Transcript 4_I_ Basic marketing concept

Basic Marketing Concepts
Samir K Mahajan
SCOPE OF MARKETING
OR WHAT ARE MARKETED
10 types of entities as per (Philip Kotler )
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goods
services
experiences
events
persons
places
properties
organizations
information
ideas
which forms the scope of marketing.
Samir K Mahajan
SCOPE OF MARKETING
OR WHAT ARE MARKETED
Marketing is a dynamic business process. Due to change of time, the scope of marketing has been changed.
Marketing people are involved in marketing 10 types of entities: goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas which forms the scope of marketing.
o Goods: Good is defined as something tangible that can be offered to market to satisfy a need or want.
Exchange of physical goods result in ownership. Goods constitute the bulk of most countries’ production
and marketing effort. The total marketing programs are centred with goods. In a developing country like
India fast moving consumer goods (shampoo, bread, ketchup, cigarettes, newspapers etc.) and consumer
durables (television, gas appliances, fans etc.) are produced and consumed in large quantities every year.
o Services: Service is any activity or benefit that one party can offer to another that is essentially intangible
and does not result in the ownership of anything. Services include the work of professionals lawyers,
doctors, teachers etc, hotels, airlines, banks, insurance companies, transportation corporations etc.
Production of service may or may not be tied to a physical product. Many market offerings consists of a
variable mix of goods and services. At the pure, service end would be a doctor listening to a patient or
watching movie in a cinema hall; and at a more tangible level in fast food centre, the consumers consume
both a good and a service. As economies advance, the share of service in gross domestic product
increases.
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SCOPE OF MARKETING contd.
o Experiences: By mixing several services and goods, one can create, stage and market experiences. For
example, water parks, zoos, museums etc. provide the experiences which are not the part of routine life.
There is a market for different experiences such as climbing Mount Everest or Kanchanjunga, travelling in
Palace on Wheels, rope ways, river rafting, a trip to Moon, Toy train in Darjeeling, travelling in Trans
Siberian Railways across five time zones etc.
o Events: Marketers promote time–based, theme-based or special events such as company anniversaries,
sports events (FIFA world cup, IPL, as Olympics, ), artistic performances (KK live concert), trade shows
(Book Fair, Automobile fair), award ceremonies (Film fare awards, Screen awards), beauty contests (Miss
World, Miss Universe, Miss India, Miss Chandigarh), Other notable example is organising of religious
events such as Ardh Kumbh and Maha Kumbh at Hardwar, Ujjain, Nasik etc. during different years.
o Persons: Celebrity marketing has become a major business. Film stars, singers, cricketers, footballer
celebrity cook are has an agent, personal manger and ties with public relation agency, and getting help
from celebrity marketers. In the 18th parliamentary election, BJP’s election strategy centres around
Narendra Damodar Modi, that’ s power of personality. Rakhi Sawant.
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SCOPE OF MARKETING contd.
o Places: Cities, states, regions and whole nations compete actively to attract tourists, factories, company
headquarters, skilled labour and new residents. India and China are competing actively to attract foreign
companies to make their production hub. Cities like Bangalore, Hyderabad and Gurgaon are promoted as
centre for development of software. Bangalore is regarded as software capital of India. Kerala, Himachal
Pradesh, Uttranchal Pradesh and Rajasthan are aggressively promoting themselves to attract local as well
as foreign tourists. Due to its cost effectiveness and competitive ability of Indian doctors coupled with
ancient therapies, India is fast emerging as country that can provide excellent medical treatment at
minimum costs.
o Properties: Properties whether real property (real estate) or financial property (share and debt.
instruments) are bought and sold, and this requires marketing effort. Property dealers in Ahmedabad
work for property owners as well as property seekers to sell or buy plots, residential or commercial real
estate. In India some builders like Ansal, Sahara Group, both build and market their residential and
commercial real estates. Brokers and sub-brokers buy and sell securities on behalf of individual and
institutional buyers.
o Organizations: Organizations actively work to build a strong, favourable image in the mind of their
publics. Companies spend money on corporate identity ads. Companies can gain immensely by
associating themselves with social causes. Universities, museums, and performing art organisations use
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marketing to boost their images, and to compete for images
SCOPE OF MARKETING contd
o Information: Information can be produced and marketed as a product. This is essentially what schools,
colleges and universities produce and distribute at a price to parents, students and communities.
