3.0 sales & marketing management_1
TRANSCRIPT
Sales & MarketingManagement
Definition of Marketing
Marketing is a social & Managerial process by which individuals & groups obtain what they need & want through creating & exchanging products & value with others.
Philip Kotler in 1991
American Marketing Association’sDefinition
Marketing is an organisational function & a set of processes for creating, communicating & delivering value to customers & for managing customer relationships in ways that benefit the organisation & its stakeholders
Marketing
Marketing is concerned with anticipating customer demand & directing the flow of goods from producers to consumers
Marketing has to do with matching producer’s outputs to consumer’s activities (needs, wants)
Marketing is the business function that interprets customer needs to the rest of the organisation
Marketing- Definition
Process of Planning & Executing the conception,pricing,promotion & distribution of ideas, goods& services to create exchanges that satisfy individuals & organisational objectives.
What is Marketed ?
Goods or Products
Services
Events
Experiences
Property, Time share, etc
Marketing Practice
Marketing Triad
Dialogue
RelationshipCoordination Customer
Concepts of Marketing
1. The Exchange Concept
2. The Production Concept
3. The Product Concept
4. The Sales Concept
5. The Marketing Concept
Sales & MarketingSales: Selling concept is to sell what you make rather
than make what the market wantsMarketing: Emerged in the mid 50sCustomer centered – find the right products for your
customers
Selling
Selling focuses on the needs of the seller
Preoccupied with the seller’s need to convert his product into cash
Marketing
Marketing on the needs of the buyer
Idea of satisfying the needs of the customer by means of the product
Sales & Marketing
Selling Concept:
Marketing Concept:
Starting Focus Means Ends
Factory Profit through Sales Volume
Selling & Promotion
Products
Coordinated Marketing
Market Customer Needs
Profits through Customer Satisfaction
Sales & Marketing
Difference between Selling & Marketing:
Selling:
Revolves around the needs & interests of the seller
Starts with existing products
Seeks profits by pushing the products on the ‘ buyers’
Marketing:
Revolves around the needs & interests of the buyer
Starts with the customers – present & potential
Seeks profits by meeting the needs of the customer
The Marketing Concept
The Marketing concept has four major distinguishing features:
1. Consumer Orientation
2. Integrated Management, with Marketing as the fulcrum.
3. Consumer Satisfaction
4. Realisation of all organisational Goals, including profits
The Marketing Concept
1. Consumer Orientation
Emphasis on the consumer and his need.
Enables the firm to look at its business from the point of view of the consumer.
When a firm adopts a Marketing concept, the consumer becomes the focal point of the business.
Marketing2. Integrated Management, with Marketing as the
Fulcrum
All different functions of the business must be tightly integrated with one another, keeping Marketing as the pivot.
All functions have to be integrated and properly aligned with Marketing
All elements are seen through the eyes of the customer and are coordinated so as to produce the best benefits & satisfaction for the customer, and no dept. or executive functions in isolation.
Marketing
3. Customer Satisfaction
Integrated Management is the means for fulfilling the needs of the consumer.
Marketing concept leads to consumer orientation which in turn should lead to consumer satisfaction
Marketing
4. Profits
The Marketing concept also considers the creation of profits or surpluses as an essential requirement of any business firm
Attractive returns & surpluses are essential for the survival and growth of any business.
MarketingMarketing ConceptThe Marketing concept is essentially a
point of view about business. It enunciates that business is basically a “need-satisfying process” and that businesses must be managed keeping the consumer and his need as the focus.The concept prescribes that all goals of
business, including profit, must be realised through consumer orientation and generation of consumer satisfaction.
Marketing
Concept of Value
Customer seeks value in what he buys
He has to pay a cost for acquiring this value
He is happy when this value exceeds the cost he incurs
He also gets satisfaction when using the product
The larger the value-cost gap, the greater is his satisfaction
Marketing
He selects the offer that gives him the best trade-off.
Benefit-value-cost-satisfaction-is a challenging exercise
Winning combination of the above is the job of Marketing Management.
The Marketing concept gets implemented when a firm searches for the benefits sought from it by the customer & builds them into its offer
Marketing
Market Offer
The firm incorporates the benefit that it wants to provide to the customer into its market offer.
The firm has a value creating & value delivering system & it includes the firm’s production facilities, processes, organisation, expertise, etc.
Marketing
Market Offer
The firm makes out the best possible bundle of benefits as per the customer’s expectations and puts it across in the form of its Market Offer.
Providing the Best Value-Cost Balance is thus the key to Marketing
In its effort to deliver the intended value to the customer, the firm uses its Tool Kit- Marketing Mix.
MarketingPerceived Value
Every benefit promised by the product, carries a measure of value to the customer
The customer mentally judges the value of the product
This is called the “Perceived Value” The estimate is based on various information which
he has on hand from different sources Buyer behaviour also influences the process of
customer value assessment Branding can come into play
Marketing
In any Marketing situation, one can discern four distinct steps in the value providing process :
1. Value Selection
2. Value Creation / Value Delivery
3. Value Communication
4. Value Enhancement
Marketing
Value Selection
Only after selecting the value to be offered, can the firm proceed with production, sales and promotion.
Marketing Planning, Buyer analysis, market segmentation and targetting are concerned with Value Selection.
Marketing
Value Creation / Value DeliveryThis is the bulk of the marketing job.Product development, manufacturing,
service planning, pricing, distribution and servicing, are concerned with value creation / value delivery.Thus, technology, design and Engg.,
Finance management and organisation set up have a role in this function.
Marketing
Value Communication
The firm first makes out a Value Proposition and then communicates this to the customer.
The product offer consisting of the best possible benefits / value is put forward as a value proposition
Personal selling, advertising, publicity and sales promotion are concerned with value communication.
MarketingValue EnhancementThe firm has to continuously and
proactively keep enhancing the value of the product offeringFirm has to collect feedback from the
customer about his level of satisfaction, upgrade product value etc.Market research and other control
activities help in enhancing the value of the product offering.
Marketing Mix
Products Price Promotion Place
Advertising
Marketing Mix
Variety
Quality
Design
Features
Brand
Packaging
Size
Services
Warranties
Returns
List price
Discounts
Allowances
Payment Period
Credit Terms
Sales Promotion
Advertising
Sales Force
Public Relations
Direct Marketing
Channels
Coverage
Location
Inventory
Transport
Marketing Mix
Product1. Product Design, features, brand name,
models, style, appearance2. Product Quality3. Warranty / Returns4. Package : Design type, material, size,
appearance and labelling5. Service : Pre-sale & after sale, service
standards, service charges.
Marketing Mix
Place
1. Channels of Distribution: Channel design, types of intermediaries, location of outlets, channel remuneration, dealer-principal relations. Etc
2. Physical distribution: Transportation, warehousing, inventory levels, order processing etc.
Marketing Mix
Price
1. Pricing Policies, List prices, Margins, discounts and rebates.
2. Terms of delivery, payment terms, credit terms and installment purchase facilities
3. Resale price maintenance
Marketing Mix
Promotion
1. Personal Selling: Selling expertise, size of sales force and quality of sales force
2. Advertising: Media Mix, vehicles, programmes
3. Sales Promotion
4. Publicity and Public relations
Marketing Information System(MIS)
Sources: Internal Data Personal Experience External Data
o Internal Data:» Performance Data» Written Reports» Data Handling
o Personal Experience:» Oral Reports & Feedback» Questioning
o External Data:» Market research » Desk Research
Qualitative
Quantitative
Marketing Research is now made by leading Management consultancies
Systematic collection & organisation of data relevant to the needs of the marketer - computerised
Marketing Intelligence Systems
Intelligence
Data
Information
Intelligence
Is the interpretation which is made,followinganalysis of above information
Most important use of MIS data on a large scale is in “Precision Marketing” where small groups of customers are used to target promotional efforts very accurately
Internal Sources of Information
Performance Analysis
ABC Analysis
Variance Analysis
Marketing Research
Gives a profound insight into the whole of the marketing process
Syndicated Research
Custom Research
Sub Contractors
Syndicated Research
Easiest & quickest service
Some of this can be standard research
Shared cost is one major advantage
o Areas:
» Retail audits
» Panel research
» Omnibus surveys – Questionnaires
» Consultancies
Custom Research
Specific to Customer needs
Cost is significant
When costs are cut quality suffers
The Marketing Environment
Environmental Analysis
The Marketing EnvironmentThe foll. constitute the environment variables of
Marketing :
Competition
Consumer
Govt. of the land
Forces of Nature etc
While the Marketing Manager can choose, alter and control the Marketing Mix variables, he cannot choose or alter the environment variables against which he markets his product.
The Marketing Environment
Hence:Environmental Variables : Non Controllable
Marketing-Mix : Controllable variables
Marketing – Interaction betweenMarketing Mix} EnvironmentalVariables } & VariablesMarketing Objective is achieved using different
combinations of the Marketing Mix.
The Marketing Environment
Selecting an optimum combination is the name of the game
The task is to give correct weightage to the different elements of the mix.
Ensure that all the elements are integrated
The aim is to select a combination which will have the desired impact on the market being cost effective at the same time.
The Marketing EnvironmentOther factorsChange in Environmental variables
Change in customer preference
Changes within the firm
Corporate strategy
Product Lines
Organisation
Resource level
Thus knowledge of Marketing Environment is central and crucial to Marketing Management
Environmental Analysis
1. Introduction
2. The Environment
3. Analysis
4. Scanning
5. Areas of Information
6. Macro – environmental Analysis
7. Porter’s Five Competitive Forces
Introduction1. The business environment is the setting within
which a business operates, formulates policies & makes decisions
2. We can distinguish between Internal & External environment
3. Considerable control can be exercised over its Internal environment by a firm, but a firm cannot exert control in the same way or to the same extent over the External environment
4. The nature of this environment & the changes occurring within it, present Opportunities, Threats & Constraints to an organisations’ activities.
Introduction
5. An Organisation in its environment might be likened to a ship at sea
6. Organisational environments present the same kinds of Opportunities ,Threats & Constraints for the organisation as the sea does for the ship
7. Organisations need to respond & adapt to changing environmental conditions if they intend to survive.
The Environment
1. Infinite number of environmental variables 2. Large number of non – controllable variables
Pose both opportunities & threats
3. Essence of strategy: Future Orientation4. We need to understand & diagnose the
environment 5. No simple models or algorithms for success 6. If you get it wrong: You go out of business 7. If you get it right: Does not ensure success
Analysis
1. Identify & Monitor potential threats & opportunities 2. Diagnosis: Through a process of decision making,
assess the significance to the company of such threats & opportunities
Analysis of environment: Current product / market strategies & predictions of
variance Diagnosis stage: Improvements to existing strategiesTherefore, Environmental Analysis: Integral part of the strategic
planning process
Scanning
Environmental audit is also referred to as ‘ Scanning’
There are four forces of scanning:
1. Undirected viewing
2. Conditional viewing
3. Informal search
4. Formal search
Undirected viewing
Exploring information in general without carrying a specific agenda
Viewer is exposed to a large amount of varied information
Just a broad attempt to be aware of factors or areas that may have changed
Conditional viewing
Not an organised search
Viewer is sensitive to information that identifies changes in specific areas of activity
Informal search
Organised but limited search for information to support a specific goal
Formal search
Search is actively pursued & specifically designed to seek particular information
Balance has to be struck between the resources allocated to this search activity & the potential benefits
Areas of Information
Managers search for information in five broad areas:
1. Market Intelligence
2. Technical Intelligence
3. Acquisition Intelligence
4. Broad Issues
5. Other Intelligence
Areas of Information
Area of external Information
Category General Content
Market Intelligence
Market Potential
Structural change
Competitors & Industry
Pricing
Sales Negotiations
Customers
Capacity, consumption, imports, exports
Mergers, acquisitions, new entries
Competitor information, Industry policy
Effective & Proposed prices
Information on specific current or potential sales
Current or potential customers, markets & problems
Areas of Information
Area of external Information
Category General Content
Technical Intelligence
New product, processes & technology
Product problems
Costs
Licensing & Patents
Technical information relatively new or unknown to enterprise
Involving current products
For processing, operations, etc. for suppliers, customers & competitors
Products & Processes
Areas of Information
Area of external Information
Category General Content
Acquisition Intelligence
Intelligence on broad issues
Other Intelligence
Leads for mergers, joint ventures or acquisitions
General conditions
Govt. actions & policies
Suppliers & raw materials
Resources available
Miscellaneous
Information concerning possibilities for the organisation
General information: Political, demographic, etc.
Decisions affecting the industry
Purchasing information
Availability of people, land, other resources
Any other information
Macro - Environmental Analysis
This audit examines the broad range of environmental issues that may affect the organisation
P : Political
E : Economic
S : Social
T : Technological
Macro – Economical Analysis
PEST:
The central role of this PEST analysis is to identify the key factors that are likely to drive change in the environment
Then, the aim is to establish how these key factors will affect the industry in general & the organisation in particular
Political / Legal issuesGovts. Are in a position to take actions which can substantially alter a
company’s marketing environment. e.g Duties on cars / commodities Import / Export policies Telecom Regulations
Political instability in a country can also have a marked effect on Marketing methods used by exporters.
Other factors include the foll:
1. Taxation policy2. Monopoly controls3. Environmental protection measures4. Employment law5. Environmental legislation6. Foreign trade agreements
The Economic Environment
Sales
Time
Prosperity demand for well known & well established products
Recession demand for basic functional & less expensive products
Recovery demand for convenience products
Effects of booms & slumps in economy
The Economic Environment
Effects of booms & slumps in economy: In each stage of the cycle there are different patterns In times of prosperity – consumer spending is high Organisations exploit this by:
Extending Product lines Increasing Promotional efforts Expanding distribution Raising prices
On the presumption that consumers are often willing to pay more for well known & well established products & have the means to do so
The Economic Environment
Current & Future state of key economic variables used to describe wealth, purchasing power, savings & consumption together with government economic policy deployed to affect those variables
GDP or disposable income are key determinants of demand
Rate of inflation & Govt. policy towards it can greatly affect consumer’s attitudes to credit
Other areas considered are: 1. Conservation of Natural resources 2. Costs of pollution 3. Energy consumption 4. Management of natural resources
The Economic Environment
As part of strategic planning process: Identification, monitoring & forecasting of those economic variables to which the company’s market effort is most sensitive
Key marketing task is to attempt to realisethe relationships between movements in the economy & changes in the market place
Economic Factors
Interest rates
Inflation rates
Money supply
Business cycles
Unemployment
GDP trends
The Demographic Environment
Demographic and cultural factors make up society-wide influences and changes that can affect the marketing environment.
Factors: Population : size, growth rate, distribution
by gender, birth rates / death rates, life expectancy etc.
Density : Location, geographic / regional shifts.
Hosehold / Family : Size, make-up Income / Wealth distribution Socio-economic groups : Occupations, ethnic groups.
The Demographic Environment
These factors change slowly over time & exert powerful effects on the volume & nature of demand for most products & services.
e.g. Children’s products & services
Elderly population
Smaller families / Single Parent families
Career couples.
Nature of Cultural Values
Different regions of a country exhibit different buying preference patterns that seem to reflect different cultural & traditional values
Culture is reflected in the prevalent core beliefs & values of people.
These beliefs & values are declared in family & friendship relations etc.
Nature of Cultural Values
Religious beliefs, have a major influence on consumer attitudes & purchase behaviour.
Reflected in the kinds of food that people consume, the drinks they purchase & even their manner of dress.e.g. Spate of new restaurants that have come up recently.
Changes in Menu to meet the requirements of the changing class of people.
Marketers have to understand cultural values in all aspects of implementing the marketing concept & managing the Marketing Mix.
Changes in Values & Attitudes
Attitudes towards credit have changed substantially since the 1980s.
Credit has become an intrinsic part in the marketing of many products.
Changes in society’s attitudes towards health & wellness have resulted in an entirely new set of businesses coming up.
People are now more weight conscious, exercise conscious & diet conscious.e.g Diet India- supplies food which is door-delivered-three times a day.
The role of working women in society is also a result of changing attitudes.
Social / Cultural issues
Other factors
Social mobility
Changes in life style
Levels of Education
Work behaviour
Leisure activities
Patterns of ownership
The Technological Environment
Technology has always been important but the rate of innovation has increased so rapidly in recent years that the impact of technology has become a principal driving force in business activity.
The last three decades have seen an amazing no. of new technologies that have created new markets for many electronic and other products.
Technology can also change how businesses operate (Banks, airlines, retail stores etc.)Consumers today enjoy cheque- free banking, printing of air and train tickets at home etc.
The Technological Environment
Music industry has been forced to change the way they distribute music.
Technological developments are also having a profound impact on all aspects of marketing practice :
Marketing communications
Distribution
Packaging
Etc.
Technological Factors
Focus of government research
Rate of technology transfer
Materials
Developing technological processes
Porter’s Five Competitive forces
Competitive Rivalry
Bargaining power of Suppliers
Bargaining power of Buyers
Threat of Substitute Products
Threat of new Entrants
Competitor AnalysisThe Five Forces Model of “Porter”
Introduction
The essence of Strategy formulation is coping with competition.
The state of competition in an industry depends on five basic forces :
1. Bargaining power of suppliers
2. Bargaining power of customers
3. Threat of new entrants
4. Threat of substitute products or services
5. Competitive rivalry
Competitor Analysis
The collective strength of these forces determines the ultimate profit potential of an industry.
Knowledge of these underlying sources of competitive pressure provides the groundwork for a strategic agenda of action.
This analysis should be conducted at the level of the individual strategic business unit (SBU)
The analysis is as below:
Competitor AnalysisBargaining Power of SuppliersPower of suppliers is liable to be strong where:Control over supplies is concentrated into the
hands of a few playersCosts of switching to a new source of supply are
high.The supplier has a strong brandThe supplier is in an industry with a large no. of
disparate customers Its product is unique or at least differentiated. If suppliers can realistically threaten forward
integration.
Competitor AnalysisBargaining Power of Suppliers
Depending upon the above factors, a powerful supplier is in a position to influence the profitability of a whole industry by raising prices or reducing the quality of the goods it supplies.
