MARKETING MANAGEMENT

Transcription

1 MARKETING MANAGEMENT Question 1: State and explain the functions of Marketing. Differentiate between marketing and selling concept ( May 13, May 12 ) (Mark - 7) Answer: Marketing is defined as the process of determining the needs and wants of consumers and being able to deliver products that satisfy those needs and wants. The functions are: 1. Buying - people have the opportunity to buy products that they want. 2. Selling - producers function within a free market to sell products to consumers. 3. Financing - banks and other financial institutions provide money for the production and marketing of products. 4. Storage - products must be stored and protected until they are needed. This function is especially important for perishable products such as fruits and vegetables. 5. Transportation - products must be physically relocated to the locations where consumers can buy them. This is a very important function. Transportation includes rail road, ship, airplane, truck, and telecommunications for non-tangible products such as market information. 6. Processing - processing involves turning a raw product, like wheat, into something the consumer can use -- for example, bread. 7. Risk-Taking - insurance companies provide coverage to protect producers and marketers from loss due to fire, theft, or natural disasters. 8. Market Information - information from around the world about market conditions, weather, price movements, and political changes, can affect the marketing process. Market information is provided by all forms of telecommunication, such as television, the internet, and phone. 9. Grading and Standardizing - Many products are graded in order to conform to previously determined standards of quality. Selling Concept Marketing Concept Starting point Focus Means Ends Factory Products Selling and Profits through Promoting sales volume Market Customer Coordinated Profits through Needs marketing customer satisfaction Marketing Concept Focuses on Customer s needs. Customer enjoys supreme importance. Converting customer s needs into product. Profits through customer satisfaction. Emphasis is given on product planning and development to match products with the market. Integrated approach to marketing is practiced. The principle of caveat vendor (let the seller beware) is followed. Selling Concept Focuses on seller s needs. Product enjoys supreme importance. Converting product into cash. Profits through sales volume. Emphasis is placed on sale of products already produced. Fragmented approach to selling is practiced. The principle of caveat emptor (let the buyer beware) is followed.

2 Question 2: Why market segmentation is important? ( May 13 ) (Mark - 7) Answer: There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below: 1. Better matching of customer needs - Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution. 2. Enhanced profits for business - Customers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profits. 3. Better opportunities for growth - Market segmentation can build sales. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product. 4. Retain more customers - Customer circumstances change, e.g. they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life ("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands. 5. Target marketing communications - Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that a. The key customers are missed and b. The cost of communicating to customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost 6. Gain share of the market segment - Unless a business has a strong or leading share of a market, it is unlikely to be maximizing its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones. Question 3: Explain in detail 4 P s of marketing mix. (Nov 11, Jan 13) (Mark -7) Answer: The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market. The 4Ps make up a typical marketing mix - Price, Product, Promotion and Place. Price: refers to the value that is put for a product. It depends on costs of production, segment targeted, ability of the market to pay, supply - demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall business plan. Pricing can also be used a demarcation, to differentiate and enhance the image of a product. Product: refers to the item actually being sold. The product must deliver a minimum level of performance; otherwise even the best work on the other elements of the marketing mix won't do any good. Place: refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy it is the main aim of a good distribution or 'place' strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is 'location, location, location'. Promotion: this refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prizes. The importance of the marketing mix: All the elements of the marketing mix influence each other. They make up the business plan for a

3 company and handled right, can give it great success. But handled wrong and the business could take years to recover. The marketing mix needs a lot of understanding, market research and consultation with several people, from users to trade to manufacturing and several others. Question 4: Define segmentation and explain consumer base of segmentations. (Nov 11) (Mark -7) Answer: Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers, who have common needs, and then designing and implementing strategies to target their needs and desires using media channels and other touch-points that best allow reaching them. Bases for Consumer Market Segmentation There are number of variables involved in consumer market segmentation, alone and in combination. These variables are: 1. Geographic Segmentation In geographical segmentation, market is divided into different geographical units like: Regions (by country, nation, state, neighborhood) Population Density (Urban, suburban, rural) City size (Size of area, population size and growth rate) Climate (Regions having similar climate pattern) A company, either serving a few or all geographic segments, needs to put attention on variability of geographic needs and wants. After segmenting consumer market on geographic bases, companies localize their marketing efforts (product, advertising, promotion and sales efforts). 2. Demographic Segmentation In demographic segmentation, market is divided into small segments based on demographic variables like: Age Gender Income Occupation Education Social Class Demographic factors are most important factors for segmenting the customers groups. Consumer needs, wants, usage rate these all depend upon demographic variables. So, considering demographic factors, while defining marketing strategy, is crucial. 3. Psychographic Segmentation In Psychographic Segmentation, segments are defined on the basis of social class, lifestyle and personality characteristics. Psychographic variables include: Interests Opinions Personality Self Image Activities Values Attitudes A segment having demographically grouped consumers may have different psychographic characteristics.