Encyclopaedias and most non-fiction books market information. Magazines such as Fitness and Muscle
provide information about staying healthy ; Business India, Business Today and Business World provide
information about business activities that are taking place in various organizations There are number of
magazines which are focussed an automobiles, architecture and interior designing, computers, audio
system, television programmes etc. which cater to the information needs of the customers.
o Idea: Every market offering includes a basic idea. Charles Revson of Revlon observed: "In the factory, we
make cosmetics; in the store we sell hope”. Film makers, marketing executives and advertising agencies
continuously look for a creative spark or an idea that can immortalise them and their work. Idea here
means the social cause or an issue that can change the life of many. Social marketers are busy promoting
ideas such as ‘Say no to drugs’, ‘save water’ , ‘exercise daily’ ‘empower the women’.
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COMPETITION
Competition: Competition includes all the actual and potential rival offerings and substitutes that a
buyer might consider. Suppose an automobile company is planning to buy steel for its cars.
There are several possible levels of competitors. The car manufacturer can buy steel from SAIL or
other integrated steel mills in TATA Steel or abroad (e.g., from Japan or Korea); or buy aluminium for
certain parts of the car to lighten the car's weight ; or buy engineered plastics for bumpers instead of
steel.
Clearly, TATA STEEL would be thinking too narrowly of competition if it thought steel companies only.
In fact, TATA STEEL is more likely to be hurt in the long run by substitute products than by its
immediate steel company rivals. It must also consider whether to make substitute materials or stick
only to those applications where steel offers superior performance.
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RELATIONSHIP BETWEEN INDUSTRY AND MARKET
Marketers often use the term market to mean
various groupings of customers. They view the buyers
as constituting the market and the sellers as
constituting the industry. They talk about need
markets (the diet-seeking market), product markets
(the shoe market), demographic markets (the youth
market), and geographic markets (the Gujarat
market); or they extend the concept to cover other
markets, such as voter markets, labour markets, and
donor markets. Industry refers to group of firms
selling a product.
Following figure shows the relationship between the
industry and the market. Sellers and buyers are
connected by four flows. The sellers send goods and
services and communications (ads, direct mail) to the
market; in return they receive money and
information (attitudes, sales data). The inner loop
shows an exchange of money for goods and services;
the outer loop shows an exchange of information.
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TARGET MARKET
Marketer can rarely satisfy everyone
in a market. Not everyone likes the
same cereal, hotel room, restaurant,
automobile, college, or movie.
Therefore, marketers start by dividing
up the market into segments.
Target Marketing involves breaking a
market into segments and then
concentrating your marketing efforts
on one or a few key segments. Such
efforts comprises of preparing
marketing plans,
formulating
strategies (marketing mix of product,
price, promotion and distribution) for
the targeted market.
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LEVEL OF MARKET SEGMENTATION
To help a company develop more focused marketing plans, each market is broken down into
segments. Each level of a market segment requires different information and a different
marketing approach. A company need to understand what the levels of market segmentation
are, how to address them and how they work together to develop comprehensive marketing
plans.
Different levels of marketing segments are
Mass marketing
Micro Marketing
o Segment Marketing
o Niche Marketing
o Local Marketing
o Individual marketing
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level of market segmentation contd.
Mass Marketing:
In case of mass marketing, the seller does mass production, mass distribution and mass
promotion for the product. The single product then caters to all the buyers in the
population. Mass marketing though creates the largest potential market leading to lower
costs and thereby lowering prices and higher margins, but it also creates difficulty of
reach and makes it real difficult as well as expensive to reach all audience. Coca-Cola
practiced mass marketing when it sold only on kind of coke in a 6.5-ounce bottle.
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level of market segmentation contd.
 Micro-marketing
It is difficult and increasingly expensive to reach a mass audience. Some claims that mass
marketing is dying. Many sellers, thus, are turning towards micro-marketing which happens to be
one of these four levels: Segment Marketing, Niche Marketing, Local Marketing &Individual
marketing .
o Segment Marketing: Segment is practice of defining group of customers who share a similar
set of needs and wants. The way customers are segmented by a company can vary from
business to business but generally include areas such as income, regional location, sex,
socioeconomic factors, and previous buying or business associations. Anderson and Narus have
urged marketers to present flexible market offerings to all members of a segment. A flexible
market offering consists of two parts:
• a naked solution containing the product and service elements that all segment members value,
• discretionary options that some segment members value. Each option might carry an additional
charge.
Example: Automobile industry – basic model is same but for A.C , power steering, power window
buyer has to pay extra price.