In recent years, more no. of companies seek a partnership relationship with their suppliers, the result being:
Lower transaction costsImproved QualityDecreased transaction time.
Competitor AnalysisBargaining Power of Buyers / CustomersBuyers or customers exhibit power when : Purchases are in large volumes.
( Especially so when fixed costs are high) Buyers control a large % of a volume market. Products are standard or undifferentiated.
( Buyers can always find alternate suppliers) There are a large no. of small suppliers. The product forms a component of its product or is a fraction
of its cost. Buyer earns low profits & hence is price sensitive. The industry’s product is unimportant to the quality of the
buyer’s products or services. The buyers pose a credible threat of integrating backward to
make the industry’s product. E.g. Auto manufacturers.
Competitor AnalysisThreat of new entrants
New competitors add capacity to the industry and bring with them the need to gain market share thereby making competition more intense.
The barriers to entry are :
• Economies of scale
Apart from product cost advantage, economies of scale can also act as hurdles in distribution, utilisation of sales force, financing & almost all other part of a business.
2. Strong capital Requirements
Competitor AnalysisThreat of new entrants
3. Product Differentiation
Brand identification creates a barrier by forcing entrants to spend heavily to overcome customer loyalty.
e.g. Soft drinks, OTC drugs, cosmetics etc.
Coupled with distribution & marketing, this acts as a strong entry barrier.
4. Gaining access to appropriate Distribution Channels can be difficult.e.g Petrol bunks
Competitor Analysis
Threat of new entrants
5. Cost advantages independent of size
Built over a period of time
Experience curve
6. Hostile Reactions
7. New products, marketing etc.
Introduction of new products through R & D, Marketing initiatives,e.g.long term contracts etc.
Competitor AnalysisThreat of Substitute Products / Services
Substitute products put a ceiling on the profitability of an industry by limiting the price that can be charged, especially when supply exceeds demand.
Substitution can arise in a no. of ways : A new product replaces an existing product or service.
Fountain pen by Ball penInland Letter, Greetings Card- E MailGifts- Gift vouchersCassettes- CDs- Hard disk / I-Pod etc All Products & Services, to some extent, suffer from
generic substitution.e.g Car instead of a Holiday or vice versa
Competitor AnalysisThreat of Substitute Products / Services
Substitute products that deserve the most attention strategically are those that
Are subject to trends improving their price-performance trade off with the industry’s product.
e.g. Tea Bags, Shoe polish, self sealing envelopes, ready to eat snacks etc.
Competitor Analysis
Competitive RivalryRivalry among existing competitors takes the
familiar form of “Jockeying” for position using tactics like price competition, product introduction, advertising etc.
Intense rivalry is related to the presence of a no. of factors :
Competitors are numerous & almost equal. Industry Growth is slow.Product or service lacks differentiationFixed costs are high or the product is perishable
Competitor Analysis
Competitive RivalryCapacity is normally augmented in large
increments. E.g chemical, steel etc.Exit barriers are high
Firms may find it difficult to get out of business because of the relationship of the business with other businesses in which they are engaged.Rivals are diverse in strategies.
Functions of Marketing
Functions of Marketing
Obtaining Demand:
1. Personal selling
2. Product planning / Development
3. Pricing
4. Sales Promotion
5. Advertising
Functions of MarketingServicing Demands:
6. Distribution
Warehousing
Inventory Management
7. Order processing handling
8. Transportation
Functions of Marketing
Transpermeating Activities:
9. General Administration
10.Financing
11.Marketing Research
12.Marketing Info. Management
Product
Product Management
1. Product Management encompasses the whole range of activities pertaining to Product Planning & Management
2. Product Planning includes the Basic corporate & Marketing Plan
3. Product Planning covers the entire spectrum of Marketing Management like:
1.Pricing 2.Promotion3.Distribution4.Products
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Product Management
4. In Products, the objective would be to raise it to a BRAND status over a period of time so as to establish a bond with the customer
5. Product Management also considers Product Life & Strategies at each stage of the life cycle
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Product Manager & his Responsibilities
Product Manager is also called as:Brand Manager Marketing Manager
Responsibilities:1.Responsibility for Planning Activities related
to the Product or Product LineAnalyse the market including customers,
competitors & their external environmentMakes use of this info to make out the
Marketing Objectives & Strategies for the Product
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Product Manager & hisResponsibilities
2. Responsible for getting the Organisation to support the Marketing Programmesrecommended in the plan
3. To coordinate with R & D ( For product line extensions), Manufacturing, Market Research & Finance
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Product Manager’s PotentialInteractions
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Product manager
AdvertisingAgency Media
PromotionServices
Packaging
Purchasing
Publicity
Sales
MarketResearch
Fiscal
Legal
R & D
Manufac &Distribution
Skills required for a ProductManager
Analytical Ability
Communication skills
Team work
Negotiation
Creativity
Business sense
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Definition
A Marketing Plan is a written document containing the guidelines for the Business centre’s Marketing Programmes & Allocations over the Planning Period
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Objectives of a Marketing Plan
Define the current situation facing the product Define problems & opportunities facing the Business Establish objectives Define strategies & programmes necessary to achieve
the objectives Pin point responsibilities for achieving product objectives Encourage careful & disciplined thinking Establish a customer – competitor orientation
Customer & Competitor hold the key in today’sdynamic world
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Componenets of the marketingPlan
Marketing Plan Summary:I. Executive SummaryII. Situation Analysis
a) Category / Competitor Definition b) Category Analysis c) Company & Competitor Analysis d) Customer Analysis e) Planning Assumptions
III. ObjectivesIV. Product / Brand Strategy V. Supporting Marketing Programs VI. Monitors & Controls VII. Contingency Plans
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Product Life Cycle
Introductory Phase:
Growth & size low: Attractive to Pioneer
Growth Phase:
Market becomes attractive
Maturity Phase:
Growth is low
Decline Phase:
Negative Growth
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Product Life Cycle
Product life cycle varies form segment to segment
Can be 4 to 5 or even 15 years
Industrial products generally have a longer lifespan than consumer products
When life cycle is low, product development cycles are to be shortened
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Marketing Strategies across theProduct Life Cycle
Product Life Cycle Stage
Introduction Growth Maturity Decline
1.
2.
4.
3.
Characteristics
Sales
Costs
Profits
Competitors
High
Decline
Negative or Low
Few
Average
Rising
Rising
Increase
Low Low
Low
Declining
DecliningPeak Level
High
Stabilisation
Sl.
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Product Planning
Product Management begins with Product Planning
Product Planning provides us strategies to realise our Marketing objectives set in the Marketing Plan
Environment Scanning
Organisation Objectives
Organisational Strategies
Production Objectives
Production Strategies
Marketing Objectives
Marketing Strategies
Other Departmental Objectives
Other Departmental Strategies
Pricing Objectives
Promotional Objectives
Distribution Objectives
Product Objectives
Pricing Strategies
Promotional Strategies
Distribution Strategies
Product Strategies
Elements of a Product Strategy
1. Statement of the objective the product should attain
2. Selection of Strategic alternatives3. Selection of customer targets4. Choice of competitor targets5. Statement of core strategy6. Description of supporting Marketing Mix7. Description of supporting Functional
programmes
Setting Objectives
Two important objectives commonly set are:
1. Sales Revenue or Market share
2. Profitability
Generally one is achieved at the expense of the other & hence one becomes the Primary while the other secondary
Quantifying the objective & setting a time frame for its achievement is important
Selection of Strategic Alternativesfor Growth
Choice is between:
andGrowthLong TermProfits
Selection of Strategic Alternativesfor Growth
Growth:
Market Penetration
Product Development
Market Development
Diversification
Present New
Present
New
Market
Product
Market Penetration
Increasing sales on existing products in existing markets
Advertising, line extensions, new applications, etc.
Increase frequency of use
Through customer acquisition: Inducing Brand switching
Through sales promotion: Expensive
Through sales Advertising: Expensive
Market Development
Introduce current products to new markets – customer acquisition
Enter new markets – approach different segments
Product Development
Development of new products for existing customers
Needs time bound action plan with full knowledge on competitors’ products
Diversification
Growth in sales by introducing new products in new markets
Diversification can be:
Horizontal – addition of new products
Vertical – moves forward
Positioning – Choice of customertargets
Positioning is a popular term in ‘Marketing’ first coined by two advertising executives, A L Ries & Jack Trout in 1972
According to them, positioning is a creative exercise that starts with a product or an individual brand
It is an exercise of creating & maintaining an image for the Product or Brand in the mind of the Target audience relative to other brands
Positioning – Choice of CustomerTargets
Definition:A place in the mind of the customers in
relation to competitors It occupies a distinct & valued place in the
mind of the target customersPositioning is not what we do to a Product
but is what we do to the mind of the Prospect
Positioning – Choice of CustomerTargets
After choosing the appropriate Marketing Strategy, we now have to decide on the customer target & competition Generally three key considerations are critical:Size / Growth of the segmentOpportunities for obtaining competitive advantageResources available
Customer targets, competitor targets & some attribute for differentiation are chosen
Depending on the Market strategy chosen, the customer targets are identified
Competitor Targets
In Positioning, we have to decide on the competitors who are worth competing –weakest are chosen
Depending on the Marketing Strategy, the targeted customers are identified
Positioning: Core Strategy
Each Business must have a Core strategyCore Strategy decides our competitive
behaviourDifferent segments require different Core
strategiesThere is a need to develop a Core strategy
that runs as a common thread through all pieces of planning
Positioning: Core Strategy
Core strategy tells us why customers buy our product and how we shall compete with others
Core strategy defines the differential advantage that is communicated to the target customers
Called - Product Positioning
I.e.. Positioning a product to specific segments
In Positioning, we will have to decide our competitors
Positioning: Core Strategy
Two Methods:
Cost or Price Advantage
Differentiation based on Product offering
Cost / Price Strategy
Low Price has been used as a strategy by some companies
Eg: Walmart, Pantaloons. Nirma, Parle, etc.Nano car is the latest
Requires large volume, efficient facilities & benefit of latest technology
Control in costs also required in Sales Distribution Expenses
Low Price core strategy poses real risksCustomer can shift tastesTechnological changes can bring in more
competitors One advantage: There will always be room
Non Price Strategy
Differential advantage in the product by way of additional features will fetch a higher price
Differential advantages are often obtained by going beyond what customers expect, to provide unanticipated product benefits
Focussing on customer benefits & experience will make their products & services different from competiton.
Areas for Differentiation
1. Quality
2. Status & Image
3. Branding
4. Convenience & service
5. Distribution
Managing Brand Equity
A brand is built up over a period of time
First level of Brand Equity is Brand Recognition
Brand Equity is just the process of Brand Building
Eg: Wills, Lux, Dalda, Amul, Airtel
Managing Brand Equity
Many Brands remain powerful & profitable
Aaker (1996) calls Brand Equity a set of assets associated with a brand & which add to the value provided by the product / service to its customers
Brand Equity also refers to the value inherent in a well known Brand name
Managing Brand Equity
Advantages:
Easy acceptance
Willingness to pay more
Preferred shelf space, etc.
Brand Equity
Brand Managers create & enhance four assets to build Brand Equity
Brand Awareness
Brand Loyalty
Perceived Quality
Brand Associations
Brand Awareness
Top of mind recall
Familiarity – liking
Past experience
Feeling of confidence
Brand Loyalty
1. Brand loyalty gives a stable & growing market share- Due to Repeat Buying.
2. Reflects in the purchase price
3. Customers are to be retained on a continuous basis
4. Brand Loyalty can be defined in terms of consumer behaviour
Brand Loyalty
5. Consumers buy due to commitment & also due to habit.
6. Strong Brand Loyalty is an effective entry barrier for competitors
7. Leads to reduced Marketing Costs
8. Brand Loyalty is enhanced by creating Brand Awareness, improving the perceived quality & establishing a clear identity.
Brand Associations
Aaker states that a Brand Association is anything that is “linked” in meaning to a Brand. There are many types of associations.
Consumers associate the Brand with certain tangible & intangible attributes, a celebrity endorser or a visual symbol.
These are derived from Brand Identity & Brand Image.
Associations form a Brand Personality that suggests situations for which a Brand is suitable / not suitable- Aaker
Perceived Quality
Certain Brands convey good qualityGilletteBournvita-brand by itselfBlue Dart / Fedex
Perceived Quality is a result of an understanding of the requirements of customer segments.
It is a key positioning dimension & often a part of company’s mission statement.
It is necessary to educate the customers about the right parameters to measure the quality.
Importance of Brand Equity
Important for Packaged goods manufacturers that face increasing competition from super-markets- own label.
Stretching of successful brand names :
Toyota-Lexus
Nissan-Infiniti
Honda-Acura
Product Manager must view the Management & Sustenance of Brand Equity as an important task.
Product Strategy over the life cycle
Introductory Stage:
Market Strategy:
Examining Price & Promotion variables of the Marketing Mix. 4 Strategies are available:
Rapid Skimming
Slow Skimming
Rapid Penetration
Slow Penetration
H
H
L
L
Promotion
Price
Introductory Stage
Rapid Skimming Strategy
Cost structure of the product is largely variable cost
Launched at a high pricePromotional effort is heavyProduct penetrates the market due to high
promotionRisk of competition- Firm has to build up
Brand preferenceStrategy useful when Entry Barriers are highMargins can be used to fund investment in R
& D leading to new products
Introductory Stage
Slow Skimming Strategy
Assumed that the Market size is limited
It is perceived that Potential competition will not be around right now
Introductory Stage
Rapid Penetration StrategyMore appropriate when Fixed costs are highObjective is to bring about a very fast Market
penetrationResult- Larger Market share.Strategy suitable for large markets which are
highly competitiveMarket is price sensitiveProduction costs expected to show a downward
trend with increase in Production
Introductory Stage
Slow Penetration Strategy
Lower prices lead to fast market acceptance
Healthy Profits
In a large market with high awareness level & price sensitiveness, this strategy makes sense. There is some potential of competition.
Growth Stage
Overall Objective is to sustain the growth rate.
Strategies have the foll. Elements:No. of competitors increases
Product quality is improved. New features are incorporated. Style is improved.
New models are introduced. Flanker products are introduced.
New Market segments are tapped
Growth Stage
Re Position the product through re segmentingBrand building promotion is resorted to.Pressure on pricesPrices may be lowered to lure the next
layer of price conscious buyersFirm has to trade off between high market share
& High current profit.
Maturity Strategies
Most Products fall under this category
Fraught with battles for market share, access to distribution channels, customer promotion & aggressive pricing
Foll. Strategies can be tried by Marketers:
Market Modification
Product Modification
Marketing Mix Modification
Maturity Strategies
Market Modification
Market can be expanded by increasing the no. of users or the consumption
Explore new Market segments or attract customers of competitors
Discover new applications for the Product
Maturity Strategies
Product Modification
Product can be modified to stimulate thro:
Quality improvement
Feature improvement
Style Improvement
Maturity Strategies
Marketing Mix Modification Sales can be stimulated by manipulating one or more
elements of the Marketing Mix1. Advertising2. Sales Promotion3. Personal Selling4. Price5. Distribution6. Services As Firms battle it out in the Market Place, there may be
profit erosion for each firm.
Decline Stage
Markets reach this stage for a variety of reasons
Most obvious reason could be Technological Obsolescence
Can also be due to shift in customer taste
Try to be the last to quit. Can be the monopoly and resort to “Harvesting”
Brand Strategy Decisions
Line Extension Brand Extension
Multiple Brands New Brands
Existing
New
Existing New
Product Category
Brand Name
The Product Life Cycle
New Products
New Products
1. Introduction2. Product Modifications3. Line Extensions4. Inputs for New Products5. Testing slightly new products6. Forecasting7. Brand extensions8. Real New Products9. Summary
Introduction1. Introduction of New Products is the
responsibility of the Product Manager, Brand or Category Manager & is part of the Marketing Plan
2. Most new products introduced by companies are only variants
3. Purpose: Can be introduced to either : Gain sales or share To match or block competitors
4. While launching a new product, you need to decide on :
Brand to be attached to the product Customers targetted
5. The development of new products typically occurs in stages.
Product Modifications1. New Products introduced may be :
An upgrade ( Soap, software etc ) Different Inferior ( Value engg., less expensive )
2. Reactions can be from : Loyal customers Occasional Buyers Current non-customers
3. After trials, profit implications need to be studied4. Modifications can also be made in the foll. areas:
Distribution channel Price Service Packaging
5. Modifications introduced only after careful consideration of allthe above.
Line Extensions
Popular method of using an existing brandGenerally product families are all found
with close relatives – designed to appeal to various segmentsEg: Cinthol soapsThe objective of introducing multiple
versions is to appeal to multiple segments
Price differential brings in users with different needs & preferences
Line Extensions
More versions – Less efficiency of operations ( Production, Inventory , Distribution)Less versions – Better efficiencyOver use of a brand – with extensions may
dilute & weaken Brand EquityUltimate form of product variants – Introduced &
practised by Dell – P.C BusinessThe downside – Operational Inefficiency
Line Extensions
Adding a Product variant:
1. One reason to add a product variant is to attract new customers – Market Development or Penetration
2. Maruti does it frequently3. Cannabalisation can occur4. Since profits can be affected, you need both
customer & cost data to evaluate the effect of adding a product variant
Line Extensions
5. Adding versions sometimes lead to customer confusion & dilution of Brand Equity
e.g. Different models in automobile Industry
6. If Quality spread is more, a new name is given
7. If the number of versions is very high, the information overload facing a purchase sometimes makes customers postpone a decision because of confusion
Line Extensions
Dropping a Product Variant:
1. A variant may be dropped due to slow sales or low profits
2. Reaction of customers, besides cost & operational issues are considered before taking a decision
3. However, dropping one variant, may add to the cost of the others
4. Dropping a variant will be seen as an admission of failure by customers & distribution channels & will also be an indication of reduced commitment to the Product Category
Inputs for New Products
For product modifications & extensions the following are done:
1. Customer Analysis2. Competitor Analysis3. Active Search:
Of new products & processes in other areas with a view to incorporate them in company’s own product
4. Category Analysis 5. Brainstorming
Inputs for New Products
Other sources include the following:
CustomersEmployeesSuppliers Distribution ChannelsOperations people Internal & external R & DEntrepreneurs
Testing slightly new products
All new products need to be tested for a feedback:
Foll. methods are used :
Concept Testing
Product Testing
Market Tests
Quasi Market Tests
Testing slightly new products
Concept Testing is done through: Surveys Focus Groups Demonstrations
Product Testing involves physical use by customers and used for :
Diagnostic Trial Placement of product
Discrimination & Preference Testing feedback is obtained.
