?”
4. Most products/services appear to be similar – nothing stands out.
5. Customers’ financial problems reduce loyalty.
6. Time scarcity (not enough time to be loyal).
 
These forces lead to consumer defections, complaints, cynicism, decreased affiliation, greater price sensitivity, and a tendency to carry on lawsuits.



Relationship Marketing

Companies in developed countries and many businesses in developing countries aim to satisfy customer needs and build lasting relationships. The issue focuses on reliability and trust between customer and organisation. As a result of this customer focus, a whole new subject, customer relationship management is now studied in marketing courses. 

According to Jagdish N. Sheth and Rajendra Sisodia, the term ‘relationship marketing’ refers to long-term and mutually beneficial arrangements wherein both buyer and seller focus on value enhancement through the creation of more satisfying exchanges. This approach attempts to transcend the simple purchase exchange process with customers to make more meaningful and richer contacts by providing a more holistic, personalised purchase, and use or consumption experience to create stronger ties. The new approaches to marketing such as experiential, permission, and one-to-one marketing can all be seen as means of creating stronger relationships with customers. 

The emphasis is on developing long-term bonds with customers by making them feel good about how the firm interacts or does business with them by giving them some kind of personal connection to the company. Real relationship-marketing programme is much more than the use of database marketing to target customers more precisely. Its purpose is that each customer must feel she/he has received something in return for being a
member of the partnership. Firms have found that Internet is an inexpensive, efficient and more productive means to extend a firm’s customer services. 

Internet permits firms to ask consumers if they permit the company to send them targeted e-mail ads, promotions, or messages, before actually doing so. Some airlines, hotel chains, credit card businesses, and big retailers, etc., use relationship marketing techniques by awarding points to committed customers that can be used to obtain additional goods or services from the concerned company. To put it differently, relationship marketing is all about building trust between the company and its customers and keeping promises. These factors increasingly strengthen the customer dependence on the organisation, as a result of which the customer’s confidence grows, while the company better understands the customer and her/his needs and wants. Ultimately, this helps in cementing the relationship and encourages cooperative problem solving. 

Relationship marketing is based on the principle that current customers are the key to long-term business success. According to Frederick F. Reichheld, the importance of customer retention can be judged by observing some of the following benefits it provides: 

* Acquiring new customers can be five times more expensive than the costs involved in satisfying and retaining existing customers.

* The average company loses 10 per cent of its customers each year.

* A decrease of 5 per cent in the customer defection rate can increase profits by 25 per cent to 85 per cent, depending on the industry.

* The customer profit rate tends to increase over the life of retained customer.

Jagdish N. Sheth and Atul Parvatiyar are also of the opinion that it is to a company’s advantage to develop long-term relationships with current customers because it is easier and costs less to make an additional sale to an existing customer than to make a new sale to a new customer. Neighbourhood grocery shop owners frequently reassure their frequent customers that if they are not satisfied with a consumable product, they can return it, even after some use and get the full replacement. They practice relationship marketing based on conventional marketing wisdom obtaining in India.



Marketing concept emphasises three main principles

Customer-oriented planning and implementations :
It should be the sole aim of all employees, irrespective of their department or functional area, to satisfy customers’ needs. It would require carefully segmenting the market on the basis of the right criteria, targeting suitable segment(s), learning about customer needs and wants, analysing and spotting the right opportunities and matching them with the company’s strengths.

Coordination of all organisational activities :
Mainly product planning, pricing, distribution, and promotion should be combined in a sensible and consistent manner, and the head of marketing should be a part of top-level management.

Coordinated marketing is critically important to achieve organisational goals :
The reward of doing the job well will bring in sales and profits because without profits, the firm cannot survive, neither would it be in a position to improve its offers. Marketing concept is significantly different from production concept and selling concept. Not long ago, Indian auto companies, Hindustan Motors, Premier Automobiles, and Bajaj Auto hardly showed any consideration for customers, producing obsolete models in  large numbers (demand exceeded the supply). 

Though the prices kept on increasing, little was done to improve the models. Bajaj was the only manufacturer of scooters preferred by customers and to own one, customers had to deposit money in advance and wait for five to ten years before they could become proud owners. It is only after the entry of Maruti cars, with Japanese collaboration, that things started changing. Premier Auto, and Hindustan Motors experienced major setbacks, sales declined and ultimately there were hardly any willing buyers. In the beginning, Maruti found it difficult to meet the demand and buyers willingly booked the car and waited for delivery. 

Bajaj Auto faced a similar situation as customers had many choices of two-wheelers. The position now appears as if almost every auto manufacturer is desperately trying to please customers. Customers have strong preferences for certain features and price ranges. Maruti has even started selling second-hand, reconditioned, and reliable cars from its outlets to customers looking for such deals, is order to expand its hold on the market.

In line with the marketing concept, it is imperative that the typical pyramid depicting an organisation needs to be inverted to pursue marketing concept. In an inverted position, the customer will occupy the highest pedestal and top management will be at the bottom position. The communication flow will start from the customer, and the employees and executives will look up to learn what the customer wants and then respond to the inputs. This is the way to offer desired value, deliver more satisfaction, and help retain the customer.

Marketing concept is sometimes interpreted as a philosophy of attempting to satisfy all customers’ needs with no concern for the cost. This would seem to be a sure way to financial disaster. The marketing concept is consistent with the idea of taking into consideration only those customer segments that the company can satisfy both effectively and profitably. 