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level of market segmentation contd.
Niche marketing : Niche marketing is targeting a narrowly defined customer group who
seeks a distinctive set of benefits who are ready to pay extra premium. A niche is a more
closely defined group, it is dividing the segment into sub-segment and it can be divided by
identifying the distinct traits of consumers which might need special combination of
benefits. Example: washing detergents: hard & gentle washes , surf excel for tough stains
( hard on clothes) & Ezee from Godrej for delicate clothes, Astha , Sanskar , Q TV focus on
religion & spiritualism but Star Sports, ESPN, Ten Sports targets of games and sports
Local marketing : Local marketing focus on brands and promotion to the local needs, and
design marketing program according to the needs and wants of local consumer groups
such as : in cities, neighbourhoods and even specific stores. Local marketing reflects a
growing trend called grassroots marketing. Example KFC - a fast food restaurant chain that
specializes in fried chicken has diversified to the veg-items, cheese, paneers stuffs etc in
order to cater to the needs of vegetarians in Gujarat. Spiderman 3 was released in 5
different language in India including bhojpuri
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level of market segmentation contd.
Individual marketing: Individual marketing is ultimate level of segmentation where segmentation
boils down to segments of one. Individual marketing focus on satisfying the needs, wants and
preference of individual customers. It’s also known as one-to-one marketing . It empowers the
consumers to design the product or service offering of their choice. Example: Paint companies such
as: Asian Paint , Nerolac , Berger Paints etc developed dye /color as per requirement of the
customers. Arvind mills launched Ruff’n Tuff Jeans - branded ready – to – stitch.
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TARGET MARKET contd.
BASES FOR SEGMENTING CONSUMER MARKETS
Segmentation bases are the dimensions that can be used to segment a market. The major
segmentation variables—geographic, demographic, psychographic, and behavioural
segmentation.
A target market can be separated from the market as a whole by segments with respect to
such variables, and identify and profile distinct groups of buyers who might prefer or
require varying product and services mixes. The marketer then decides which segments
present the greatest opportunity—which are its target markets.
The beauty of target marketing is that it makes the promotion, pricing and distribution of
company’s products and/or services easier and more cost-effective. It provides a focus to
all of your marketing.
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BASES FOR SEGMENTING CONSUMER MARKETS contd.
 Geographic segmentation: Geographic segmentation calls for dividing the market into different
geographical units such as nations, states, regions, counties, cities, or neighbourhoods, density of
population, climate etc. The company can operate in one or a few areas, or operate in all but pay
attention to local variations. Example: Major retailers such as Wal-Mart, Reliance Fresh all allow
local managers to stock products that suit the local community. Hilton Hotels customises rooms
and lobbies according to the location of its hotels.
 Demographic Segmentation: In demographic segmentation, the market is divided into groups on
the basis of variables such as age, family size, life cycle, gender, income, occupation, education,
religion, race, generation, nationality, and social class. Demographic variables are the most popular
bases for distinguishing customer groups. One reason is that consumer needs, wants, usage rates,
product and brand preferences are often associated with demographic variables. Another is that
demographic variables are easier to measure. Some demographic variables that have been used to
segment market are as follows:
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bases for segmenting consumer markets contd.
o Age and Life-cycle Stage: Consumer wants and abilities change with age. Baby food brand
‘Complan’ target parents of new born babies , and it comes out with different version of
complan for growing babies corresponding to different stages of the their age.
o Life stage: Persons in the same part of the life cycle may differ in their life stage. Life stage
defines a person’s major concern, such as going through marriage, live together, divorce,
going into a second marriage, taking care of older parent, deciding to cohabit with another
persons, deciding to buy a new home and so on. The life stage offers opportunities for
marketers.
o Gender: Men and women tend to have different attitudinal and behavioural orientations,
based partly on generic makeup, partly on socialization practices. For example, women
tend to be more communal minded, men tend to be more self-expressive and goaloriented. Gender differentiation has long been applied in clothing, hairstyle, cosmetic,
magazines. Some product has ben posted as masculine or feminine. Thus, life style
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magazine Femina targets the women folks. Or Nike is viewed more masculine
than
Reebock.
bases for segmenting consumer markets contd.
o Income: Income segmentation is a long-standing practice in such product and service
categories as automobiles, clothing, cosmetics, and travel. However income does not
always predict the best customer for a given product. The most economical cars are not
bought by the really poor but by the those who think themselves as poor relative to their
status aspirations.
o Generation: Many researchers are now turning to generation segmentation such as youth,
middle age, old age etc. Each generation is profoundly influenced by the times in which it
grows up – the music, the movies, politics. Demographers can call these groups cohorts.