Market Tests are done to predict sales and to set up the infrastructure for selling
Quasi Market tests tend to be a little expensive.
Forecasting
Forecasting for New products though difficult needs to be done.
It is done using the foll. 4 key factors :
Awareness
Trial
Repeat
Usage Rate
Different Models are available for carrying out these exercises.
Brand Extensions
Of late customers extend Brands beyond their original category
Eg: Nike – Sportswear
Dunlop – Sportswear
Reliance – Fresh, Footwear
Sony- Entertainment
Godrej- Housing, Food etc.
Brand Extensions
Carries a lot of Risk Product Manager has no control over these Brand
Extensions Brand extension value depends on the value of the
original Brand and the fit in the new category. Fit depends on the technical competence and Image
match A key issue regarding extensions is the impact of the
extension on the original brand. Research continues to be done on the success of Brand
Extensions & acceptability by consumers.
Real New Products
Some examples are :1. Packaged Food2. Bottled Beverages3. Cut & frozen veg, fruits etc.4. Cell phones5. ATMs6. R.O.water filters7. Microwave ovens8. Tata Sky programme recorders9. Gym Products10. Neutraceuticals
Real New Products
Create or expand a new category
New to customers-have to learn
Require new channels & Team to handle.
Real New & Slightly New Products
Before introducing a slightly new product, a detailed analysis & review needs to be done. Ref. annex.For a real new product, there is no
industry to analyse & the competitive set is not definedEmphasis is more on achieving sales &
advertising is used only to build awareness.
Inputs for New Products
Customer Feedback
Survey
Involvement with customers – Industrial Products
Scientists
New Technology
Evaluation of New Products
Real new products tend to take a few years for development
Following Characteristics are analysed :Relative AdvantageCompatibility – Retrofitting should be feasibleAll types of risksComplexityCommunicabilityTrialability
Conclusions
New Products are the lifeblood of many companies.
Eg: 3M, Gillette, HP, Sony, Nokia, etc
Slightly new products are relatively easy to forecast & low in risk
Real new products take time to develop & hard to forecast
Summary
1. Most Product Managers have limited flexibility in changing product composition
2. Proper evaluation is made considering the following, before any new product is introduced:
Customer need and acceptance Impact on Brand value / Equity &
customer loyalty Capability to produce Impact on costs Long term profitability
3. Product Manager has to form teams across functions- Mktg., Design, R & D & Operations & coordinate with them for the systematic development of new products.
Pricing Decisions
Pricing Decisions
1. Introduction2. Elements considered when prices are fixed.3. Types of Market Situations4. Marketing Strategy & Prices5. Measuring Perceived Value & Price6. Psychological Aspects of Price7. Competition & Pricing8. Pricing Objectives9. Other Factors affecting Price10. Specific Pricing Tactics11. Summary
Introduction
1. Price is one of the most important factors that determines the success or failure of a product in a market.
2. Originally Pricing was cost based:Price = Cost + Profit
3. Different Prices produce different levels of Demand.
4. Customer plays an important role in the Pricing of a Product.
Introduction
5. Customer does not care about your cost. Looks at Value
6. Purpose of Price is to capture the perceived value of a Product in the mind of the customer
7. Price is therefore not determined by internal factors alone, but also by customers
8. Pricing has become one of the most innovative areas of Marketing.
Elements considered when Pricesare fixed
1. Production cost
2. Profit Plans
3. Brand Image / Equity
4. Seasonality of Business
5. Market Segment
6. Competition
Elements considered when Pricesare fixed
7. Product Life Cycle stage
8. Guarantee / Warranty
9. Payment Methods & Terms
10.Discounts / Special Offers
11.Range of Products with the Firm
12.Product value & utility for the customers
Types of Market Situations
There are usually three types of market situations and each gives pricing opportunities in diff. ways :
1. Monopoly Market
2. Oligopoly Market
3. Perfect Competition
Types of Market Situations
Monopoly MarketThere is only one supplier of the product and in such
cases the firm has the foll.options : Charge Premium price or keep skimming price Keep cost plus pricingOligopoly Four to Five suppliers Customer’s purchasing power governs the price Sometimes cartel formedPerfect Competition Large no. of suppliers of the product, Size,
category etc. Perfect competition usually brings about
penetrating prices.
Marketing Strategy & Prices
Price must be consistent with the Marketing Strategy that is developed.
Marketing Strategy consists of Market segmentation & core strategy or Product Positioning decisions.
Prices can vary widely over segments leading to Price Discrimination.
Substantial price variation can exist even within a targetted segment- Price Bands.
Product Manager to understand price sensitivity of the different mkt. segments & the flexibility (width of the price band)
Measuring Perceived Value & Price
Perceived value of a Product by the customer becomes very important
Customers have some notion on what constitutes a good or a bad price
Notion is developed by : Comparing the price being charged to the
perceived value or benefits that would be derived through purchasing.
Comparing price to a reference point-past price
Three possible relations1. Perceived value > Price > Variable cost2. Price > Perceived value > Variable cost3. Price > Variable cost > Perceived value
Measuring Perceived Value & Price
Perceived value > Price > Variable costProduct Manager “leaves money on the
table”-sacrifices profits by charging less than what he can obtain.This situation is extremely difficult for the
PM to discover without using Market Research methods“Value Pricing” is sometimes done
deliberately as a strategy.
Measuring Perceived Value & Price
Price > Perceived value > Variable cost
The Product is a bad deal.
Customers simply do not buy the Product.
Increase in customer value or downward price revision is necessary.
Competition is used as reference point.
Measuring Perceived Value & Price
Price > Variable cost > Perceived value
Product needs to be withdrawn from the Market.
Such products need to be weeded out.
Measuring Customer Value
Psychological Aspects of Price
Customers continuously assess the prices charged for products based on prior purchasing experience, formal communications etc.
The concepts relating to psychological aspects of pricing are :
Reference prices
Relationship between Price & Perceived Quality
Psychological Aspects of Price
Reference prices1. External prices are prices marked or Retail Prices2. Internal prices are mental prices used to assess an
observed price3. Internal reference prices include : Last Price paid Price frequently charged Fair price Upper amount someone would pay The price of the brand usually bought Average prices charged for similar products Expected future price Typical discounted price
Psychological Aspects of Price
Reference prices Concept of Reference price has important implications
for Product Managers During a promotion, the special price offered would
seem to be the reference price for the consumer thereafter
Customers also resort to predicting future prices and if they feel it is going to drop, wait for the price cuts
Some PMs, knowingly or unknowingly, create predictable pricing patterns. Customers make decisions based on their personal forecasts of future prices.
Psychological Aspects of Price
Relationship between Price & Perceived Quality
In some situations, higher price can lead to higher demand.
Customer perceives the higher priced product to be of higher quality
The Brand imparts a feeling of Prestige to the owner
Other examples are when it is difficult to assess the product’s quality. E.g. Experience,- Perfume, wine, services etc,.
Competition & Pricing
1. PMs have to estimate competitor’s cost in the Product category
2. It helps in determining margins in the category & useful in the case of a Price war.
3. Also helps in deciding amount that can be spent in Brand building
4. Two ways of estimating : Reverse Engg. Use of Publicly available data.
Competition & Pricing
Use of Publicly available DataAverage margins are ascertainedExperience curve is used to understand
current costs & forecast future costs.The assumption is that costs are a
decreasing function of accumulated “Experience” or production volume.Ref. notes.
Competition & Pricing
Historical Pricing BehaviourHistorically, certain brands tend to be the
first when it comes to price increasesCompetitons follow suitMost PMs tend to be pro activeCompetitor Analysis and Objectives of
competitor will help the PM to decide on the Pricing strategy.
Pricing ObjectivesPricing Objectives are set after the PM has carried out
the analysis on Category, Customer & CompetitionPenetration Pricing This strategy is often used as an entry strategy for a
new product The Objective of Penetration pricing is to build or
keep a market share Not to be used when the product has a strong
competitive advantage.Prices for Industrial Products Customers prefer stability Look at transparency and a Model / Formula Some customers like GM look at YOY price
reductions
Pricing Objectives
Skimming
It is the opposite of Penetration pricing
Reasonable objective when there is little chance of competition in the immediate future.
Also a good objective when costs are not related to volume
Pricing Objectives
Competitive Pricing
Here the PM tries to maintain a “Competitive’Price
Done either by pricing at Category average or equivalent to the competitor’s price
May be necessary in a Product Category with high Fixed costs.
Other factors Affecting Price
Category Conditions
Threat of New Entrants
Power of buyers / Suppliers
Rivalry
Pressure from Substitutes
Unused capacity
Specific Pricing Tactics
1. Product Line Pricing
2. Price bundling
3. Complementary Pricing
4. Value Pricing
5. Price Discrimination
6. Seconds Market
7. Seasonal pricing
8. Auctions
Summary
1. Price Objectives and Pricing made only after an analysis of the market & finalisation of Marketing Strategy.
2. Customer plays an important part in the Pricing of a Product
3. Reference Price & perceived value affects the strategy and profits of the company
4. Product Manager’s role is crucial in the pricing of a Product which affects the fortune of a company.
Sales Promotion
Sales Display & Sales Promotion
1. Objectives of Sales Display:
Products shown to potential customers
Details & features about product seen by customer
Display induces customer to purchase
Reminds customers about the need & they are attracted to buy
Sales Display & Sales Promotion
2. Types of Sales Display:
There are three forms of display:
1. Interior Display
2. Exterior Display
3. Other Displays
Sales Display & Sales Promotion
a.Interior:
Floor / Walls / Showcases, etc.
Display / Lighting / Colour matching
b. Exterior:
Show window
Attracts attention
Sales Display & Sales Promotion
c. Other displays:Show room / Show casesOutside – Places of public interestInflatables – Outside the show room Classes of display:1. Product Unit Display2. Life – style Displays3. Assortment
Open – Super market Closed Jewellery
4. Rack Display
Sales Display & Sales Promotion
3. Role of Retailers in Sales Displays:Retailers have a major role to play They need to be:Trained & MotivatedTrainingSpace UtilizationRotationCreative displaysHow to attract customers
Sales Display & Sales Promotion
Motivating the Retailer:
Display contest
Publicity through newsletters mentioning retailer’s name
Provision of display goods & fixtures at subsidised prices
Sales Display & Sales Promotion
Sales PromotionRole of Sales Promotion
Informs Persuades Reminds
DefinitionSales Promotion consists of a diverse
collection of incentive tools, mostly short term, designed to stimulate quicker and / or greater purchase of a particular product by consumers & traders.
Kotler
Sales Display & Sales Promotion
Push- Pull Strategy
Aimed at channels of distribution.
Distributors / Wholesalers / Retailers
Includes a lot of Personal Selling & Sales Promotion
Sales Display & Sales Promotion
Factors Influencing Sales Promotion
a. Target Market / Segment
b. Nature of Product & Services
c. Stage of the Product Life cycle
d. Budget available for Promotion
Sales Display & Sales Promotion
Factors Influencing Sales Promotion
a. Target Market / Segment
Customer may be in any one of the follstages :
Awareness
Knowledge
Liking
Creating preference
Conviction
Purchase
Sales Display & Sales Promotion
Factors Influencing Sales Promotion
b. Nature of Product & Services
Product Attributes which influence the Promotional Strategy
Nature of pre-sale & post sale
Unit Price
Degree of customisation
Sales Display & Sales Promotion
Factors Influencing Sales Promotion:
c). Stage of the product Life cycle:Both Advertising & personal selling are critical
in a Product’s Introductory staged). Budget available for Promotion:Budget for Sales promotion can be prepared by:
% of sales
Fixed funds available
Follow Competition
Budget by objectives
Sales Display & Sales Promotion
Tools of Sales Promotion:
1. Prize schemes
2. Trade fairs & exhibitions
3. Free samples
4. Correspondence
5. Catalogues
6. Advertising Novelties
7. Entertainment of customers
8. Sales contests – Sales personnel
9. Price – off
10. Refunds
11. POS materials
12. Boosters for dealers
Sales Display & Sales Promotion
Summary:
Sales Displays are very important for RetailingAttracts customers & enhances image
of the storesIncrease sales & ProfitabilityDealers need to be motivated
Sales Promotion Strategies
1. Introduction to Sales Promotion Objectives
2. Launch New Product & Increase Trial
3. Encourage Repeat Purchase
4. Sales Promotion & Consumer Behaviour
5. Consumer’s Price Perception
6. Perceived Risk & Attitudes
Sales Promotion Strategies
7. Consumer Decision Making
8. Profiles of High & Low Involvement Consumers
9. Rate of Discount, Terms & Conditions
10.Protection from Competition
11.Summary
Sales Promotion Strategies
1.0 Introduction to Sales Promotion Objectives:Sales promotions are used to achieve some of
the marketing objectives Some of the Sales Promotion objectives are:Proactive: Increase Revenues / Market share Expand the target market Add extra value to the product & develop brand
franchise
Sales Promotion Strategies
Reactive:
In response to competitive moves
Due to excessive Inventory
Generate short term cash
When you discontinuous a product or close down the business
Sales Promotion Strategies
It is important to spell out the objectives which the sales Promotion offer is intended to achieve
The objectives should be:
Specific
Measurable
Clear & concise
Practical & realistic
Affordable
Attainable
Sales Promotion Strategies
Examples:a) Marketing objective: To increase market share from 15% to 20% Increase sales by 15% Increase profit by 10%b) Marketing Strategy: Promotion to use a combination of ‘Pull’ &
‘Push’ Increase purchase rate of Trade
Sales Promotion Strategies
Promotion objectives: Increase purchase rates by consumerMaintain distribution at 85%Decrease inter – purchase duration for 8 weeks
to 6 weeksSales Promotion Strategies:Use Trade & consumer deals Use ‘Pull – Push’ sales promotions to encourage
faster usage rate & frequency price cuts Stop common promotion which are unprofitable
Sales Promotion Strategies
Promotion Objectives can be:
Increase sale volume
Speed up sales of slow moving products
Attract new customers
Launch new product & increase trial
Encourage repeat purchase
Sales Promotion Strategies
Clear excess inventories
Motivate dealers / Sales force
Improve relationship with dealers
Block competitors’ moves
Supplement Advertising & Personal Selling efforts & deflect customers’attention from price
Sales Promotion Strategies
2.0 Launch New Product & Increase Trial
Small budget companies that cannot afford sustained advertising expenditure to introduce new products, find sales promotion very cost effective & helps in generating Sales volume
Extra benefit to customers & retailers help in trial by customers & in obtaining shelf space
Freebies with the product together with attractive displays at the Retailer shops help in initial trials by consumers
Sales Promotion Strategies
3.0 Encourage Repeat Purchase Repeat purchase leads to increased sales volume Offers may be given by way of ‘Freebies’ or tokens, etc.Block competitor’s moves: A company threatened by competition sometimes plan to
load consumers to increase the interval of purchasing Bundled offers for soaps, etc. Attractive retailer schemes to block shelf space is
combined with above A ‘Push – Pull’ strategy is used
Sales Promotion Strategies
Encourage Dealers to participate in Display & Sales contests:
Display is a powerful tool to enhance sales. Generate higher sales volume
They encourage unplanned purchases Contests are used to motivate dealers.
Combination of incentives & certificateContests help in attaining short – term objectives
& improve company reseller relationship
Sales Promotion Strategies
Advertisements:
Print advertisements with ‘Free’ offers often catch the eye of consumers
Sales Promotion Strategies
4.0 Sales Promotion & Consumer Behaviour:Understanding consumer behaviour can help in
launching appropriate sales promotion measures
Classical Conditioning:A brand frequently associated with premiums &
contests can excite customers to buyCustomers get conditioned by performing a
certain type of behaviour repeatedly Customers have learnt to be smart shoppers
because of this conditioning
Sales Promotion Strategies
Instrumental Conditioning:Behaviour is a function of its
consequencesFavourable experience as the outcome
becomes instrumental in encouraging the consumers to repeat the behaviour in futureA coupon inside the product pack
serves as a good example of instrumental conditioning
Sales Promotion Strategies
Attribution & Dissonance Theories:
Group of inter – related psychological principles
Consumer’s explanation on their behaviour is called attribution
Attributions have a direct effect on attitude but have no direct effect on behaviour
Attitudes affect behaviour – hence relevant to sales promotions
Sales Promotion Strategies
Self Perception:Consumer’s behaviour due to external causes
(sales promotion) or internal (favourable brand attitude)
Consumer’s behaviour in using a combination of these at the time of buying
Object Perception: If a particular brand alone is offered at a
discount, frequently, consumers may draw a conclusion
that the brand is inferior
Sales Promotion Strategies
Dissonance Theory:Dissonance or Discomfort is felt by
consumers when they are exposed to information that conflicts with their original belief or attitudeEspecially in expensive high - involvement
product purchasesPost purchase dissonance is quite normal
Sales Promotion Strategies
5.0 Consumer’s Price Perceptions:Consumer’s perceived prices are important to
determine the appropriate price reductionAmount of difference between the list price &
the promoted price should be sufficient enough to be noticeable
To protect the shift in consumers’ perceived reference price, marketers often provide a reference price in their communications of sales promotion
Eg: Rs. 18 Rs. 16
Sales Promotion Strategies
6.0 Perceived Risk & Attitudes:Perceived risk is defined as ‘the uncertainty
that consumers face when they cannot foresee the consequences to their purchase decisions’
Two important dimensions associated with the purchase of a new brand –
Uncertainty & ConsequencesOnly the risk which is perceived by the
consumers will affect the purchase decision: Will not affect the purchase behaviour of the
consumer if not perceived
Sales Promotion Strategies
Risk can be:
Functional
Financial
Psychological
Physical
Social
Two ways that consumers use to reduce risk
Reduce uncertainty
Reduce consequences of a wrong choice
High risk perceivers reduce the risk by purchasing well
known brands
Sales Promotion Strategies
7.0 Consumer Decision MakingFour types of behaviour depending on the degree
of perceived differences among brands & the level of consumer’s involvement in a purchase situation
1. Complex Buying behaviour 2. Dissonance reducing buying behaviour3. Habitual buying behaviour 4. Variety seeking buying behaviour
Sales Promotion Strategies
8.0 Profiles of High & Low Involvement ConsumersTo maximize the satisfaction from their
purchases is the purpose of highly involved consumersConsumers with low involvement seek
only an acceptable level of satisfaction after the use of the product
Sales Promotion Strategies
9.0 Rate of Discount, Terms & ConditionsPrice elasticity of low prices products is high
because consumers do not perceive much difference between brands & do not mind switching to another brand
In case of trade promotion, the producer may specify the minimum purchase value or the quantity of product to avail the benefit of promotion
Terms & conditions vary with products, market conditions & consumers response patterns
Sales Promotion Strategies
10.0 Protection from Competition:Normally for any promotion, competitor
follows suitOne way to gain protection is to make the
promotion a little complex & difficult to copyCompany can also tie up with a non -
competing product
Sales Promotion Strategies
Summary:Sales Promotion aims at inducing purchasers to
buy a product It involves, demonstrations, contests, coupons,
etc.Sales Promotion activities are designed to
encourage resellers to sell the productSales Promotion objectives are to be consistent
with Marketing objectives Sales promotion alters the market share
permanently
Sales Promotion Budget &Evaluation
1. How are sales affected by Sales Promotions ?
2. Sales Promotion Design Issues
3. Testing the Sales Promotion
4. Guidelines to Planning Sales Promotion
Sales Promotion Budget &Evaluation
1.0 How are Sales affected by Sales Promotions ?
Sales Promotion affect sales through these mechanisms
Brand switching
Repeat buying
Purchasing more or accelerating timings
Increasing category expansion & consumption
Sales Promotion Budget & Evaluation
Brand Switching
Objective of some sales promotions is to induce brand switching
Repeat Buying
Sales Promotion scheme is introduced to promote repeat buying of the same brand.