4 4. Behavioral Segmentation In this segmentation market is divided into segments based on consumer knowledge, attitude, use or response to product. Behavioral variables include: Usage Rate Product benefits Brand Loyalty Price Consciousness Occasions (holidays like mother s day, New Year and Eid) User Status (First Time, Regular or Potential) Behavioral segmentation is considered most favorable segmentation tool as it uses those variables that are closely related to the product itself. Question 5: Discuss about four P s of marketing. What is the significance of advertising in marketing? (May 12, June 11) (Mark 7) Answer: 4 P s of marketing have already been discussed. So, let s move further. In marketing it must be remembered that advertising is an element of promotion that affects other marketing variables. Advertising affects the marketing of the product and how it is viewed. Advertising is designed to give the customer a view of the product that the marketing department has set out. Advertising also creates an image through the advertising of the price. For example, a high price gives the impression of a quality product, and a low price the opposite. People associate a lot of their opinions on a product by way of the price. Where the product is advertised is another part of how a product is marketed. Goods available in certain shops result in a certain impression. This is all part of developing the brand image and creating customer loyalty. Packaging is central to the advertising strategy, as people's impression of a product can be solely based on packaging. As such, it is a central part of the marketing mix. This conveys a lot of the image of a band that a company wants to project. New products, updated versions of a product and a variation will all have an effect on the way a customer views a product. If a new product comes out immediately it can be interpreted in a certain way or vice versa; if a product remains unchanged for years it can also have a certain influence on how a product is viewed. Advertising is used as part of a marketing strategy in order to raise awareness and create interest in the brand or product you are trying to sell. While advertising is a single part of the Marketing mix it can be an important one and using the right techniques, not only in the production of the actual advert but also the placement of it is crucial. Sometimes word of mouth may be even more important and this is a strategy that has been used for a while to create a buzz around products. This can be created by the product itself or the advertising message can be quirky enough to get people talking even if the product isn't so exciting. Association with other brands such as a TV show or sports event can also bring in a new audience but this advertising needs to fit in with the marketing strategy.

5 There have been many techniques and trends within advertising and different agencies will have their own new ideas to add to the mix. Fundamentally though, advertising will only be one part of a marketing strategy, which will also have to take in research, public relations exercises, distribution and supply chain as well as pricing and sales strategies to deal with retailers. You could see the advertising as the public face of the marketing strategy but there will be a lot going on behind the scenes as well. Question 6: Define marketing and discuss what is meant by societal marketing? (Jan 13) (Mark 7) Answer: Marketing is defined as the process of determining the needs and wants of consumers and being able to deliver products that satisfy those needs and wants. The societal marketing concept was an offshoot of the marketing concept wherein an organization believes in giving back to the society by producing better products targeted towards society welfare. Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration, resource shortages, explosive population growth, world hunger and poverty, and neglected social services. Are companies that successfully satisfy consumer wants necessarily acting in the best, long-run interests of consumers and society? The marketing concept sidesteps the potential conflicts among consumer wants, consumer interests, and long-run societal welfare. Yet some firms and industries are criticized for satisfying consumer wants at society s expense. Such situations call for a new term that enlarges the marketing concept. We propose calling it the societal marketing concept, which holds that the organization s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer s and the society s well-being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often conflicting criteria of company profits, consumer want satisfaction, and public interest. Yet a number of companies have achieved notable sales and profit gains by adopting and practicing the societal marketing concept. Some companies practice a form of the societal marketing concept called because related marketing. Pringle and Thompson define this as activity by which a company with an image, product, or service to market builds a relationship or partnership with a cause, or a number of causes, for mutual benefit. Question 7: Differentiate Marketing from Selling and enumerate various marketing concepts in brief. (June 11) (Mark 7) Answer: Differentiation is already done ahead. What philosophy should guide a company marketing and selling efforts? What relative weights should be given to the interests of the organization, the customers, and society? These interest often clash, however, an organization s marketing and selling activities should be carried out under a well-thoughtout philosophy of efficiency, effectiveness, and socially responsibility. Five orientations (philosophical concepts to the marketplace have guided and continue to guide organizational activities: The Production Concept. This concept is the oldest of the concepts in business. It holds that consumers will prefer products that are widely available and inexpensive. Managers focusing on this concept concentrate on achieving high production efficiency, low costs, and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This orientation