Members of a cohort share the same experiences. They have similar outlooks and values.
Marketers often advertise to a cohort group by using icons and images prominent in their
experiences.
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bases for segmenting consumer markets contd.
o Social Class: Social class is the result of social stratification which are hierarchically
ordered and whose members have similar values, interests and behaviour. Social class
reflects not only on income but also on other indicators such as education, occupation,
wealth, value orientation and areas of residence. Social class differ in dress, speech
pattern, recreational preferences, language. Social classes show product and brand
difference in many areas including clothing, home furnishes, leisure activities,
automobiles, reading habit, media preferences. Many company design product and
services for specific social class.
 Psychographic Segmentation: Psychographics is the science of using psychology and
demographics to better understand consumers. In psychographic segmentation, buyers
are divided into different groups on the basis of psychological/personality traits, lifestyle,
or values. People within the same demographic group can exhibit very different
psychographic profiles.
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bases for segmenting consumer markets contd.
o Life styles: People differ in attitudes, interests, and activities, and these affect the good and
services they consume. Life styles are shaped by money constraints or time constrained.
Consumers who are time famine are prone to multi-tasking, doing two or more things at the same
time. They will phone or eat while driving or bicycle to work to get exercise. Companies making
cosmetics, alcoholic beverages, and automobiles are seeking opportunities in life style
segmentation.
o Personality: Marketers have used personality variables to segment markets. They endow their
products with a brand personality that corresponds to a target consumer personality. A brand may
wish to be mild (Dove), sincere and exiting (Nike), rough and tough (Woodland), competent (HP),
sophisticated( Parkar), youthful, rugged or authentic (Levi’s).
o Values: Some marketers segment by core values, the belief systems that underline consumer
attitudes and behaviours. Core values go much deeper than behaviour or attitude and determine,
at a basic level, people’s choices and desires of the long term. Marketers who segment by values
believe that appealing to people’s inner selves, it is possible to influence their outer selves – their
purchase behaviour.
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.
 Behavioural Segmentation: In behavioural segmentation, buyers are divided into groups on the
basis of their knowledge of, attitude toward, use of, or response to a product. Here, consumers are
segmented into groups such as occasions (regular, occasions, special occasion), user status (nonuser,
ex-user, potential user, first time user, regular user), user rate( heavy or light users, brand loyal or
brand switchers) , and so on.
bases for segmenting consumer markets contd
o Occasions: Buyers can be distinguished according to the occasions when they develop a need,
purchase a product, or use a product. For instance, railway travel is triggered by occasions related
to vacations, religious rituals, festivals. Some other occasions may be marriage, child birth,
relocation, careers change etc.
o User status: Market may be segmented into nonusers, ex-users, potential users, first time users, and
regular users of a product. New born babies are potential users of diaper, or baby food.
o Loyalty Status: Consumers have varying degrees of loyalty to specific brands, stores, and
companies. Buyers can be divided into four groups according to brand loyalty status such as hardcore loyals (consumer who buy one brand all the time), split loyals ( consumer who are loyal to two
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or three brands), shifting loyals ( consumers who shift from one brand to another), and switchers (
consumers who shows no loyalty to any brand).
MARKETPLACE, MARKET-SPACE AND META-MARKET
The marketplace is physical, as when a buyer shop in a store; market-space is digital, as when a buyer shop on
the Internet.
A Meta-market brings all buyers and sellers in one platform for one purpose only. It describes a cluster of
complementary products and services that are closely related in the minds of consumers but are spread across
a diverse set of industries.
For example. the automobile meta-market consists of automobile manufacturers, new car and used car
dealers, financing companies, insurance companies, mechanics, spare parts dealers, service shops, auto
magazines, adds on cars, classified auto ads in newspapers, and auto sites on the Internet.
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COMPETITION
Competition: Competition includes all the actual and potential rival offerings and substitutes that a
buyer might consider. Suppose an automobile company is planning to buy steel for its cars.
There are several possible levels of competitors. The car manufacturer can buy steel from SAIL or
other integrated steel mills in TATA Steel or abroad (e.g., from Japan or Korea); or buy aluminium for
certain parts of the car to lighten the car's weight ; or buy engineered plastics for bumpers instead of
steel.
Clearly, TATA STEEL would be thinking too narrowly of competition if it thought steel companies only.