Objective is to make it a habit especially for Low-involvement products
Sales Promotion Budget & Evaluation
Purchasing more or Accelerated Timings
Consumers buy more qty. than their immediate requirements or the purchase timings are changed.
Increasing category Expansion & Consumption
Consumption of total product category is increased by the consumers as a result of sales promotion.
Sales Promotion Budget &Evaluation
2.0 Sales Promotion Design Issues
1. Promotion Choice
2. Product Choice
3. Choice of Market Areas
4. Promotion Timing, Duration & Frequency
Sales Promotion Budget & Evaluation
Sales Promotion Design Issues Promotion Choice
Different types of promotions that can be used singly or in combination:
Consumer Promotion Trade Promotion & Sales Force Promotion
Two major approaches for consumer & Trade promotions Same for Less More for the same
Two types of promotions are usually offered:1. Immediate value offer vs Delayed value offer2. Price cut vs extra Value Offer.
Sales Promotion Budget & Evaluation
Product Choice
Sales Promotions can be run on the entire product line or only selected items in the line.
Sales Promotion Budget & Evaluation
Choice of Market Areas
National or regional markets can be chosen.
Sales Promotions of similar value products are normally announced at the same time everywhere.
Sales Promotion Budget & Evaluation
Promotion Timing, Duration & Frequency Normally promotions are introduced when
the channels have enough inventory Duration of consumer promotion should be
such that a larger % of customers get exposed to the promotion offer. Low involvement products have a shorter
duration
Sales Promotion Budget & Evaluation
3.0 Testing the Sales Promotion
Pre Testing
Pre test helps to find out what is likely to be the perceived value & the risk
Pre test can be conducted by using “Focus Groups” & “consumer Panels”
Sales Promotion Budget & Evaluation
Concurrent TestingIs done when the sale promotion is in
progress. Helps in modifying the promotion if needed.
Post testingAn evaluation is done on the success of
the promotion at the end of the scheme.Helps in the launch of future promotions.
Sales Promotion Budget & Evaluation
Guidelines to Planning Sales Promotion
1. The first step in Promotion Planning is “Situation Analysis”
2. Based on Marketing Objectives & Strategies, the promotion objectives would be developed.
3. Measurable objectives must be set.4. Allocation of Budget to Sales Promotion from
the Total Budget is made.5. Considering the objectives & the Budget
allocation, each promotion event must be carefully created.
Types & Techniques of SalesPromotion
Types & Techniques of SalesPromotion
1.0 Types of Sales Promotions:
Promotions are generally offered by
Manufacturers
Retailers
Types & Techniques of SalesPromotion
2.0 Sales Promotions- Tools & Techniques
Price deals
Bonus paid
Coupons
Contests
Sampling
Continuity plans ( Flap exchange)
Trade coupons
Trade allowances
Exchange offers
Trade fairs / Exhibition
Event sponsorshipsAbove list includes both Trade & consumer Promotions
Used for a variety of Products
Types & Techniques of SalesPromotion
3.0 Price Deals Generally used when Brand Loyalty is low Product category is considered a commodity Price is the primary considerationPrice Discount: Discount given to beat competitors’ prices Also used to generate additional sales & increase in
Market share Communication through: Press / TV / POP / Display Retailers offer discounts to liquidate inventory
Discounts from 5% to 20%
Types & Techniques of SalesPromotion
Advantages:
Flexibility & convenience of implementation
Discount offers immediate value
‘Pull & Push’ can be implemented
Price offers can be kept flexible:
Products / Discount / Period
Types & Techniques of SalesPromotion
Disadvantages: If competition offers similar discount, advantage
is lostSales may drop when discounts are withdrawnPrice discounts may lead to decrease in Brand
LoyaltyPrice – Pack Deals:Also called value – packs Bonus Pack / Branded pack
Types & Techniques of SalesPromotion
4.0 Refunds & RebatesRefund orders are used to :• Encourage trial of a new product• Purchase of increased quantity• Increasing the frequency of purchase• Encourage customers to purchase those
products whose purchases can be postponed.
Types & Techniques of SalesPromotion
Refunds & Rebates
Some of the offers make the customer buy the product on trial basis with an option to return if they are not satisfied.
Refund offers are only limited by the imagination of the promotion planner and the budget allocation.
Types & Techniques of SalesPromotion
Coupons1. Coupons can be used to achieve many
different sales promotion objectives.2. Coupons are particularly attractive to
consumers who are price sensitive.3. Coupons generally attract older, better
educated, urban, miiddle-income families.DistributionCoupons can be delivered direct to customers,
through the print media or along with the product.
Types & Techniques of SalesPromotion
Coupons can be used to serve the foll. Objectives:
1. Encourage trial
2. Encourage Brand switching
3. Encourage Repeat Purchase
4. Supplement Print Media Advertising.
5. Price Discrimination.
Types & Techniques of Sales Promotion
Contests1. Among all the sales Promotional devices,
probably the most exciting & highly rewarding are the contests & sweepstakes.
2. A contest is an event that invites the customer to apply skill to solve or complete a special problem. American Assoc. of Adv. Ag.
3. A contest is based on testing skill or ability & may not involve proof of purchase to enter the contests.
Types & Techniques of Sales Promotion
4. Two stages :
Contest in terms of skill.
A draw of chance to decide the winners
5. A sweepstake is a random drawing & is sometimes called a chance contest. May or may not involve purchase of any product or service.
6. Often a combination of contest & sweepstakes is employed in some promotions
Types & Techniques of SalesPromotion
Premiums1. A Premium (Gift) is a reward given to the
consumer for purchasing a product or service.2. Premium may be given free or made available
at a price well below the market price. E.g. Printer free with computerDVD Player free with LCD TV.
3. Premiums are chosen carefully to appeal to the consumer.
Types & Techniques of SalesPromotion
In-Pack, On-Pack & Container Premiums Premiums are attached either to the product,
enclosed with the product or otherwise available with the product when the consumer buys the product.
Premiums can be used to solve a competitive price advantage or to counter the competitor’s coupon promotion.
In-pack PremiumPremium is enclosed inside the product pack. Such
premiums are generally small & low priced.On-Pack PremiumAttached to the outside of the product package. Also
known as banded premium.
Types & Techniques of SalesPromotion
Near-Pack Premium
Premium bulky in size & cannot be enclosed or packed with the product. E.g. Bucket
Container Premium
Product itself is packed inside the premium, which is a container.
E.g. Bru, Tata Tea, Pet jars, glass tumbler etc.
Types & Techniques of SalesPromotion
Summary
Premium selection should be based on Pre testing
The premium should be a known brand name.
Premium should communicate its good quality & Value
Premium should (if possible) be related to the promoted product or the promotion theme.
Premium should be as distinctive as possible.
Types & Techniques of SalesPromotion
Summary
Promotions are generally offered by both Manufacturers and retailers.
Price appeal include Price-cuts, coupons, rebates, bonus packs etc.
Promotions are powerful competitive tools.
Distribution Management &Marketing Mix
Distribution Management & Marketing Mix
1. Introduction
2. Distribution Management
3. Distribution Channel
4. Distribution Channels-Why are they required?
5. Activities of a Distribution Channel
Distribution Management & Marketing Mix
6. Functions of Distributor Channels
7. Value enhancement through the Distribution Function
8. Distribution channel strategy
9. Setting distribution Objectives
10.Overview of Distribution Channels
11.Patterns of Distribution
1.0 Introduction
Distribution Management deals with the ‘Place’part of the ‘Marketing Mix’
Provides Place, Time & Possession utility to the customer
Customer buys a product at a particular Place & Time & takes Possession of it by making the payment without the direct involvement of the manufacturer
This is the role that the Distribution Management function of the company has played
2.0 Distribution Management
Definition:The Management of all activities which facilitates
movement & coordination of supply & demand in the creation of time & place utility in goods
The art & science of determining requirements, acquiring them, distributing them & finally maintaining them in an operationally ready condition for their entire lives
Broad range of activities concerned with the efficient movement of finished products from the end of the production line to the customer
3.0 Distribution Channel
Definition:
Distribution channels are sets of interdependent organisations involved in the process of making a product or service available for use or consumption
- Stern & El Ansary (1992)
They play a critical role in the overall marketing function
As companies expanded, direct distribution became unmanageable & also quite expensive
Distribution Channel
Definition: Intermediaries came into the picture Intermediaries are a link between the
manufacturer & his customersTheir primary job is to re – distribute the
products of the company in a manner that it reaches the ultimate consumer & gets used
Intermediaries are able to perform the Distribution functions & deliver benefits at a lower cost than if the company were to do it by itself
4.0 Distribution Channels-Why are they required ?
Channels or intermediaries exist for the following reasons;
They help in the smooth flow of goods & services
They improve the efficiency of the process
They adjust the discrepancy of assortment through the performance of the sorting process
They hang together in channel arrangement to provide for the routinization of the transactions
Channels facilitate the searching process
5.0 Activities of a Distribution Channel
Discrepancies creep in between a typical production activity & a typical consumption activity
General discrepancies are:
Spatial Discrepancy
Temporal discrepancy
Need to break the bulk
Need to provide assortment
Information Gap
Need for Financial Support.
Activities of a Distribution Channela). Spatial Discrepancy:Can be defined as the discrepancy that exists
because of the physical distance between the location where a product is manufactured & the location where the product is eventually consumed
b). Temporal Discrepancy:Can be defined as the discrepancy that exists
because of the inevitable difference in the point in time at which a product is manufactured & the point in time when the product is consumed
If the stock consists of perishable items, the task for bridging the temporal discrepancy becomes all the more complex & critical
Activities of a Distribution Channel
c). Need for breaking the Bulk:To achieve economies of scale, products
have to be manufactured in bulk quantitiesProducts are consumed in smaller
quantities Without the routinization activity, performed by the intermediaries, millions of small transactions will take more time & effort
Activities of a Distribution Channeld). The Need for Assortment: Most of the time, consumers demand an assortment &
not just a single producte). Information Gap: This is especially true in the Travel & Tourism Industry f). Need for financial support:Combination works better:Most companies use a combination of a direct & indirect
distribution modes Technical equipment requiring technical knowledge & high
value products are sold directly by the company & not through intermediaries
6.0 Functions of Distributor Channels
1. Collection of information about customers, competitors & any other entities which can affect a company’s marketing efforts
2. Provide for storage & physical movement of the goods
3. Place orders on the manufacturers of the goods for delivery to end users or other customers
4. Canvass sales of products through effective communication
Functions of Distributor Channels
5. Act as a link for transferring ownership of the goods from one party to another
6. Finance the inventories after the goods leave the manufacturer till they reach the end user
7. Provide credit facilities to their buyers8. Help the manufacturer to effectively run,
trade & consumer promotions
7.0 Value enhancement through theDistribution Function
1. Distribution function complements the form utility by providing the time & possession utility
2. Time Utility: Customer need not buy in advance & stock the item.
Can buy when he requires3. Place Utility: Products are available at a convenient location4. Possession utility: Channels routinize transactions & maintain linkage with
the upstream entitiesValue provided by a distribution channel often goes beyond
the three utilities provided
8.0 Distribution Channel Strategy
Distribution, being part of the Marketing effort, forms a critical part of the Marketing Strategy.
It is critical because the distribution channel strategy cannot be frequently changed as it requires building a network based on sound, & long term relationships.
Distribution looks at some of the foll. Factors: Defining customer service levels Define the distribution objectives to achieve these
service levels
8.0 Distribution Channel StrategyOutline the steps or activities required to
achieve the Distribution channel objectives
Decide on the structure of the network.
Make out a Policy & Procedure for the network to carry out its daily activities
Outline the key performance indicators
Understand the critical success factors to make the distribution Strategy effective.
Overview of Distribution Channels
Distribution Channels can broadly be classified as :
Sales Channel
Delivery Channel
Service Channel
Overview of Distribution Channels
Distribution Channels normally include the foll:
Co. owned Distribution centres
Carrying & Forwarding agents ( C & FAs)
Consignment selling agents
Distributors, stockists, value added reseller agents.
Wholesalers
Retailers
Patterns of Distribution
This determines the intensity of desired distributionIntensity denotes the service level that the
organisation provides to its customersThere are three types:Intensive distributionSelective distributionExclusive distribution
Patterns of Distribution
Intensive
This strategy is to make sure that the product is made available in as many outlets as possible so that, anywhere the consumer goes, he or she should be able to get the product of his choice. E.g HLL, FMCG,Autospares etc
Selective
Outlets are carefully selected by the co. in line with the image it wants to project about itself and its exclusive products. E.g Philips, Tanishq etc.
Patterns of Distribution
Exclusive
Exclusive- as the name suggests
Co. keeps a close watch & control on the distribution of its products.
Summary
Companies cannot reach hundreds of customers directly and hence have to use the medium of distribution channels
Distribution channels provide the right situation for time, Place & Possession Utilities for the company’s products
Distribution Channels provide financial support to the Marketing effort to maintain healthy inventory levels & credit in the market place
Companies can also decide on the intensity of the distribution effort.
Marketing Channels
Marketing Channels
1. Introduction2. Five kinds of Flows3. Information Flows4. Marketing Channel & Formats5. Relationship of Flows to Service Levels6. Channel Levels7. Service Channels8. Expectations from Channels9. Channel Systems10. Multi Channel Marketing Systems
Introduction Co. needs to communicate to the customers on :
Price Availability Other terms & conditions
Channel Partners- Facilitate change of title of the products from manufacturer to the end users
They take physical possession of the goods, pay for it & are also responsible for the stock including its condition.
Channel is responsible for the safe keeping of stocks & takes the risk towards storage, losses, price fluctuations etc.
Introduction
The physical movement of goods is also the responsibility of the channel partner
Channel also takes care of :
Sales on credit
Insurance
Complete documentation
All statutory levies.
Five kinds of Flows
a) Physical Flows of Goodsb) Title Flow of the Goods( includes
negotiation, ownership & risk sharing)c) Payment Flows for the Goodsd) Information Flow about the Goods, orders
placed, executed & so one) Promotion Flows about the advertising &
other support to the customer Channel Partners or members are involved
in various degrees in all these flows For every flow in the channel, there is an
element of cost involved
Information Flows
1. Correct, accurate & immediate information on all transactions at each stage must flow to the channel members, company & customers
2. Info. Flows are in the nature of reports & records. Examples are :
A one time info. to the channel members on the features of the co. products, details of customers, prices, margins & any promotional or merchandising support.
3. Inventory levels to be held by the distribution centres
Information Flows
4. Frequency of stock receipts, production centres etc.
5. Indents / orders from distributors to C & Fs
6. Info. on targets, performance- monthly etc
7. Info. to customers on co. products by distributors, including promotional offers.
8. Details of Invoices generated
Marketing Channels- Formats
Channels can be categorised depending on who drives the channel:
Producer Driven
Seller Driven
Service Driven
Others
Marketing Channels- Formats
Producer Driven
Co. owned Retail Outlets
Licensed Outlets
Consignment selling agents
Brokers
Franchisees
Distributors
Marketing Channels- Formats
Seller DrivenExisting RetailersWholesalersFranchiseesModern Store FormatsSpecialty storesDiscount storesAgents, Dealers, stockistsDoor to Door sales people
Marketing Channels- Formats
Service Driven
Carrying & Forwarding agents
Transporters
Warehouse owners
Couriers
Credit Card companies
Financial Institutions
Logistics Service Providers
Marketing Channels- Formats
OthersMulti level marketingCo-op SocietiesKiosksVending MachinesGift MakersTV Home ShoppingCatalogue ShoppingInternet Based SellersExhibitions, Trade ShowsDatabase Marketing
Relationship of Flows to Service Levels
Channel Design depends on the Product, the customers & what competition has to offer
Cost associated with the channel system should be affordable to the co.
The nature of the product dictates the flows required in the channel system
Consumer Product- C & F –Wholesalers etc
Relationship of Flows to Service Levels
Ownership flow is relevant as the products change hands before reaching the final customer
Each channel member performs only some of the channel flows. The channel flows performed by all the channel members put together helps deliver the customer service output.