6 makes sense in developing countries, where consumers are more interested in obtaining the product than in its features. The Product Concept. This orientation holds that consumers will favor those products that offer the most quality, performance, or innovative features. Managers focusing on this concept concentrate on making superior products and improving them over time. They assume that buyers admire well-made products and can appraise quality and performance. However, these managers are sometimes caught up in a love affair with their product and do not realize what the market needs. Management might commit the better-mousetrap fallacy, believing that a better mousetrap will lead people to beat a path to its door. The Selling Concept. This is another common business orientation. It holds that consumers and businesses, if left alone, will ordinarily not buy enough of the selling company s products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers typically sho9w buyi8ng inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotional tools to stimulate more buying. Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants. The Marketing Concept. This is a business philosophy that challenges the above three business orientations. Its central tenets crystallized in the 1950s. It holds that the key to achieving its organizational goals (goals of the selling company) consists of the company being more effective than competitors in creating, delivering, and communicating customer value to its selected target customers. The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. The Societal Marketing Concept. This concept holds that the organization s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors (this is the original Marketing Concept). Additionally, it holds that this all must be done in a way that preserves or enhances the consumer s and the society s well-being. Question 8: What is demand forecasting? Explain various qualitative forecasting methods. (June 11, May 13, Nov 11) (Mark 7) Answer: Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements, or in making decisions on whether to enter a new market. The following are the Qualitative Methods: 1- Survey of buyers intention: marketer ask buyers about how many units that they would like to purchase from ABC company s products for coming period of time. Well defined buyers Limited in number Advantage: Simple and Easy Disadvantage: buyers might change their opinions, there is no enforcement on buyers to buy that much, buyers might over or under estimate.

7 2- Test Marketing: this research method is heavily preferred when company offers a new product to the market (innovation). Before offering product to the market, marketers need to get some real feedback from market. Marketer: choose a specific region or a store to test the product in real market conditions. Advantage: provide real feedbacks about customers reactions and make estimates upon that. Disadvantage: no control over who will purchase our new product. Rivals might get aware of it and company loose all of its competitive advantage. 3- Sales force composite: Marketers have sales managers or representatives at different sales territories (districts/region) and marketers believe that sales managers know their territory better than anybody else. Marketers ask respective sales manager to forecast expected sales in their own territories. The total of all these estimates basically gives company s sales/demand forecast for next period. Advantage: simple Disadvantage: forecasting requires especial education and training, most managers have lack of education on this issue sometimes managers 1- Over estimate: More than sales potential Over production (extra cost) Additional cost for keeping stock. 2- Under estimate: Less than sales potential Demand do not match Shift to competitors and decrease in sales and decrease in profitability. 4- Executive method (jury of executive method): Company forms a committee to make forecast from members from different departments (marketing, accounting, R&D, production) Make their own forecast and send to committee at a written form Committee members came together and discuss forecasts and agree one of the estimates or come up with a new estimate for whole company. Advantage: easy and simple to use. Disadvantage: estimates are for whole markets and difficult to separate them to specific market or product line; Reliability and accuracy of estimate depend on how to up-to-date; Members can easily influence each other (objectivity is in question). 5- Delphi method: Very similar to jury of executives method but this time members are both inside and outside the company Members do not know each other and never come together. A moderator from company organize all the contacts Moderator prepare data and send it to members to make their own estimate

8 Members send their estimate to moderator as a written form and moderator makes analysis on estimates and form a new data set and conditions and send back to members for further estimate This will continue until all members agree on same forecast. (it is suitable for long-term forecasts). Advantage: No group pressure, more objective Disadvantage: Takes long time. Things to remember: Three compulsory questions asked in each examination. Preferably Question 1. A) and B). Each question will be of 7 marks. This topic covers minimum 21 marks in examination. One question is always asked regarding demand forecasting and its methods.