In fact, TATA STEEL is more likely to be hurt in the long run by substitute products than by its
immediate steel company rivals. It must also consider whether to make substitute materials or stick
only to those applications where steel offers superior performance.
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VALUE AND SATISFACTION
Customer Value is the difference between the values the customer gains from owning and using a product
and the costs of obtaining the product.
e.g. For buying McDonald's food, customer will think about food content, effort etc and the values against
the money, and compare McDonald's with BurgerKing and Subway and select the one that gives them the
greatest delivered value.
Customer Satisfaction is the extent to which a product's perceived performance matches a buyer's
expectations. Customer might be dissatisfied or satisfied.
If the product's performance falls short of expectations, the buyer is dissatisfied.
If performance matches or exceeds expectations, the buyer is satisfied or delighted.
Smart companies aim to delight customers by promising only what they can deliver, then delivering more
than they promise.
e.g. A customer of McDonald's expects quality food within short period of time after placing their order. If
they get their food in hand within their expected time then they become satisfied. Otherwise, dissatisfied.
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MARKETING MIX
The marketing mix is a business
tool used in marketing and by
marketers for creating and
delivering customer value in the
target market.
It is often associated with four
elements
( four P’s) such as
product,
promotion,
place
(distribution) and pricing which
constitute the marketing mix of
the firm.
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MARKETING MIX contd.
Product: Product means the goods-and-services combination the company offers to the target
market. The marketer creates the product that will meet the identified needs of the consumer.
Price: Price is the amount the consumer must exchange to receive the offering . The marketers
tackles the price mechanism and consummates the marketing task by arriving at a price that is
acceptable to the consumer .
Promotion: Promotion includes all of the activities marketers undertake to inform consumers about
their products and to encourage potential customers to buy these products. Marketers
communicate the benefits of the offer to the consumer by carrying out various promotional
activities such as personal selling, advertising and sales promotion.
Place: Place includes company activities that make the product available to target consumers. Place
is also known as channel, distribution, or intermediary. It is the mechanism through which goods
and/or services are moved from the manufacturer/ service provider to the user or consumer.
These are the elements with which the marketer accomplishes his value delivering task. It can also
be seen that in each of these elements, there are several sub-elements. For example, packaging is
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one of the sub-elements of product and warehousing is one of the sub-elements of distribution.
MARKETING MIX contd.
Example: Marketing Mix of Samsung
 Product: Samsung has a vast product portfolio and its presence is in several different product categories. Overall,
Samsung is present in the following product categories.
1) Tablets
2) Mobile phones – Smart phones, normal phones
3) Televisions – LEDs, LCDs. Plasma TV, SMART TV, HDTV etc
4) Cameras and Camcorders
5) Refrigerators
6) Air conditioners
7) Washing machine
8) Microwave ovens
9) IT – Laptops, printers and accessories
The brand image driver for Samsung are the Samsung Smartphone’s such as the Samsung note series or the Samsung
galaxy series. The benefit of Samsung in terms of its product is that there is a trust on all Samsung products because of the
way these product have performed in the last few years. Problems with the products has been negligible. And with its
Smart phones, Samsung has achieved a status symbol for its customers.
At the same time, Samsung is known for its service and people know that Samsung gives a very fast service for any of its
product. Thus in the marketing mix of Samsung, the product portfolio is one of the strongest point for Samsung.
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MARKETING MIX contd.
Example: Marketing Mix of Samsung contd.
 Price : Because of its presence in different product categories, Samsung uses various pricing strategies. We can divide
the pricing strategies and match it with the products that it is used for.
o Skimming price – Samsung’s smart phones are one of the best in the market and are the market leader in terms of the
features and USP’s that they provide. Thus Samsung uses Skimming price for these products wherein it tries to get a
high value in the start before competitors catch up. Once the model is old or any competitor has launched a similar
product, Samsung immediately drops the price.
o Competitive pricing : For products other than smart phones, Samsung uses competitive pricing. Televisions, air
conditioners, refrigerators and other products have competition in the form of Panasonic or LG. Samsung is known to
be a great brand but it is not greater than LG for home appliances. In fact LG beats Samsung where home appliances
are concerned. Similarly in Washing machines – Whirlpool, and in Cameras – Cannon, are the brands which are to be
beaten. Thus in various categories, Samsung keeps competitive pricing so as to beat the competitor. Samsung as a
brand hardly uses penetrative pricing because it doesn’t enter late in the market. In fact, it is present in most consumer
durable segments in the market.