Channel levels
No. of Channel members decides the level of the channel in operationZero-Level Channel : Direct distribution.
Co. to end user or consumer directlyOne-Level channel : Consists of one
intermediary. E.g. Big Bazaar, Vivek & co. Two-Level Channel : Two Intermediaries.
E.g. FMCG.
Service Channels
Service : Education, Banking & Insurance, Hospitality, Financial Services, etc
Companies have to establish their own unique channels for distribution of their service to the largest no. of end users
Each of these, uses a unique channel to promote their business.
Expectations from Channel
Expectations of the end user or consumer is as follows:
Variety of Products
Location-Proximity to the consumer
Speed of Delivery
Availability-In terms of sizes as well
Home Delivery, credit, packing etc.
Expectations from ChannelServices of ChannelsChannels take care to provide the foll:Provide smaller qtysPlace utilityMin. cycle timeVariety, assortment etcIn the case of consumer durables, the channels
provide: Installation supportAfter sales supportTraining of personnelFinance
Company Policies
Co. takes policy decisions to enable the channel partner to deliver
Clear Pricing-MRP on packClear terms on payment, sales returns,
damaged goods, etcFrequency of DeliveryMin. InventoryAssignment of territoryAny other support
Channel Systems
1. Vertical Marketing Systems
2. Horizontal Marketing Systems
3. Multi Channel marketing Systems
Channel SystemsVertical Marketing Systems When the manufacturer, Distributor & retailer act
together as one team to provide service to the end user, it would be called a “Vertical Marketing System”
All members cooperate & work together Conflicts are avoided Improves efficiency & Marketing effectiveness Benefit from size, bargaining power & reduce
duplicationThree types1. Corporate2. Administered3. Contractual
Channel Systems
Vertical Marketing SystemsCorporateSuccessive stages of production &
distribution are handled by one entityGives a high degree of control over the
channel for the co.Retailers are resorting to this for their own
brandse.g Mico filters
Channel Systems
Administered VMSOne entity or a distributor controls other channel
partners.Manufacturers like HUL or Nestle dictate terms
to retailers on stock levels, shelf space, displays etc- Coca Cola, Gillette etc
These products and brands enjoy a strong consumer franchise
All channel members are proud to stock and sell these products & willing to listen
Channel Systems
Contractual VMSConvenient arrangements between channel
members when they get together to achieve economies of scale or use favourableopportunities to increase their sales.
Can take the form of:Retailer co-operatives like Janatha Bazaar,
TUCS etcManufacturer sponsored-car dealers of Maruti
& HyundaiBottlers of pepsi or Coca ColaService firm sponsored: Retailer franchise
like Coffee Day, MacDonalds etc.
Channel Systems
Horizontal Marketing SystemsTwo or more unrelated companies.
Arrangement provides benefits to bothHighly opportunistic arrangementEach co. exploits the strength of the other. A
mutually beneficial arrangementE.g. Supermarkets- ATMs
Café Coffee day- AirportsRetail Outlets in petrol pumps
Veg shop / soup counters / etc in dept stores- Vitan
Channel Systems
Multi Channel Marketing Systems
Companies use 2 or more marketing channels to reach different customer segments.
FMCG- Different for Retail & Institutional
Benefits
Better coverage of the market and its various segments
CSD-classified as a separate customer / segment
Channel Systems
Multi Channel Marketing Systems
Generally used where :
Same product is sold to different segments
Un related products are sold in the same market
Size of buyers varies
e.g Tea / Coffee- Retailers & Hotels, Hospitals & Nursing Homes
Urban & rural Markets
Designing Channel Systems
Designing Channel Systems
1.0 Channel Design & Planning ProcessThe foll. are considered in the Designing &
Planning process:Customer NeedsChannel ObjectivesCost of the ChannelEvaluating alternatives
Channel system has to be a combination of Revenue generation & Physical distribution
Servicing can also be a third entity.
Designing Channel Systems
1.1 Factors consideredFoll. factors are considered :
Activities channel members are required to perform
How these activities are going to help the co. achieve its customer satisfaction objectives
No. of channels required.Definition of roles & responsibilitiesCompensation to channel membersEvaluation of channel members’
performance
Stages in Channel Planning
SegmentationPutting customers in similar groups based on their
needs.Positioning Ideal channel partner chosen for each segment. No. of channels & service objectives also decided.Focus StageFocus segments are selected out of the different
segments already chosen,Developing the right channel alternative Best possible alternatives are chosen Channel partners of competitors also studied
Defining customer needs
Customer needs are defined by the desired customer service levels expected out of the channel system
Service levels relate to :
Lot size
Waiting time
Choice to the customer-assortment
Place utility
Service support
Defining Channel objectives Channel objectives are simply what the channel
system is expected to do to support customer service Channel system to carry out all the activities required
to achieve the service levels at the least cost. Service levels required may vary between segments.
E.g. Consumer > Retail> Institutional
Channel objectives also depend on product characteristics
Indl. ProductsConsumer productsIce creamsSeeds, Fertilizers > Rural Marketing
Channels adopted by competitors also need to be reckoned
Channel Alternatives
After selecting the target segment and the service deliverables, channel alternatives are looked at :
Current Business intermediaries available in the market
The No. and type of intermediaries required
Any new channel members that need to be specially developed. E.g. Technical Training
Roles of each of the channel members.
Cost of the Channel System
Cost elements of the channel network include:
Margins of the channel partners
Cost of transportation of goods between the co. and the end user
Cost of order booking & execution
Cost of stock returns / date expired.
Stocks taken back from the market
Cost of any reverse logistics reqd.
Cost of the Channel System
6.1 Current IntermediariesDistributors or Re distribution StockistsC & F agents Logistics service providersManufacturer’s agents, stockists, etcFinancing agenciesWholesalers / semi-wholesalersRetailersService centres
Cost of the Channel System
6.2 No. of IntermediariesNos. should be adequate for covering the
targetted segmentToo many can add to competition,
reducing their marginsIt is not easy to get rid of channel partnersThe No. depends on the “Intensity of
Distribution” the co. desires.
Evaluation of Major Alternatives
Evaluation is done using the foll. criteria:
Cost
Ability to manage & control
Adaptability
Range & volume to be handled
Selecting Channel Partners
The process of recruitment includes:Placing advertisementsGetting the sales people to visit the
marketsGetting references from existing channel
partners about prospects in other townsSelection criteria depends on whether the
channel partner reqd. is a C & F agent, wholesaler, Distributor etc.
Training Channel Members
Training is a continuous process & starts right from the time the channel partner is appointed
Since the channel partner represents the co., he has to maintain a high profile.Training includes:On the job training to channel sales peopleClass room training to the distributor & his staff
on the co. products, competition etc.Training on submitting reports & maintaining
records
Training Channel Members
Statutory requirements
Care of the co. products in the custody of the channel member
Technical training if the product is technical
Repair, maintenance, demonstration etc
Servicing.
Motivating Channel Partners
Channel members need to be kept highly motivated to deliver results consistently.
French & raven have suggested the foll. Power format which can be used on the intermediaries to make them effective:
Referent PowerExpertLegitimateRewardCoercive
Motivating Channel Partners
The foll. two can also be added to the above :SupportCompetition
For multilevel marketing cos. like Amway, Tupperware etc, relationship is the main source of motivation. Promotions like meetings, trips abroad etc are also used.
Evaluating Channel Members
A company’s success depends on the effectiveness of its distributor channel.
Co. needs to keep reviewing the performance of the channel partners to ensure the highest standards of performance
Evaluation done against agreed performance criteria like :
Targets / Sales Quota Avg. level of inventory held% of volume achieved by extending credit Productive calls per day Servicing complaints handled and so on. FMCG cos. Work on 30 % ROI for the distributors &
support with schemes & promotional programmeswhen the % falls
Modifying an Existing ChannelNetwork
Channel Design comparisonfactors
Efficiency
Effectiveness
Capacity
Agility
Consistency
Reliability
Integrity
Channel Design Implementation
Channel Management
Channel Management
1. Use of Channel Power
2. Channel Conflict
3. Principles of Channel Management
Use of Channel Power Co. & Channel members are dependent on each
other
Dependence on each other considers the foll:
% of channel partner’s business from the co’s products
Ability of co. to find alternatives who are better than the existing
Consistent good performance of the channel & co’s dependence on the channel
Channel becomes indispensable when customers, wholesalers & retailers depend entirely on the channel partner.
Use of Channel PowerFive sources of Power
1. Rewards
2. Coercion
3. Expertise
4. Legitimacy
5. Reference
Use of Channel PowerFive sources of Power1. Rewards Reward is a benefit given to a channel member
for him to conform his behaviour in line with the system.
Reward can be financial or otherwise e.g Incentives on achieving sales targets. Best Distributor award in the Annual Sales
conference Reward power is the most popular in the
administration of Marketing channels
Use of Channel Power
Five sources of Power2. Coercion This is a hint of punishment for the channel
if he does not fall in line with the requirements
E.g. Withdrawing of incentive payments if promised infrastructure is not built up.
Being more strict on payment mode, methodology etc.
Use of Channel Power
Five sources of Power3. Expertise
Special knowledge that the Principal / co. has which is of benefit to the channel
Principal & channel partner trust each other
Co. to make efforts to renew the expertise continuously.
Use of Channel Power
Five sources of Power4. Legitimacy These are contracts or agreements entered by
the Principal with the channel partner.E.g. Stock Keeping, Credit etc.
Most of these clauses have been developed over a period of time & have become standards.
Legitimate Power is the most objective of all the powers between the channel partners.
Use of Channel Power
Five sources of Power5. Reference
Referent Power helps in companies being selective in the channel partners they would like to work with.
Referent Power can be developed over a long period of time with a lot of hard work.
Use of Channel Power
Countervailing Power
At times, the channel may have some influence on the Principal.The Distributor can have referent &
expert power over his own customers & this is equally valuable to the company.This leads to “Interdependence of
Channel Members”
Use of Channel Power
Countervailing Power
This is called as “Countervailing Power”
It reduces confrontation & improves cooperation which is good for the channel system
However, at times, the relationship seem to exploit the weaker parties.
Channel Conflict
A situation of discord or disagreement between channel members from the same marketing channel system
Driven more by feelings than by facts
When one entity in the relationship is behaving in a certain way or doing some things which will directly affect the performance, of the first entity, or come in the way of its goals, a situation of “Conflict” arises.
Channel Conflict
Channel conflict arises when the behaviour of a channel member is in opposition to its channel counterpart. It is opponent centered and direct, in which the goal or object sought is controlled by the counterpart.
Channel Conflict
Channel conflict occurs when one member of a channel views its upstream or downstream partner as an adversary or opponent. The key is that interdependent parties at different levels of the same channel (upstream & downstream) attempt to block each other.
Conflict implies an incompatibility at some level.
Channel Conflict
Some features of Conflicts are:
It is initially latent & does not affect the working of the channel members
It is not possible to detect till it reaches a level of disruption.
When conflict is desirable
Opposition actually makes a relationship better on certain occasions :
This is Functional Conflict.
Functional conflict is common when channel members recognise each other’s contribution and understand that each party’s success depends on the other.
When conflict is desirable
Conflict can be Functional because channel members drive each other to improve their performance.
By raising and working through their differences, they incite each other to do better and challenge each other to break old habits and assumptions.
Channel Conflict
Reasons for Channel Conflict1. Roles not defined properly2. Resource scarcity3. Differences in perception on the Business
environment.e.g Quantum of credit.4. Channel members have certain expectations
from each other. If they do not materialise, conflicts can arise
5. Decision Domain disagreements6. Goal Incompatibility
Channel Conflict
Reasons for Channel Conflict
7. Communication Difficulties.
8. New Channel Partner
9. Target fixing exercise
10.Extension of credit
11.Multiple Distributors
12.Loss of opportunity
Managing Conflict
There are four steps to be taken to resolve conflicts:
1. Understanding the nature of the conflict & measuring its intensity
2. Tracing the source of the conflict.
3. Finding out the consequences of the conflict
4. Strategy and action plan for resolution
Managing Conflict
Nature & Impact of conflict
List down the major issues
Tackle routine issues
Check frequency of the issues
e.g Distributor coverage
Assess perception of each party on the issue
Lastly, take an inventory of all the issues ranked in terms of importance.
Managing Conflict
Tracing the source of conflictObjectives may not have matchedChannel members may have read the
business differentlyUnderstanding of the Domain may be
differentCheck with channel members at regular
intervals- on each other’s performanceTheir opinion on the irritants in the systemSalespeople to continuously assess the
performance of the channel members to sense any latent conflicts.
How Conflicts escalate
Conflict can escalate into a dispute
There is an element of “Distrust” built into the system
Ideal to identify the conflicts in the early stage itself & resolve them
Use the power of Coercion.
Conflict Resolution
If conflicts happen, they have to be accepted & resolved
Where conflict arises between channel partners who are not bound by contracts or agreements of any kind, the conflict resolution is guided by the best past practice.
Conflict Resolution
Other Methods:
Joint membership of trade associations
Distributor councils
Personnel exchange between channel partners
Mediation through Trade Associations
Final stage: Through Arbitration
Building Channel Relationships
Use of Motivational Tools
Payments for shelf space
Higher Trade discounts
Higher margins for better distribution
Strong Advertising, merchandising & promotional support
Support of field sales people- particularly in achieving secondary sales.
Provide sales training to distributor salesmen
Building Channel Relationships
Use of Motivational ToolsOffer Financial assistance- subsidies on
distribution to new markets or rural marketsProvide logistical supportGenerate customer leads and pass on to
channel membersCommunicate promptly all crucial
marketing related decisions
Principles of Channel Management
Channel Management is in four steps:1. The Planning effort-setting the objectives2. The Organisation structure to deliver the
customer service objectives-the people and the channel members & a clear definition of responsibilities
3. Ability to control the channel- measuring progress towards the objectives & making course corrections
4. Measuring performance for constant improvement.
Physical Distribution Management
The Management of all activities which facilitate movement and coordination of supply and demand in the creation of time and place utility in goods
Physical Distribution Management
SummaryTransportationWarehousingPacking & PackagingHandling of MaterialsMaintenance of Stocks, inventory controlsOrders, processing, despatchCustomer services, complaints, redressalsMaintenance of records related to these
activities
Transportation
Transport system in an organisation should be :
Efficient
Economic
Reliable
Meeting customer needs in a timely manner
Experienced
Capable of meeting emergencies, special needs
Warehouses
Facilities OfferedStorageStackingEase of handlingRe PackingDeliverySafety measures in stocking-fire, burglary..Safety- Insects, rodents etc
Warehouses
Classification of Warehouse
1. General warehouse
2. Bonded warehouse
3. Cold storage
4. Warehouses meant for agricultural goods
5. Buffer storage warehouses
6. Import-Export warehouses
Modes of Transportation
RailwaysRoadAirSea Inland waterwaysRopeways-hilly areasPostalCourierHand carts, cycle rickshawsBullock carts etc
Distribution Agreement
Covers the foll:PriceDiscount structureCredit periodArea of operationMin. order qty.Right to appoint additional distributorsTermination clauseType of expenses to be borne
Segmentation
Segmentation
1. Introduction
2. Why segmentation & Why segment ?
3. Segmentation Process
4. Segmentation Criteria
5. Choosing Attractive Market Segments
6. Different Targetting strategies
Segmentation
1. Introduction
Segmentation process is a crucial aspect of Strategic Marketing.
It is central to strategy & can be broken into three distinct elements:
1. Segmentation
2. Targetting
3. Positioning
Segmentation
Segmentation
Market segmentation is the process by which a market is divided into distinct subsets of customers with similar needs and characteristics that lead them to respond in similar ways to a particular product offering & marketing program.
Segmentation
Targetting or Target MarketingEvaluating the relative attractiveness of various
segments in terms of :Market PotentialGrowth RateCompetitive Intensity & other factorsAnd the firm’s mission & capabilities to deliver
what each segment wants, in order to choose which segments it will serve.
Segmentation
Product PositioningProduct Positioning entails designing
product offerings and marketing programs that collectively establish an enduring competitive advantage in the target market by creating a unique image, or position, in the customer’s mind.
These three are closely linked and have strong interdependence
SegmentationWhy segmentation ? A Market segment is a section of a market
which possesses one or more unique features that both give it an identity & set it apart from other segments.
Market segmentation amounts to partitioning a market into a number of distinct sections, using criteria which reflect different & distinctive purchasing motives & behaviour of customers.
Segmentation makes it easier for firms to produce goods or services that fit closely with what people want.
SegmentationWhy Segment ?1. Meet consumer needs more precisely
Customer has different wants & needs
2. Increase Profits3. Gain segment leadership4. Retain customers5. Focus marketing communications6. Population growth has slowed
More Product Markets are maturingCompetition becoming more intense
Segmentation7. Expanding disposable incomes
Different resources at the buyer’s disposal
8. Higher educational levels9. More awareness of the world, resulting in more
varied & sophisticated needs, tastes & lifestyles
10. Increasing and important trend towards micro segmentation.
Careful segmentation & accurate targetting keeps a firm close to the market, reduces waste, finds the best customers & helps to keep them satisfied.
Segmentation Process
The segmentation process involves establishing criteria by which groups of consumers with similar needs can be identified.
These criteria have to establish consumer groups that have the foll. characteristics :
The consumers in the segment respond in the same way to a particular marketing mix.
The consumers within the segment have to react in a clearly different way from other groups of consumers to the marketing mix on offer
Segmentation Process
The group has to be large enough to provide the return on investment necessary to the organisation
The criteria used to identify the segment have to be operational.
Segmentation Criteria
The development and implementation of a Market segmentation strategy can incur greater costs (e.g market research, separate promotional campaigns, distribution channels etc) than a mass-marketing strategy. Therefore, each segment must meet the foll. basic criteria:
1. The organisation must be able to identify and measure each segment
2. The market must be substantial enough3. The organisation must be able to reach
customers
Segmentation Criteria
1. Customers in the selected segment must be responsive
2. Characteristics of the segment are relatively stable over a long period
Segmentation Criteria
Broadly there are three major categories for both consumer and organisational markets :
1. Geographic2. Demographic3. Behavioural Some Marketers also use Geodemographic and
Psychographic as additional criteria for segmentation. More the variables-better- Tighter target market. Leads to :
Less waste, more relevant offers to appropriate customers & higher customer satisfaction.