The firm has to earn profits to survive, offer new and better products and services, and be a meaningful member of society. A company might therefore choose to offer less costly products and services to unprofitable customer segments, or even avoid them altogether. Being market-oriented pays dividends and has a significant effect on company performance.


The Marketing Concept

After World War II, the variety of products increased, people had more discretionary income, and could afford to be selective and buy only those products that more precisely met their changing needs and wants. However, these needs were not immediately obvious. Sometime during the mid-1950s, there was growing recognition among American business people that merely efficient production and extensive promotion, including hard selling, did not guarantee that customers would buy products. 

With the passage of time, more knowledge, and experience, customers increasingly seemed unwilling to be persuaded. More and more companies found that determining what customers wanted was a must before making a product, rather than producing products first and then persuading them to buy. The key questions became:

1. What do customers really want?
2. Can we develop it while they still want?
3. How can we keep our customers satisfied?
 
Thus, the marketing concept era began. Marketing concept proposes that an organisation should focus on customer needs and wants, coordinate its efforts, and endeavour to accomplish organisational goals. Geraldine E Williams reported that the CEO of Nike said, “For years we thought of ourselves as a production-oriented company, meaning we put all our emphasis on designing and manufacturing the product. But now we understand that the most important thing we do is market the product.” 

The major focus of all sets of organisational activities should be satisfying customer needs. This requires carefully listening to customers as a student listens to a teacher. Stanley F Slater and John C Narver reported that there is positive relationship between market orientation and performance.

Sometimes, philosophies that sound quite reasonable and appear attractive on paper, are difficult to put into practice. To embrace the marketing concept as the guiding philosophy, the concerned firm must accept certain general conditions and manage some problems. Alan Grant and Leonard Schlesinger are of the view that market-orientation requires organisation-wide generation of market intelligence across departments, and organisation wide responsiveness to it. 

It means establishing a reliable information system to learn about real needs of customers and design the right need satisfying solutions. Setting up an information system can usually be an expensive proposition and requires committing money and time to its development and maintenance. Company-wide coordination may require restructuring the internal operations and overall objectives in case of one or more departments. Appreciating the critical role of marketing, the head of marketing has to be part of the top management team. Acceptance and implementation of marketing concept demands support of top management and other managers and staff. 

To inculcate a customer-orientation culture, it is necessary that employees at all levels in the organisation should understand the value of the customer and the importance of the customer satisfaction. Obviously, the internal customers (company employees at all levels) themselves should be satisfied and motivated to promote an organisation-wide culture that puts high value on creating a satisfied customer. For this, the company has to ensure an appropriate work environment and take care of their legitimate needs. Benson P. Shapiro is of the opinion that a company is customer focused if the answers are “yes” to the four critical questions:

1. Are we easy for customers to do business with?
2. Do we keep our promises?
3. Do we meet the standards we set?
4. Are we responsive to customer needs?


The Selling Concept

Sales concept seems to be based on a lurking apprehension that customers will not buy the product in sufficient quantities unless aggressively pressurised. The selling concept was the major means of increasing sales and profits during 1920s to 1950s in the developed countries of that period. Companies believed that the most important marketing activities were personal selling, advertising, and distribution. 

Selling concept is geared towards converting existing product(s) into cash rather than first finding and then satisfying customer needs. Sales concept is often observed in practice when companies show heavy reliance on their promotional capabilities based on “hard sell” approach. It is obvious that if a company’s products do not match the changing tastes and requirements of customers, with many alternative choices available, managers might be inclined to go for aggressive promotional efforts to sell enough quantities. 

The End of Marketing as We Know It, Sergio Zyman writes that the purpose of marketing is to sell more stuff to more people more often for more money in order to make more profit. Of late, this has been happening in case of some Credit Cards in our country. Generally, “hard sell” is often seen in case of products or services that people buy without giving much thought to the matter, such as non-essential goods, and tend to postpone such purchases. 

With ever intensifying competition, products becoming more standardised without any meaningful differentiation i.e., commoditization, heavy promotional efforts in all possible manners are bound to remain the practice, in order to grab more share of the customers’ purse. 

The consequences of “hard sell” might harm the customer base to the extent that, in some cases, they might even bad-mouth the product if the product fails to match up to their expectations.



The Production Concept

This concept, viewed as one of the oldest of managerial orientations, typically aimed at achieving as high an output as possible. This philosophy assumed that customers would be more interested in acquiring conveniently available, reasonably priced, and well-made products. 

Keeping in view the market behaviour prevailing in times when customers did not have much choice, it was a sound approach. The focus of managers, generally having backgrounds in manufacturing and engineering, was to concentrate on achieving increasingly higher efficiency in production, lower production costs, and more intensive distribution. 

Even today, this approach seems to be quite sensible in relatively underdeveloped and developing economies because customers are more interested in owning a product and not overly concerned about finer features and aesthetic appeal. In general, one important condition seems to be favourable to adopt production orientation: when the masses look for a cheaper product and demand far exceeds production. 

In India, The National Textile Corporation (NTC) and all its subsidiaries are sticking to this philosophy while producing textiles for the huge, poverty-stricken population in this country. Their philosophy and positioning is reflected in their ad, “Clothiers of the nation with affordable prices.” In the global scenario, for nearly three decades Intel  Corporation focused on achieving increasingly high production output of its successive generations of processors so as to bring down the prices of each improved version. 

The production concept is unlikely to get discarded for a very long time to come, because there would always be products and populations of such a nature that some companies would feel comfortable with this philosophy.