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MARKETING MIX contd.
Example: Marketing Mix of Samsung contd.
Place : Samsung is present through various channels in the market. It works on the channel marketing concept wherein
there are three segments. Sales and service dealers, Modern retail and Distributors.
The sales and service dealers handle key accounts for Samsung and are involved in corporate sales. These dealers may also
open exclusive Samsung showrooms.
The Modern retail segment includes large retailers like Croma, Hypercity, Vijay sales, Vivek’s and any others who are present
in the modern electronic retail chain. Samsung being such a branded product, the retailers are bound to keep Samsung as an
alternative for their customers.
As far distribution network in several cities is concerned, Samsung has a single distributor through whom they distribute
throughout a territory. For example in Mumbai, Samsung has SSK distributors who are distributors for all Samsung products.
This distributor has a huge investment in Samsung. Both the distributor and the company go hand in hand for the sale of
Samsung’s products. Thus all material of Samsung will be sold to a single distributor who in turn will sell it forward to
retailers.
Promotions: Samsung uses multiple forms of promotions. Samsung as a company believes in pulling the customer to
themselves through advertising but at the same time uses strong tactics to push the product to the customer through sales
promotions. On one hand, Samsung uses various marketing vehicles across the year covering festive season as well as nonfestive time. On the other, it gives many offers and discounts to its trade partners to motivate them to sell Samsung above
competition.
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MARKETING MIX STRATEGY
Marketing-mix decisions must be made for influencing the trade channels as well as the final consumers. The company
prepares an offering mix of products, services, and prices, and utilizes a communications mix to reach the trade channels
and the target customers.
The firm can change
its
price
and
advertising
expenditures in the
short run. It can
develop
new
products and modify
its
distribution
channels only in the
long run.
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MARKETING MIX STRATEGY contd.
The four Ps represent the sellers' view of the marketing tools available for influencing buyers.
From a buyer's point of view, each marketing tool is designed to deliver a customer benefit. Robert Lauterborn suggested
that the sellers' four Ps correspond to the customers' four Cs
Four Ps
Product
Price
Place
Promotion
Four Cs
Customers Solution
Customers Cost
Convenience
Communication
Winning companies will be those that can meet customer needs economically and conveniently and with effective
communication.
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PRODUCT OR OFFERING
People satisfy their needs and wants with products. A product is any offering that can satisfy a need or want.
Products that are marketed includes one of the 10 basic offerings of goods, services, experiences, events,
persons, places, properties, organizations, information, and ideas. The customer will judge the offering by three
basic elements: product features and quality, services mix and quality, and price appropriateness.
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PRODUCT LEVELS: CUSTOMER
VALUE HIERARCHY
Marketers plan their market offering at
five levels. Each level adds more
customer value, and together the five
levels constitute a customer value
hierarchy.
 Core benefit : The most fundamental
level is the core benefit. Core benefit
is the inner need ( or fundamental
service or benefit) that urges the
consumers to buy a product or a
service or any other offering. The
main aim of consumers is to satisfy
this inner urge. e.g. A hotel guest is
buying “rest and sleep.”
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PRODUCT LEVELS contd.
 Basic product /Generic Product : At the second level, the marketer has to turn the core benefit into a basic product.
The basic product must satisfy the inner needs of the consumer. In this stage, the product contains those values
that are totally necessary for it to function. Thus a hotel room includes a bed, bathroom, towels, desk, dresser.
 Expected Product: At the third level, the marketer prepares an expected product – a set of attributes and
conditions buyers normally expect when they purchase a product. Hotel guests expect a clean bed, fresh towels,
working lamps, and a relative degree of quiet and privacy. Because most hotels can meet this minimum
expectation, the traveller normally will settle for whichever hotel is most convenient or least expensive.
 Augmented Product: At the fourth level, the marketer prepares an augmented product that exceeds customer
expectations. Augmented product include those attributes that can differentiate it from the competitors’ products
and might provide a slight advantage over them for the consumers. These may include the brand name, the design,
the packaging, the overall quality, the additional functions (apart from the basic features), the installation, the
after-sale service, the warranty, the home delivery and the possibility to accept credit from the consumers. A hotel
can include a remote-control television set, fresh flowers, rapid check-in, express checkout and fine dining and
room service.
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PRODUCT LEVELS contd.
 Potential Product : At the fifth levels stands the potential product, which includes all the possible augmentations and
transformations that the company finally includes in the product to differentiate it from the competitors’ products.