Segmentation Criteria1. Geographic Used more extensively in the past Different locations vary in their sales potential,
growth rates, customer needs, cultures, climates, service needs and competitive structures as well as purchase rates for a variety of goods.
Used in both consumer & organisational markets
Retailing & many service businesses-esp. because customers are unwilling to travel very far to obtain the goods or service they require.
Segmentation CriteriaGeoDemographic Targeting of one demographic group in an area This segmentation can be used to aid decision making in
a variety of areas:Identifying favourable retail locations for a
specific retail formatThe specific mix of products & services
delivered in a particular retail location.Decision on direct mail campaignsBoundaries of specific sales territoriesSelection of Media
This has been used very successfully in Europe spread across many countries
Segmentation Criteria
2. Demographic Key Demographic variables consist of Age,
Gender, Income, Occupation, Education and Family Life cycle
Age and Gender can be combined Products and markets are also created &
targetted based on life cycle.Micro segmentation groups are also created by the
characteristics of the individuals who influence the purchasing decision.
Segmentation Criteria
3. BehaviouralThe influences that affect consumer’s purchasing
decisions can be broken down into four major categories :
I. SocialII. PersonalIII. PsychologicalIV. SituationalV. Benefit SegmentationVI. Usage SegmentationVII. Purchase occasion
Segmentation Criteria3. Behavioural:
1.Social:There is a range of social influences on a consumer’s
purchasing behaviour, in particular culture & social classCulture Social classReference groups Family
2.Personal:AgeOccupation & Financial situation PersonalityFamily life cycle
Segmentation Criteria
3.Psychological:
Motivation
Perception
Learning
Beliefs & Attitudes
All the above are influences on consumer behaviour
Segmentation Criteria4.Situational:
Self ImagePerceived risk, eg – Expensive purchasesSocial factors – level of social acceptance may
depend on the right purchasing decisionHedonistic factors – Concerned with products or
services that are linked to providing to personal pleasure
5.Benefit:Based on the concept that the key reason a
consumer buys the product or service is for the benefit that product or service gives themTo identify groups of consumers that are seeking a
common benefit
Segmentation Criteria
6.Usage:The characteristics & patterns of consumer
usage are the essence of this segmentation approach Use of PPPPP analysis - can lead to the
identification of new segmentation opportunities
7.Purchase occasion:Marriage New Year, etc.
Organisational Market Segmentation
Organisational markets can be segmented according to the characteristics of the organisation. Factors that would be analysed at this level would be:
Industry sector
Size of the organisation
Geographic location
End use application
Organisational Market Segmentation
Organisational markets can also be segmented according to the characteristics of the decision making unit; also called micro segmentation. Factors include:
The structure of the decision making unitThe decision making processStructure of the buying functionAttitude towards innovationKey criteria used in reaching a decision on a
purchasePersonal characteristics of decision makers
Organisational / IndustrialSegmentation Techniques
Choosing Attractive Market Segments1. Select Market – Attractiveness & Competitive –
position factors
2. Weigh Each factor
3. Rate segments on Each factor, Plot Results on Matrices
4. Project future position for each segment
5. Choose segments to Target, Allocate Resources
Developing Competitive Brands
Strategy Formulation
Approaches to DifferentiationThere are many approaches or strategic
orientations that can lead to sustainable differentiation strategies.
Employing Quality
&
Building strong Brands,
are two of the most important approaches.
Strategy FormulationQuality option
Here, the Business will deliver and be perceived to deliver a product or service superior to that of competitors.
A Quality strategy can mean that the brand, whether it is a hotel, car or computer, will be a premium brand as opposed to a value or economy entry.
To be the quality option, a business must distinguish itself with respect to delivering quality to customers.
Strategy Formulation
Quality optionA Quality focussed Management
system that is comprehensive, integrative and supported throughout the org. is required.A hallmark of most customer driven
organisations is that the top executives have regular meaningful one-to-one contact with customers.
Strategy FormulationBuilding Strong Brands
Differentiation can also be accomplished by building strong brands to create Brand Equity.This strategy is likely to prove sustainable
since it creates competitive barriers.Brand equity generates value to the
customer that can emerge either as a price premium or enhanced brand loyalty.
Strategy FormulationBuilding Strong BrandsBrand Equity is a set of assets and liabilities
linked to a brand’s name and symbol that add to or subtract from the value provided by a product or service to a firm or that firm’s customers. Aaker-1991
The assets and liabilities on which Brand equity is based can come under:Perceived brand QualityBrand IdentityBrand awarenessBrand Loyalty
Brand Valuation
Brand Equity has led to Financial valuation of the assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s ValueMarket TypeMarket ShareGlobal PresenceDurabilityExtendabilityProtectionSuperior Products & Services
Brand ValuationBrand Equity has led to Financial valuation of the
assets in a company’s balance sheets.Factors seen as indicators of a Brand’s ValueMarket Type
Brands operating in a high margin, high volume & stable markets carry a higher valuation than brands in less profitable or stable sectors.One of the aims in developing a strong
brand is to allow a company to compete on other factors than price in order to make strong margins.
Brand ValuationBrand Equity has led to Financial valuation of the
assets in a company’s balance sheets.Factors seen as indicators of a Brand’s ValueMarket Share
Brands that are market leaders are deemed to command a premium because competitors will find it difficult to overcome a consumer’s tendency to buy the dominant brand.Holding the market leadership position is
seen as a barrier to entry for other brands. E.G. Titan, Horlicks, etc.
Brand Valuation
Brand Equity has led to Financial valuation of the assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s Value
Global Presence
Brands that are accepted in the Global market carry more value than brands within a purely domestic market.
Brand ValuationBrand Equity has led to Financial valuation of the
assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s Value Durability
Some Brands manage to maintain a contemporary appeal & retain their relevance to customers over a long period of time.
These brands have created strong customer loyalty & become an established player in the market. E.G. Cadbury, Gillette, Kodak, Colgate etc.
Brand Valuation
Brand Equity has led to Financial valuation of the assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s Value Extendability
Brands that have the ability to be extended into related markets or stretched in new markets offer greater value than brands with more limited options.
E.g BIC successfully extended from disposable pens to razors etc.
Brand Valuation
Brand Equity has led to Financial valuation of the assets in a company’s balance sheets.
Factors seen as indicators of a Brand’s Value Protection
Brands that have some protection from being copied through patents or registered trade marks or designs, potentially offer greater value.However, retailers have been able to offer similar
products in similar packaging in their own brands. Superior Products & Services
Brands that offer the consumer products and / or services that are superior to those of competitors.
Strategic Brand Management
Successful Brand development consists of “Elements of brand delivery” visible and not visible to the consumer.
Elements visible
Symbols
Brand name
Packaging
Advertising
Price
Strategic Brand Management
Successful Brand development consists of “Elements of brand delivery” visible and not visible to the consumer.
Elements not visibleQualityProduction efficiency / operational costsResearch & DevelopmentService delivery systemsSales serviceSupply chain
Strategic Brand Management
Organisations now have the option of coordinating activities without necessarily owning all the assets and competencies needed.
The capability to support a brand is done through various forms of relationships and alliances. The foll. options are used :
1. Manufacturer’s Brand system2. Retailer’s own Brand system3. Franchise Brand system4. Manufacturer’s private label Brand system
Strategic Brand Management
Manufacturer’s Brand system Such companies produce products under their own
brand name. E.g Kellogs The majority of the businesses is owned by the
company.Retailer’s own Brand system The Brand is owned by the Retailer and there are
suppliers who supply the Retailer in the required Brand. Product development is sometimes undertaken by a third
party but definitely under the guidance and care of the Retailer.
E.g Gap, Marks & Spencer etc
Strategic Brand ManagementFranchise Brand system The retail outlets are mainly Franchise
operations The key skills relating to core aspects of the
Brand’s quality are kept in-house.Manufacturer’s private label Brand system These are companies that supply goods under
a certain Brand name to the retailers. E.g. Marks & Spencer.
These companies create their competitive position through highly efficient manufacturing skills, customer service and new product development abilities
Brand Name Strategy
An organisation has to decide its policy for naming brands across all its products & services.
The focal point of decisions on Branding strategy is about the emphasis the org. wishes to place on creating a distinctive offering in the market against the weight it wishes to place on the origin of the product or service.
Between these two extremes lie several options:
Brand Name Strategy
1. Corporate Brand
2. Multi Brand
3. Company and Individual brand
4. Range Brand
5. Private Brand
6. Generic Brand
Brand Name Strategy
1. Corporate Brand
Organisations that follow this approach use one corporate name across all products.E.g Cadbury, Heinz etc Individual products merely carry a descriptive name under the corporate umbrella.
Strong overall image
Opportunity to create economies of scale in marketing comm, distribution etc.
Brand Name Strategy
2. Multi Brand This is the complete opposite of corporate
branding approach. Each product is given its own unique brand
name. The aim is to build completely separate brand
identities. Appropriate if the org. is competing in a no. of
different segments. E.g. Washing powder. Ariel, Tide etc.
Brand Name Strategy
3. Company and Individual brand
This is the “Endorsed” approach
Endorsing the product with the corporate name gives a new product credibility while at the same time allowing the new brand some degree of freedom.
Different companies adopt different approaches to this strategy.
Brand Name Strategy
4. Range Brand Some organisations use different brand names for
different ranges of product, in effect creating a family of products. E.g Maggi
5. Private Brand This is the Distributor’s own brand.The private brand is
owned and controlled by the distributor who makes decisions regarding the product’s position in the market.
The distributor is likely to use either a strategy of corporate or a company and individual brand for its products.
Brand Name Strategy
6. Generic Brand This strategy involves the product having
no brand name. The product’s packaging merely states
the contents of the package. Flour, liquid soap etc.
Each of the approaches to Branding outlined above has advantages and disadvantages.
Combined Brand Strategies Large organisations may use a mixture of Brand
strategies to manage their large product portfolios.
The approach an organisation adopts to branding is a crucial decision relating to the overall strategy the company has decided to pursue . The branding policy should be developed in the light of:
The nature of Product or service
The pattern of consumer behaviour in the specific market
The company’s competitive position.
Combined Brand StrategiesDepending on resources, companies invest on
promoting and developing new brands.
This is normally done when the target market is large enough and has the potential profitability to justify investing in creating a new brand.
Lexus by Toyota- Premium cars
Aashirwaad by ITC
Tanishq by Tatas
Companies can also choose to use a current brand name and opt for a brand extension or brand stretching policy.
Brand Extension
There are occasions when an organisation will try to extend the use of a brand name to new products in the same broad market.
Brands that carry high Brand equity are candidates for brand extension as they have the ability to increase the attractiveness of the new products.
E.G Horlicks, Maggi etc.
Brand StretchingBrand stretching takes place when an
organisation stretches a brand into new unrelated markets.
E.g. Godrej into Frozen Foods, properties
HDFC into Bank, Insurance
Mahindra into Holiday Resorts, Gensets
Reliance- Footwear, Retail etc
Nike and others into apparel
Brand Revitalisation
Over a period of time, it is likely that an organisation will be required to undertake actions to improve the performance of a brand.
This can be due to new technology, changing consumer behaviour or new competition.
Options open to a company are either to increase sales or to raise Brand profitability.
Brand revitalisation and Brand repositioning are two approaches that can be employed to increase the sales volume of a brand.
Brand RevitalisationBrand revitalisation involves gaining sales
volume by expanding the market for a brand.
Four significant opportunities exist that can expand the market:
Enter new markets
Exploit new market segments
Increase the frequency of use
Increase quantity used.
Brand Repositioning Brand repositioning is undertaken in order to
increase a brand’s competitive position and therefore increase sales volume by seizing market share from rival products.
When repositioning, companies can change aspects of the product, change the brand’s target market or both.
This gives four repositioning options:
Image repositioning
Market repositioning
Product repositioning &
Total Repositioning
Brand Repositioning
Image Repositioning Here, The Product &Target market remain unchanged. Aim is to change the image of the product in its current
target market.Market Repositioning Here, the Product remains unchanged but it is
repositioned to appeal to a new market segment.e.g. Adults to children etc. Ordinary beverage to a health drink etc.
Brand Repositioning
Product RepositioningHere, the Product is materially changed.However, aimed to appeal to the same
target segment. Done to suit the changing tastes of the consumer.
Total RepositioningThis option involves both a change of
target market and accompanying product modifications.
Sales Management
Definition Of Sales Management
The Planning, Direction & Control of Personal selling, including recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as these tasks apply to the personal sales force.
J.Parthasarathy
Importance Of Sales Management
Development of largebusiness operations.
National level presence.
Importance & Managementof Sales Force.
Sales Management Process.
The sequence of activities that guides managers in the creation & administration of sales programmes for a firm is known as the Sales Management Process.
Customer
Sales Management Process.
Sales Manager Field force
Customer
Recruit / Train /
Motivate / Compensate / Evaluate
Products / Services
Selling Strategy & Plan of Action.
Sales Management Process.
Relationship between individuals.
Between Sales Personnel & Customers.
Between Sales Management & their Sales Personnel.
Marketing Mix & SalesManagement
Products Price Promotion Distribution
Advertising Public Relations Personal Selling
Sales Promotion
Sales Management
Marketing Mix
Sales Management
Sales Management
Planning
Budgeting
Recruiting & Selecting
Training
Motivating
Compensating
Designing Territories
Evaluating Performance
Sales Management
The Planning, Implementing & Control of personal contact programmes designed to achieve the Sales & Profit objectives of the firm.
Managing the Sales ForceSales Force: Need to be efficient, effective & focussed on customer
value.Requirements:
Right organisation in terms of:
Most Powerful Motivator : A well designed Compensation Package
1. Qualification
2. Aptitude
3. Knowledge
• Selling
• Product Knowledge
4. Experience
5.Well trained
6. Commitment
7. Right strength
8. Right compensation & Incentive system
Designing & Managing a SalesForce
Set out objectives
Design a Sales Force
Structure & Size
Territory Allocation
Make out Compensation Package
Recruitment & Selection
Designing & Managing a SalesForce
Training
Set out Duties & Responsibilities
Direction & Control
Motivation & Supervision
Performance Appraisal
Sales Manager’s Duties &Responsibilities
Set Goals / Targets
Define Expectations.
Evaluate Product features, Performance, Competition, etc.
Set out strategies
Establish Sales Controls
Sales Manager’s Duties &Responsibilities
Develop Plans / Help Develop Plans
Execute Programmes
Controlling Distribution Expenses
Get the Best output from the Sales Force.
Recognition & Awards
Sales Manager’s Job Skills
Two skills essential in Sales Management :
Leadership
Organizational Ability
Leadership
Intelligence
Energy
Personal Impact
Persuasiveness
Ambition
Vision
Motivation
Inter Personal Skills
Empowerment
Value congruence
Organisational AbilityTime ManagementHandle & Manage office staffPreparation of Budgets in timeHandle Sales Reports & other MISOrganise travel programmesRoutine office Functions
Organisational Ability
Hold Meetings
Coordinate with Production / Accounts & other departments from time to time.
Implement sales promotional programmes
Handle & Manage Sales Staff
Regular & Timely communication with Sales Force.
Enforce Policies & Rules of the Company.
Challenges for the SalesManager
Getting the right person in the team-Qualification, Age & Experience.
Budgeting in line with capacity.
Product Range, New Products, etc.
Issues on Logistics.
MIS Availability.
Challenges for the Sales Manager
Fixing of acceptable targets to sales force in line with the budget.
Delegation of Authority to sales force to help them deal with their customers
Dealing with frequent problems on prices, claims, promotion, quality, etc.
Being unable to personally visit all the areas to meet all the customers on a regular basis.
Collection of old outstandings, change of payment terms, problems of discontinued dealership, etc.
Sales Strategies
Relationship Strategy:
To Establish working relationship with customers in which mutual support, trust & goals are nurtured over time.
Usually done by high performers
Customer is treated as a partner
Win – Win Strategy
Concept is very Powerful
The only real alternative to lose – lose.
I Win,
You Win
I Lose
You Lose
I Win
You Lose
I Lose
You Win
Partnership, Win – Win, must always be looked for
Win – Win Strategy
Outcome:
Both come out of the sale feeling satisfied with neither having taken advantage of the other.
The stage is set for a long term relationship, repeat business & future referrals.
Account Relationship Management
Deals with a single customer
Especially applicable for all OE Sales.
Focus on clients needs, problems & Successes.
Clients’ wants & needs become the most important factor driving any selling process.
Sales persons are in touch with the customer almost everyday to give them information, support, service, etc. to solve their problems.
Service Strategy Aim is to provide enhanced and better quality service
to all customers.
Better service includes all activities starting from order acknowledgement to after - sales service.
Service led to the concept of “ supply chain management”.
Linked to QCD triangle.
• Highest Quality
• Lowest Cost.
• Least Delivery time
Company strives continuously to improve their service / product to help increase the customer base & to retain loyalty.
Methods of Selling
Telemarketing
Reach
Personal
Saves on Time
Cost
Immediate Feedback
Telemarketing
Products
Insurance
Holiday Resorts
Consumer Durables
Other Products
Sales through Wholesalers &Retailers
Chain is created by the company
Products made available
Promotions done by company.
Directly
Jointly
Retailing- Separate Chapter
Mail Order Sales
Old & Traditional- Reader’s Digest
Sales of different items through credit card operations.
Sales Manager as Coordinator
Coordinates with :
Production
Accounts
Higher Management
R & D
Quality
Service Dept. if separate.
Conclusion
Thus we see that the Sales Manager & his team play a very important role in the success of the company.
Personal Selling
Personal Selling
1. Features,Importance & Advantages of Personal Selling
2. Personal Selling- Then & Now.3. Role of Sales Personnel in Mktg. Mix.4. Diversity in Selling Situations.5. Advertising & Personal Selling6. Steps in Personal Selling7. Theories of Selling8. Overall Skills required by Sales People.
Features, Importance &Advantages of Personal Selling
1. Enhances Customer’s confidence in the Seller.
2. Provides human touch to business transactions.
3. Promotes Long Term business relations through personal intimacy.
4. Seller is able to understand customer’s needs & preferences more clearly.
5. Customer gets satisfied when his product gets modified to suit his needs.
Features, Importance &Advantages of Personal Selling
6. Powerful & effective tool for convincing the customer about the product.
7. Seller & Customer- Always in touch resulting in better understanding.
8. Use of language known to & comfortable to the seller enhances the relationship & reduces the time for conversion of prospect into sales.
Personal Selling – Then &Now:1. Was one of only persuasion
2. One time effort & result
3. Current role:
a) Consultative Selling
b) Cultivates long term relationship
Personal Selling – Then & Now:
c) Mutually beneficial Sales Relationship
d) Role of a Psychologist with some individuals
e) Advisors
f) Personal friends – Relationship Building
Role of Sales Personnel inMarketing Mix
Product:Aware of Product FeaturesKnowledge of Competitors’ Products & Features.Functioning of ProductsProduct complaints & servicingHow to identify a genuine product from a
spurious onePacking / Date of manufacture, etc.New Products & Design
Role of Sales Personnel inMarketing Mix - contd.
Pricing
Statutory levies
Dealer & Distribution margins
Market prices
Competitors’ prices
Unorganized sector
Role of Sales Personnel inMarketing Mix- contd.
PromotionCoordinates on PromotionEvent ManagementDemonstrationsWorks out schemes in coordination with
the dealer, etc.Synchronise Personal selling with
advertising- speak the same language.
Role of Sales Personnel inMarketing mix – Contd.
Distribution1. Selection, Performance & Monitoring of
Dealer’s Performance.2. Continuous survey on adequacy of
outlets3. Availability of Product in right nos. /
quantity.4. Logistics
Role of Sales Personnel inMarketing mix – Contd.
Distribution
5. Exclusive outlets for different product categories
6. Impart Training to Dealer Salesmen
7. Help Dealer-Overall display, Ads, POP, signboards, etc.
8. Promotion / Sales of new products.
Diversity in Selling Situations
Service Selling:
Retail shop: “ Waits on” customer
Delivery Salesperson: Milk, bread, etc.
Merchandising Salesperson: Cyclical visits to customers
Missionary: To build goodwill & to educate
Technical
Diversity in Selling Situations-contd.
Developmental Selling
Creative: Vacuum cleaners, Encyclopedias, etc.
Creative intangibles: Insurance, Educational programmes, Time share, etc.
Diversity in Selling Situations-contd.
Developmental Selling with unusual creativity
Commodity Selling:
Salesperson takes care of key buyer’s other interests in golfing, fishing, etc.
Engaged in multiple sales:
Only one can say “ Yes” while several can say “ No”
Advertising & Personal Selling
Common Objective
The seller seeks to motivate the prospective buyer to behave favorably toward the seller
Advertising & Personal Selling
Sl. No.
Personal Selling Advertising
Two way Communication One way Communication
Direct contact with representative of Company
No direct contact. Customer arrives at his own Perceptions & conclusions
Major role in pre purchase, during purchase & post purchase
Mainly in pre purchase & to some extent in post purchase
Result can be seen during and after interaction & can be measured
Cannot be measured
easily
1.
2.
3.
4.
Advertising & Personal Selling-contd.
However, Advertising & Personal Selling often supplement or support each other and the buyer reacts to their combined impact.
Steps in Personal Selling
1. Prospecting
2. Pre-Approach
3. Approach
4. Presentation & Demonstration
5. Handling Objections
6. Closing
Steps in Personal Selling-contd.
Prospecting:
Is the process of identifying potential and likely buyers of a product or service.
Prospect :
Prospects are those who have a need or will to buy and the power to pay for the product / service.
Steps in Personal Selling-contd.
Methods of Prospecting
References
Acquaintances / Friends
Cold Calling
Centre of Influence
Direct Mail / Telephone
Exhibitions / Seminar / Leads created.
Steps in Personal Selling-contd.
Pre Approach:
Salesman aware of the specific needs, preferences, behaviour, etc. about the customer.
Can plan to give an effective presentation.
Steps in Personal Selling-contd.
Pre Approach – AdvantagesSaves on time & energy – Presentation limited to
only the prospects.Has all information about the prospect –
Salesman can be fully preparedSales Presentation can be fully focussed around
the needs of the prospect – Can be made short & meaningful.
Can grade the prospects in term of Hot / Medium / Low – Accordingly priority can be given.
Steps in Personal Selling
Approach :
1. Salesman to make best use of the opportunity.
2. Approach should not fail as it gives an opportunity to the competitor.
3. To meet different people at lower levels who can influence the decision making process.
4. One of the better methods – is to try & get an appointment through a reference.
Steps in Personal Selling-contd.
Approach, Contd.
5. Some salesmen send gifts in advance-also called “ Door Openers”
6. Can use the Brand name
7. Customer Benefit Approach
8. Product Trials
9. Free Gift Offer
Steps in Personal Selling-contd.
Approach :
Dos
1. Take prior appointment.
2. Maintain Punctuality
3. Go in a formal attire
4. Make the presentation short & effective
5. Make the prospect feel important & pamper his ego
Approach
Don’ts
1. Do not try to meet during odd hours
2. Do not show over anxiety to sell
3. Do not be tense
4. Do not apologize for the time taken
Presentations & Demonstrations
1. Attractively packaged
2. Prominent location in the store
3. To spell out features of the product, its advantages, benefits, etc.
4. Demonstrate the product to highlight its features & benefits to the customer
Presentations & Demonstrations-contd.
5. As soon as customer takes a decision, discreetly stop discussion on the product & remove the other products from view
6. Make the customer handle the product at the right time
Handling Objections1. Listen carefully to all the objections of the
customer2. Acknowledge that you have understood
the objections3. Sales person should be able to identify a
real objection from an excuse & tackle accordingly
4. Clarify or overcome the objection with genuine answers
5. Present options / solutions at each stage6. Get the customer to acknowledge the
clarification before you move on to the next objection
Closing Sales
Ask for the commitment from the customer –order
Do not have “ Fear of Rejection”
Ask for leading questions half way through
Look for signs / gestures / body language which may suggest that the customer has take a “ Buy” decision
If all previous steps have been done correctly, closing the sale does not take much time
Theories of Selling
AIDAS Theory of selling.1. A ttention2. I nterest3. D esire4. A ction5. S atisfaction Many Training Programmes are organized
around this concept. Based on experiential knowledge. Known to be in existence as early as 1898.
Theories of Selling-contd.
AIDAS Theory of Selling
Attention:
1. First few minutes are crucial.
2. Prospect- Receptive state of mind.
3. Salesperson to be a skilled conversationalist.
4. To have ample supply of “Conversation Openers.”
Theories of Selling – contd.
AIDAS-contd. Interest :Objective is to convert the attention into
a strong interest.Maintain the interest of the prospect
throughout the presentation.To seek the selling appeal that is most
likely to be effective.Usually – a lot of Questions & Answers.
Theories of Selling – contd.
AIDAS-contd.
Kindling desire :
Goal is to kindle the prospect’s desire to the “ready–to–buy” product.
Objections to be anticipated & answered to the prospect’s satisfaction.
To concentrate on projecting the benefits of the product.
Theories of Selling – contd.
AIDAS-contd.
Inducing Action :
Buying must be induced.
To be done only after overcoming all possible objections.
To ask leading questions.
Check if any other person is to participate in the decision making process.
Theories of Selling – contd.
AIDAS-contd.
Satisfaction :
Order is the climax of the selling situation.
Customer to be reassured that the decision was correct.
To complete all formalities as quickly as possible.
Theories of Selling-contd.
B : Right Set of Circumstances.
Everything was right for that sale.
Situation – Response Theory.
Hinges on the skill of the Salesperson.
Theories of Selling-contd.
C : Buying FormulaBuyers’ needs or problems receive major
attention.Need ( or problem ) – Solution – Purchase –
Satisfaction.Solution can be a product or service or both.Buyer thinks of a solution – Product – Trade
name – Purchase – experiences satisfaction or dissatisfaction.
Buyer should experience a pleasant feeling of anticipated satisfaction.
Theories of Selling
D : Behavioral Equation:Sophisticated version of the “ Right set of
circumstances ” theory.Buyer’s behaviour in terms of Purchasing
Decision process.This stimulus – response model includes the
elements- Drive, Cue, Response & Reinforcement.
Relation among the variables is multiplicative.Salesperson’s response to “ Buyer Behaviour
” & the different elements determine this “Buyer Behaviour”
Overall Skills required by SalesPeople
1. Be Thorough in your product knowledge
2. Know your competitor & his products well
3. Should know how to prospect
4. Establish rapport with strangers
5. Be a good listener
Overall Skills required by SalesPeople
6. Good at making oral presentations
7. Demonstrate Product Benefits
8. Handle customer concerns
9. Be well groomed, dress well & maintain good oral hygiene
10.Speak slowly, clearly, flawlessly & with confidence
Sales Organisation
Sales Organisation1. Definition2. Pre – Requisites3. Purpose of sales organisation4. Span of control5. Setting up a Sales Organisation6. Functions of Sales Organisation7. Role of Sales Administration8. Developing a Sales Organisation9. Field Sales Organisation10. Conclusion
Sales Organisation
Definition:
It is the systematic coordination of the various functions which are essential to achieve the organisational objectives
Sales Organisation
Pre requisites :
Should anticipate changing situations.
Should be able to adapt to diverse marketing environments
Purpose of Sales organisation
Ideal Organisation:
No duplication of effort
Less friction
Maximum cooperation
To have a combination of intelligent leadership, informal organisation & formal organisation to facilitate achievement of objectives
Use of specialized personnel
Assignment & Delegation of Authority
Purpose of Sales organisation
Coordination: Motivating individuals to work together towards common
objectives is important in achieving coordination
Authority: All executives should understand the nature of their
authority with respect to each aspect of the operation; otherwise friction develops
To achieve harmony: Continuing coordination Free flowing communication systems
Span of Control
Refers to the no. of subordinates who are supervised by each manager.
It ranges from 5:1 to 10:1 depending on industry, experience & nature of job responsibility
Setting up a Sales Organisation
Most problems of Sales organisation are problems of re- organisation.
Goal is to make it more effective
Five major steps in setting up aSales Organisation
1. Defining the Objectives
2. Determination of Activities & their Volume of Performance
3. Grouping Activities into positions
4. Assignment of personnel to positions
5. Provision for coordination & control
Five major steps in setting up aSales Organisation
1. Defining the objectives Set Qualitative & Quantitative objectives
Sales volume
Produce profits
Through profitable sales
Controlling costs
Growth in Sales & Profits
Five major steps in setting up aSales Organisation
2. Determination of Activities & their volume of performance
Determine all necessary activities & estimate their volume of performance
Determine executive positions, relationships to other positions & duties & responsibilities
Five major steps in setting up aSales Organisation
3. Grouping Activities into positions
Activities are classified & grouped so that closely related tasks are assigned to the same position
Positions to offer job challenge, interest & involvement
Five major steps in setting up aSales Organisation
4. Assignment of Personnel to positions Different personnel assigned to various
positions Sometimes job specifications are
modified to suit individuals Sometimes preferable to have individuals
grow into particular jobs rather than have the jobs grow up around individuals
Five major steps in setting up aSales Organisation
5. Provision for coordination & control Written job description – a formal instrument of org.
controlAlso used at the time of employee selection processAlso used as yardsticks against which to appraise the performance
Control & coordination by sales executive is done through formal & informal means
Organisation manual is also made outContains departmental objectives & policies as also write- ups of job descriptions & specifications
Functions of Sales Organisation
1. Planning Functions: Sales Forecasting Sales Budgeting Selling Policy2. Administrative Functions: Selecting Salesmen Training Salesmen Remuneration of Salesmen Control of Salesmen3. Executive Functions: Sales Promotion Selling routine – Execution of orders
Role of Sales Administration Order Processing
Delivery
Logistics
Maintenances Stock
All communications to :o Sales & Regional
officeso Customer
o Ware houses
Transit Insurance
Excise / Sales tax Formalities / Documentation
Sales Documentation
Packing / Packaging
Sales Returns
Developing a Sales Organisation
1. Formal & Informal Organisations
2. Horizontal & Vertical Organisations
3. Centralized & Decentralized Organisations
4. Line & Staff components of Organsations
5. Size of the Company
Developing a Sales Organisation
Formal & Informal Organisations
Every firm has a formal & informal organisation
It is basically a communication pattern
To be recognized as being useful
To be encouraged to the extent
Horizontal & Vertical Organisations
Vertical
Sales Supervisor
Sales Manager
Regional Sales Manager
General Manager
District Sales Mgr
Horizontal Organisations
General Manager- Sales
Export Sales Manager
Regl. Manager-South
Regl. Manager-North
Distribution Manager
Regl Manager-West
Regl Manager-East
Mktg. Services Manager
Horizontal & Vertical Organisations
Span of control decides whether you need a vertical or Horizontal OrganisationEach company must determine the span
of control that works best for its Sales OrganisationSpan of Control should be monitored
periodically in order to assure maximum effectiveness
Centralised & De CentralisedOrganisations
Decentralised Organisation: Responsibility & Authority are delegated to lower levels.
Centralised Organisation: Concentrated at higher levels of Management.
Centralised & De CentralisedOrganisations
Centralised Organisation: Economies of scale.
Uniformity in an organisation’s product & service offerings
Encourages coordination & integration of sales peoples’efforts & behaviour
DecentralisedOrganisation:
Happens when the organisation grows in size
Due to a more diverse customer base
With improved communication facilities, becoming more feasible
Centralised & De CentralisedOrganisations
Mixture of both:Certain organisations use both where
certain functions are centralised while certain others are decentralised.Eg: Recruitment, Training, etc.However, when Responsibility is de-
centralised,organisation must take care to ensure that there is adequate authority.
Line & Staff Components
Line Function: Primary Activity
Staff Function: Supporting Activity
Line
•Selling
Staff
•Advertising
•Market research
•Planning
•Training
•Market ServicesSmall Firms: Have only one line function
Line & Staff Components
Staff Activities report to the position they supportEg: VP Has advertisements, Market research –
as staff functionsWhereas GM : Has Training, Sales & distribution,
planning, etc. as staff functions
Size of the Company
An organisation evolves as a company grows in size
Specialist functions are added
Eg: Sales Head, Production Head, Personnel, Finance & Accts, etc.
Field Sales Organisation
Geographic Sales Organisation
Product based sales Organisation
Customer based Organisation
Activity / Function based Organisation.
Hybrid Sales Organisation
Team based Organisation
Product based Organisation
Product ‘A’Product ‘A’ Product ‘B’ Product ‘C’
North
South
East
West
North
East
West
South
North
East
WestWest
South
Duplication of coverageIncreased costs J.Parthasarathy
Customer based Organisation
Sales Manager
Regl. Mgr. S Regl. Mgr. ERegl. Mgr. NRegl. Mgr. W
Asst. Mgr.
Ashok Leyland
Asst. Mgr.
TVSAsst. Mgr.
Hero Honda
Asst. Mgr.
MarutiSuzuki
Activity based Organisation
Used in high cost selling methods
Eg: One to one
Prospecting
Presentation
Installation
Service
Hybrid Sales Organisation
Any two organisation types are combined to suit the problems of individual sales organisation
Advantage: Customer service
Disadvantage: Difficulty in managing multiple sales force
Team based Sales Organisation
Customer
Marketing Technical support
Manufacturing
Conclusion
Coordination is the key
Formal interactions
Informal coordination
Companies use a combination of types –Sales Organisation
Customer service – Primary concern
Recruitment & Selection
Recruitment & Selection
Need for Recruitment
Organisation for Recruiting & Selection
Job Description & Specification
Important qualities of salespeople
Recruitment Sources
Selection Procedure
Sales Force Training
Summary
Need for Recruitment
Recruitment is a continuous process
Natural growth of organisation
Growth due to: Addition of new products
Acquisitions
Change in selling policy
People outgrowing positions
Growth of new industries & resultant attritions
Induced vacancies
Organisation for Recruiting &Selection
Varies from company to companyRecruitment normally handled by Sales
DepartmentPersonnel Department handles only a few
aspects of recruitmentWhere a company operates with
branches, to some extent, the process is decentralised
Job Description & Specification
Title of the job
Duties & Responsibilities
Reporting methods
Minimum qualifications & experience
Territory to be covered
Important Qualities of Salespeople
Aptitude
Communication skills
Personality
Product knowledge
Self motivated
Educational backgroundDeterminationIntelligenceBusiness senseConfidence
Recruitment Sources
Pre Recruiting reservoir
Advertisements
Sources within the company
Sources outside the company
Competitors & other Industries
Past employees
Pre – Recruiting reservoir
Many companies have a pre - recruiting reservoir:
Through Sales people
Customers
Through centres of influence
Earlier list of shortlisted candidates
Reservoir names to be reviewed periodically
Advertisements
Newspapers, magazines & trade journals
Quick to reach
Immediate response
Response normally overwhelming, depending on reputation of company
Highly time consuming & expensive
Sources within the company:
Company Sales Personnel
Individuals known to sales staff
Very familiar with the company; products, policies, culture, etc.
Especially helpful when filling up vacancies in remote territories
Internal transfers Between different departments in marketing
Between different departments
Sources outside the company
Recruitment Agencies
Direct unsolicited Applications
Educational Institutions
Sales forces of non – competing companies
Sources of recruitment agencies to be evaluated periodically for their success ratio:
Quantitatively
Qualitatively
Competitors & other Industries
Advantages of trained, knowledgeable & experienced manpower
Downtime is minimised
Can be expensive at times
Can also be taken from other industries to bring in sea change - inspiration
Past Employees
Especially when employees have left due to
Higher studies
Gone abroad
Returning to hometown
Change in management, etc.
Selection Procedure
Preliminary Interview
Formal Application
Interview
Psychological Testing
References check
Physical examination
Job offer
Preliminary Interview
Screening process
Done by someone at a lower level
Only those who fulfill minimum requirements in terms of age, qualification & relevant experience are short listed
Formal Application
Detailed application form given to the few short listed candidates
Generally covers the following:Present job
Dependants
Education
Employment record
Duties & Responsibilities handled
Health
Personal data
Earnings
Reasons for leaving each job
Membership in professional organisation
Training programmes attended
Achievement in each organisation
References
Interview
Most widely used
Application form becomes the basis
Covers:
Oral communication
Personal appearance & manners
Attitude towards selling
Achievements, etc.