Here is where companies search for new ways to satisfy customers and distinguish their offer . Successful companies
add benefits to their offering that not only satisfy customers but also surprise and delight them. Delighting is a
matter of exceeding expectations. Thus the hotel guest finds candy on the pillow or a bowl of fruit or a video recorder
with optional videotapes. Ritz-Carlton hotels, for example, remember individual guests’ preferences and prepare
rooms with these preferences in mind.
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Example of a Service: A Hotel Room
Core benefit: the inner urge of customers to
sleep and rest, and have some privacy and
silence.
Basic product: a hotel room with bathroom,
towels, desk, dresser
Expected product: a hotel room with a bed that
is neat and clean, clean bed, fresh towels,
working lamps, and a relative degree of quiet
Augmented product: a hotel with air
conditioned bed room, remote-controlled
television set, fresh, rapid check-in, express
checkout, fine dining and room service a
minibar,
Potential product: a hotel room with a LCD
television, a big bathroom with a hydromassage shower cabin, tub, hair dresser etc.
PRODUCT LEVELS contd.
Example of a Product: Car
Core benefit: the need to get from one place to another.
Basic product: a car on its own; on this level this basically
means that the car has 4 wheels .
Expected product: a car that is in working condition, so
the owner can use it for transportation, it has decent
mileage, etc.
Augmented product: a car (say Ford or any other brand for
that matter) that is in fully working condition, has an
attractive design, passed all safety tests, has 4-wheel
steering, built-in alarm and air condition, etc. The car is
also accompanied by other benefits provided by the
motor company like warranty, instalments, etc.
Potential product: the car is much safer than the
competitors’ products; it tends to break down less
frequently than other cars, has the best mileage, etc.
Samir K Mahajan
THE PRODUCT HIERARCHY
Product hierarchies is used to group products of a company according to different criteria. A product hierarchy can be
multilevel and used for control or informative purposes. The product hierarchy stretches from basic needs to particular
items that satisfy those needs. We can identify six levels of the product hierarchy:
1. Need family : The core need that underlies the existence of a product family. Example: personal care
2. Product family : All the product classes that can satisfy a core need with reasonable effectiveness. E.g.
skin and beauty care ( such as cosmetics, skin creams), bathing agents (such as soap), hair cleaning agents (shampoos),
hair conditioning agents etc
3. Product class (category) : A group of products within the product family recognized as having a certain functional
coherence. E.g. hair cleaning agents or skin and beauty care, or bathing agents
4. Product line : A product line is a number of products grouped together based on similar characteristics such as product
price, product quality, target group, and product specification/features. Firms may decide to split their product mix into
groups known as product lines. E.g. shampoos,( or soaps, or cosmetics or conditioner or skin creams).
Samir K Mahajan
THE PRODUCT HIERARCHY contd.
5. Product type : A group of items within a product line that share one of several possible forms of the product. E.g. antidandruff shampoos or shampoo for normal hair or shampoo for dry-hair, anti-hair fall shampoo or shampoos for oily
hair, or hair-fall control shampoo
6. product variant or Item or stock-keeping unit : A distinct unit within a brand or product line distinguishable by size,
price, appearance, or some other attribute. Example: a sachet of anti-dandruff shampoo or bottled anti-dandruff
shampoo.
Samir K Mahajan
PRODUCT SYSTEM
Product System: A product system is a group of diverse but related items that function in a compatible manner. For
example, smartphone product lines come with attachable products including headsets, cameras, keyboards,
presentation projectors, e-books, MP3 players, and voice recorders.
Product mix: A product mix (also called a product assortment ) is the set of all products and items a particular seller
offers for sale. A product mix consists of various product lines. The Godrej Agrovet division has a wide range of
products in animal feeds, agricultural inputs, horticulture, and tissue culture .
Samir K Mahajan
PRODUCT MIX (PRODUCT
PORTFOLIO OR PRODUCT
ASSORTMENT)
A product mix (also called a
product assortment) is the set of
all products and items a particular
seller offers for sale. A product mix
consists of various product lines.
A company’s product mix has four
dimensions such as width, length,
depth and consistency.
Samir K Mahajan
PRODUCT MIX contd.
 Product Mix Width: The product mix width is the number of product lines the company carries or sells. In our example
whirlpool has seven product lines, its product mix width is seven. A wide product mix increases the type of customers a
firm can target. However it may involve a lot of work as each product line will require a strategy and management. A
narrow product mix may be easier to manage and allow the firm to specialise in particular product lines and product
types. However a small product mix reduces the type of customers a firm can target as they can't cater for everyone's
product "needs and wants".
 Product Line Length :The product line length shows the number of product types in a particular product line. A product
line may be long or short. If there are too many product types in a product line, they will begin to compete with each
other, increase costs unnecessarily and even confuse customers. If the product line is too short it will limit customer
choice and send customers to competitors with a greater selection of products. The product manager's job is to work
out how many products to include in the product line. In the product line washing machine of Whirlpool , there are
three items such as semi-automatic, automatic and white magic.
 Product Mix Depth :Product Mix Depth is number of product variant offered for each product type in a product line
with respect sizes, formulations or any other distinguishing characteristic. Whirlpool’s automatic washing machine are
available in front load and top load each of which has different sizes and other features.
Samir K Mahajan
PRODUCT MIX contd.
 Consistency of Product Mix :Product mix consistency pertains to how closely related product lines are to one
another--in terms of use, production and distribution or some other way. A company's product mix may be
consistent in distribution but vastly different in use. For example, a small company may sell its health bars and health
magazine in retail stores. However, one product is edible and the other is not. The production consistency of these
products would vary as well.
These four product-mix dimensions permit the company to expand its business by (1) adding new product lines, thus
widening its product mix; (2) lengthening each product line; (3) deepening the product mix by adding more variants;
and (4) pursuing more product-line consistency.
Samir K Mahajan
PRODUCT MIX contd.
PRODUCT LINE STRETCHING
Product line stretching occurs when a business adds new product to the product line and the new product types are
added to the existing products in the product line. If the new product types are cheaper or of a lower quality it is
known as a downward stretch. If the new product types are more expensive or of a higher quality it is known as an
upward stretch. Supermarkets often stretch product lines by offering value, standard and premium versions of their own
brand products. Product stretching enables firms to fill any gaps they have identified in the market.
Product selection is an important decision as the product is the item the firm is selling. Firms need to strike a balance
between giving customers choice and trying to cater for everybody by stocking too many products. Dividing products
into product lines and the product line into further groups, helps firms to develop product strategies. It will also help
them identify which product ranges sell well and which do not as each product line will be monitored.
Samir K Mahajan
PRODUCT POSITIONING
Product Positioning is a marketing strategy that aims to occupy a distinct position relative to competing
brands in the mind of the customer. For each chosen target market, the firm develops a market offering
which is positioned in the minds of the target buyers by delivering some central benefit(s).
For example, Volvo develops its cars for buyers to whom automobile safety is a major concern. Volvo,
therefore, positions its car as the safest a customer can buy.
Companies apply this strategy either by emphasizing the distinguishing features of their brand (what it is,
what it does and how, etc.) or they may try to create a suitable image (inexpensive or premium, utilitarian or
luxurious, entry-level etc.) through advertising. Once a brand is positioned, it is very difficult to reposition it
without destroying its credibility.
Samir K Mahajan
WHAT IS MARKET SEGMENTATION
The concept of market segment is based on the fact that the market of commodities are not homogeneous but they are
heterogeneous. Market represent a group of customer having common characteristics but two customer are never common
in their nature, habits, hobbies, income and purchasing techniques.
Market Segmentation is a method of dividing a large market into smaller groupings of consumers or organizations called
segments in which each segment has similar needs, wants or demand characteristics. Its objective is to design a marketing
mix that precisely matches the expectations of customers in the targeted segment.
Generally three criteria can be used to identify different market segments:
1) Homogeneity (common needs within segment)
2) Distinction (unique from other groups)
3) Reaction (similar response to market)
Samir K Mahajan
What is Marketing?
Marketing is the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a
profit.
Marketing identifies unfulfilled needs and desires. For example when eBay recognized that people were unable to locate
some of the items they desired the most , it created an online auction clearinghouse.
It defines, measures and quantifies the size of the identified market, and the profit potential. It pinpoints which
segments the company is capable of serving the best , and thus it designs and promotes the appropriate products and
services. (Philip Kotler)
Marketing includes diverse disciplines like sales, public relations, pricing, packaging, distribution, promotions and so on.
Marketing’s key processes are: (1) opportunity identification, (2) new product development, (3) customer attraction, (4)
customer retention and loyalty building, and (5) order fulfilment. A company that handles all of these processes well will
normally enjoy success. But when a company fails at any one of these processes, it will not survive.
Ref: Philip Kotler and Internet