Different techniques used:
Formal or structured
Informal or unstructured
Interview
Applicant to be made more comfortable
Good rapport to be maintained throughout
Interaction interview is used at times
Rating is done in a format individually by each of the team members
Psychological Testing
• Four types of testing used:»Tests of ability / aptitude
»Habitual characteristic
»Interests tests
»Tests of Achievement
Ability / Aptitude
Indicate applicants’ ability to learn quickly
To arrive at accurate answers under pressure. Also measures ego & Empathy
Habitual Characteristics
Attitude, personality & interest tests.
Personality test is mainly used to identify persons with abnormal personalities
Psychological Testing
Interest Tests Used when two people have equal ability
Assumption: Interests are constant
Achievement Tests
Used to determine how much individuals know about a subject
Achievement tests can assess the knowledge applicants posses in such areas as the product, marketing channels & customer relations
Psychological Testing
Psychological Testing
• All tests have their own limitations
• Faking is one of the major reasons for these limitations
References Check
Generally provides information on the applicant not available from other sources
Personal contact is the best way to obtain information from references
Reference checks normally done before the final interview
References Check
Important points covered include the following:
Earnings
Position in co.
Reasons for leaving
Strengths
Performance
Interpersonal skills
Habits
Weaknesses
Physical Examination
One of the last steps in selection
Done to check whether a candidates possesses the required stamina, strength & tolerance needed under hard working conditions
Job Offer
A final decision is taken on hiring the person after considering the position, future opportunities, etc. & then a written offer is made as mutually agreed upon
Sales Force Training
Purpose & Benefits: To achieve improved performance Contributes by accelerating the process of learning
through experience Substitutes for or supplements experience Helps new sales personnel to perform their job
satisfactorily, thereby improving efficiency & reducing attrition
Continuing sales training improves job performances for both ‘ Born & made ’ sales personnel
Identifying Training needs
Analysis of three main factors
Job specification
Trainees’ background & experience
Sales related Marketing policies
Identifying Continuing TrainingNeeds
Covers experienced Sales personnel Changes in products & markets give rise to needs for
training Changes in company sales related marketing policies,
procedures & organisation Changes in working habits of sales personnel also give
rise to a need for continued training Management can also get to know the training needs by:
Salesperson’s reportsSales recordsPersonal observation
Training Content
Initial Sales Training programme normally covers all important aspects of performance
Continuing programmes concentrate on specific aspects of the job where the sales person has deficiencies.
Initial sales training programme to cover the following main areas:
Product DataSales techniquesMarketsCompany information
Training Methods
Lecture
Personal conference
Demonstrations
Role Playing
Case discussion
On the job training
Summary
Recruitment is a continuous process Recruitment normally handled by the sales department Job description & specifications are important & need to
be clearly spelt out Sources are many & a combination is used depending
on the industry & company Formal interview is still by far the accepted method for
selection Training needs to be identified, content decided &
training to be imparted
Motivating Sales Personnel
Salesman’s Job Objectives
Care is taken in the selection of Sales PersonnelTraining imparted so that the Salesman
acquires the necessary skills required for his performanceJob Objectives are clearly outlinedEducation, Experience & Training – Help
achieve the job objectives
Motivation
Some are self starters
What causes the salesperson to expend the necessary effort ?
Behavioural concept called Motivation
Most Sales Personnel require Motivation
Motivation
Motivation is a goal-directed behaviour aimed toward achieving given results, which in turn, provide rewards in line with the goal
Also defined as an individual’s willingness to exert effort to achieve the organisation’s goals while satisfying individual needs
Needs & Desires
Needs: Lack of something that reaching the goal could satisfy
Desires: Suggests positive ardour & strength of feeling
Expending effort on each activity making up the sales job leads to some level of achievement on one or more dimensions of job performance.
Drive & initiative with Direction
Quality of effort- Intensity
Persistence to expend effort to meet or exceed objectives
Motivation
Motivation can be
Intrinsic
Motivated Internally
Extrinsic
Someone provides the Motivation.
e.g. Pay, Promotion or recognition.
Some may be both Intrinsically as well as Extrinsically Motivated.
Reasons for Motivation
Inherent nature of the sales job
Salesperson’s Boundary Position & Role Conflicts
Tendency towards Apathy
Maintaining a Feeling of Group Identity
Inherent Nature of the Sales Job
Will have to deal with different kinds of people – some are rude & difficult to deal with
Work round the clock
Sacrifice a lot of personal life
Travel a lot – Sometimes during odd hours away from family & friends
Salesperson’s Boundary Position &Role Conflicts
Conflict of Identification:With customerWith company at office
Advocacy conflict:Advocates the customer’s position to
other groups in the company Conflict due to salesperson’s dual role:
Sometimes paid on the basis of sales volume May be selling a product whose
usefulness is limitedRole conflict on sales force morale can be reduced by
improving sales training & revising selection criteria
Tendency towards Apathy
Some cover same territory & virtually the same customers every year
Lose interest & enthusiasm Believe that good salesmanship is no longer
necessaryCompeting salesman succeeds using different
selling techniquesAdditional motivation therefore required to
maintain enthusiasm & to generate interest in the work
Maintaining a feeling of GroupIdentity
Working alone, finds it difficult to maintain a feeling of Group Identity
Team spirit is weak
Sales Management tries to bring in a cooperative endeavour
Need Gratification & Motivation
All human activity – is directed towards satisfying certain needs – reaching certain goals
Individuals seek to fulfill different sets of needs in different ways
Different motivational patterns & amounts & types of efforts they exert in performing their jobs exist
Individual’s behaviour depends upon the nature of their fulfilled & unfulfilled needs – based on their environmental & social backgrounds
Needs are primary & secondary
PrimaryFood, water,
rest sleep, sex & so on
Secondary
Safety & security, Belongingness, social relations, self esteem, self respect
Maslow’s Hierarchy of Needs
Self Actualisation Needs
Esteem Needs
Belongingness & Social Relations - Needs
Safety & security Needs
Basic Physiological Needs
Maslow’s Hierarchy of Needs
For some salespeople, order may be slightly different
Individuals continuously try to fulfill even larger portions of their need structures
Unsatisfied portions exert the strongest motivational pull
Motivation – Hygiene Theory –Frederick Herzberg
Hygiene needs:Working environmentCompensationFringe benefitsType of supervisionThe presence of these factors provide no
motivation but the absence causes dissatisfaction
Motivation – Hygiene Theory –Frederick Herzberg
Fulfilling the hygiene needs leads to the achievement of a neutral point known as ‘ A fair day’s work’
Performance at this point does not result from motivation The individual becomes ripe for influence by the
motivation factors. Motivation factors:
Achievement
Recognition
Advancement
Work itself
Growth potential
Responsibility
Two Implications for SalesManagement
Job to provide conditions that prevent job dissatisfaction – Hygiene factors
Management must provide opportunities for achievement, recognition, responsibility & advancement.
Achievement – Motivation Theory –David Mc Clelland
Person has a high need for achievement ‘Need for achievement’ – is a motivation to
exceed some standard of quality in personal behaviour
Individual is self - motivatedSelf – startersConstantly challenge themselves to improve
their own performancesRequire right kind of job environment
Expectancy Model – Vroom
Individual Needs (Goals)
OrganisationalRewards / Punishments
Individual
Performance
IndividualBehaviour(Effort)
Perceived Perf. Rewards
/ Punishments Relationship
Perceived
Effort-Performance
Relationship
Recycling
Expectancy Model – Vroom
Individual’s desire to produce or act at a given time depends on his specific goals & perception of the relative worth of performance alternatives as paths to attainment of these goals
Individual also looks at the rewards / punishments -whether appropriate for that kind of performance & to what extent it will satisfy his needs / goals
Model concerned with expectations for Sales management
Such sales personnel need counselling & support
McGregor’s Participation ModelTheory “X” & Theory “Y”
Theory X Theory Y
Direct efforts
Motivate them
Control their actions
Modify their behaviour to fit organisational needs
Pertains to unskilled & uneducated human workers
People are Creative.
Self Fulfillment.
Ego Satisfaction.
Satisfaction of the social needs of
Individual workers.
For skilled & Educated human workers.
Theory “Z”- a Hybrid ModelWilliam Ouchi
Integration of American & Japanese management practices.
Adopted for analytical & Promotional purposes.Salient FeaturesStrong Bond between co. & employees.Employee’s participationMutual trust. Integrated Org.Human Resources development.
Interdependence & Motivation
Salesman depends on the supervisor for reaching his individual goals
Superior depends on the salesman to achieve the organisation goals
Therefore the relationship between a salesman & his superior is one of interdependence
Usual situation in sales force – superior relationships is one of partial dependence
Each salesperson has a ‘zone of acceptance’ a range over which he or she accepts directions from the superior
Interdependence & Motivation
Each superior has a similar zone over which he or she honours requests from the salesperson
Within their respective zones of acceptance, too, both the salesperson & the superior exhibit a ‘degree of acceptance’ that varies – from grudging acquiescence to enthusiastic cooperation
The sales manager should try to widen the zone & increase the degree of acceptance of each salesperson
Interdependence & Motivation
Through effective supervision, the sales manager satisfies many of the salesperson’s needs & at the same time obtains fuller cooperation from them by:
Giving due credit for good workConvincing each salesperson of his job
importance Earning the sales personnel’s
confidence in his leadership Following other enlightened supervisory
practices Under this sort of supervision, sales personnel work
hard to earn praise & recognition & the resulting social approval, esteem & self respect
Other means of Motivation
Show leadership
Establish good communications
Interpersonal contact
Motivational Interviews
Written communications
Career Stage Characteristics
Exploration Establishment MaintenanceDisengagement
Career concerns
Right occupation
Successfully establishing a career in a
certain occupation
Hold on.
Reassures career
Look for re direction
Completing one’s career
Sl.
1.
Career Stage Characteristics
Exploration Establishment MaintenanceDisengagement
Dev. Broader view of work & org.
Maintain high performance level
Motivational needs – Job related
Learn skills
Become a contributing member
Using skills to produce results
Adj. to working with greater autonomy
Establish strong self identity outside of work
Maintain acceptable pref level
Sl.
2.
Career Stage Characteristics
Exploration Establishment Maintenance Disengagement
Maintain motivation
Facing concerns about aging
Personal challenges
Establish a good initial professional self concept
Producing superior results –looking for promotion
Acceptance of career accomplishments
Sl.
3.
Career Stage Characteristics
Exploration Establishment Maintenance Disengagement
Security Helping younger Colleagues
Physiological Needs
Support peer acceptance, challenging position
Achievement Esteem Autonomy Competition
Detachment from the org. & org. life
Sl.
4.
Motivating Sales Personnel
Sales Contests.
Sales Conferences & Conventions.
Sponsorships towards Training Programmes.
Reward & Recognition.
Compensating the Sales ForceCompensation
A Sales Compensation Plan is an essential part of the total programfor motivating sales personnel.
A well designed compensation plan gives returns both for the company & its sales personnel.
Normally a well laid out plan is in place.
Two situations where overhaulings done :1.0 Sales Force has low morale due to a poor compensation plan.2.0 The company is anticipating the cultivation of new &
different markets.
Requirements of a Good SalesCompensation Plan
1. Provides a Living Wage in the form of a secure income.
2. Fits with the rest of the Motivational Program.3. Plan is fair- within the limits of seniority. Sales
Personnel receive equal pay for equal performance.
4. Easy for sales personnel to understand and calculate.
Requirements of a Good SalesCompensation Plan
5. Plan adjusts pay to changes in performance.
6. Plan is economical to administer.
7. Plan helps in attaining the objectives of the sales organisation.
Devising a Sales CompensationPlan
Define the Sales job.
Consider the company’s General Compensation structure.
Consider compensation patterns in Community & Industry.
Determine compensation Level.
Compensation Elements
Fixed Salary- to provide stability of Income.
Variable element- Commission, Bonus etc as an incentive.
Fringe Benefits- Paid vacations, Life Insurance, Pensions etc.
Expense Allowances or Reimbursement of Expenses.
Types of Compensation Plans
Straight Salary.
Straight commission.
Combination of Salary & Incentive Plan.
Elements of a Good CompensationPackage
1. Basic Salary.
2. City Allowance.
3. Accommodation.
4. House Rent allowance.
5. Medical Reimbursement.
6. Insurance—Medical / Accident / Group
7. Transport Reimbursement.
Elements of a Good CompensationPackage
8. Education Reimbursement-Self.
9. Entertainment Exp.
10. Uniform Allowance.
11. Meals allowance.
12. LTA
13. Retirement Benefits- Superannuation
14. Vehicle Allowance.
15. Home Loan.
Conclusion
Sales Compensation Plan is an essentail part of the total program for Motivating Sales Personnel.
Basic sales compensation elements should be in amounts large enough to provide the living wage.
Fringe benefit elements need to be chosen and administered carefully.
Good sales compensation policies attract promising recruits and encourage satisfactory performers to remain in the job.
Reduces time and effort devoted to other aspects
of sales force management.
Monitoring of Sales Force Working
Monitoring of Sales Force working
Establish Performance Standards.
Record Performances.
Evaluate Performances against the set standards.
Take Action.
Sales Evaluation Programme
Structure, design & scope varies from firm to firm.
Consumer / IndustrialExport / Domestic / Govt.Size of Sales force
Sales Force monitoring may be informal as well as formal.
May be simple or complex.However be realistic in nature to achieve the
organisational objectives
Sales Evaluation Programme
Objective must be to improve sales.
Scope of an evaluation programme must be more to find out why one is not able to perform & take corrective actions
Evaluation programme must be positive in nature
Principles of Sales Evaluation
Should be pragmatic
Transparent in nature
Realistic
Positive in spirit
Informative
ParticipativeObjective FlexibleSpecificCost effectiveShould be a means & not an end
Performance Standards
Can be Quantitative as well as QualitativeTo be in line with Marketing Objectives of
the companyPolicies of Sales & Marketing
Management should be cohesive & role of Marketing should be supportiveMarketing policies should be in line with
changing market demand
Quantitative Performancestandards
1.Quotas:Expressed in absolute terms over a period of
time to a marketing unitUsed to measure sales volume, gross margin,
net profit, expenses, etc.2.Selling Expense ratio:Using the selling expense ratio, a salesman can
affect the profit by not only controlling the expenses but also making sales
Quantitative Performancestandards
3. Gross margin ratio:
Used for comparing territories
Sales of a balanced line of products is crucial
4. Territorial Market share:
Market share is compared
5. Sales Coverage:
Measures the efforts of a sales person to
convert prospects into customers
Quantitative Performancestandards
6.Call frequency ratio:
Number of sales calls to number of customers for a particular class of customers
7.Calls per day:
8.Order call ratio:
No. of orders / No. of calls
9.Average cost per call:
Salesman to make profitable calls
Quantitative Performancestandards
10.Average order size:
Used to control the frequency of calls on different accounts
11.Non- Selling Activities:
Meeting end customers
Conducting campaigns
Training of Distributors’ sales personnel, etc.
12.Multiple Quantitative Performance standards
Qualitative standards
Personal effectiveness in handling customer relations problems
Product knowledge
Relationship with customers
No. of sales calls
General attitude
PunctualityDiligenceCooperationAdaptabilityReliability, etc.
Performance & Job description
Written job Descriptions, upto date & logical to be made.
Each firm develops its own set of Qualitative criteria based upon the job descriptions.
Recording Actual Performance
System of Data collection to be set in place
Periodic review is a must
Field sales reports provide good control information
Field sales reports help Sales Management to give direction to field sales personnel
Different types of Reports exist
Supervision
Depends on the Organisation chart
Experience & Relationship – key
Summary
Objectives of Sales Department
Departmental Policies formulated
Promotional Programmes & campaigns are mapped out
Quantitative performance standards are set
Summary
Actual performance is recordedComparison made with standard set –
Qualitative & Quantitative and judgement reachedActions takenEvaluation & Supervision- both
instrumental in achieving sales force control
Sales Forecasting
Forecasting1. What is sales forecasting?
2. Factors to be considered
3. Market Decision Support System
4. Importance of Sales Forecasting
5. Approaches to Sales Forecasting
o Break Down Approach
o Build up Approach
6. Sales Forecasting Methods
o Qualitative
o Quantitative
Forecasting
7. Qualitative Methods
o Expert Opinion
o Survey of Buyer’s Expectations
o Sales Force composite
o Delphi Technique
o Historical Analogy
Forecasting
8. Quantitative methods
o Moving Averages
o Exponential smoothing
o Naïve / Ratio methodo Regression Analysis
o Test Marketing
o Trend Method
Forecasting
9. Guidelines for Selecting suitable Forecasting Method
10. How to improve Forecasting Accuracy
What is Sales Forecasting ?
An estimate of sales during a specified future period which is tied to a proposed marketing plan & which assumes a particular set of uncontrollable & competitive forces
Cundiff & Still
Factors to be considered
Market PotentialMarket forecast Growth rate in the categoryMarket share of the firmSales PotentialSales forecast Sales BudgetSales Quota
Market Decision Support System
Organisation to have a well designed Marketing Decision Support System
System to provide faster, less expensive & more complete information for ‘Sales Management’s decision making
High value information
Importance of Sales Forecasting
Impact on supply chain & value chain management
Logistics, inventory, production process, etc. planning can be regulated
Final output inventory can be regulated depending on the sales patterns in the market
If not done properly – leads to higher inventory –increasing the cost of the product & affects
profits
Importance of Sales Forecasting
A good sales forecast helps in:
Formulating & maintaining a production schedule
Determining the company’s business & marketing plan, growth strategies & the marketing offer
Approaches to sales Forecasting
Break down Approach ( Top Down )
Build up Approach ( Bottom Up )
Break down approach
General environmental Forecast
Industry Sales Forecast
( Market Potential)
Company Sales Forecast
Sales Forecast for the Product lines
Sales / Mktg. Manager’s Forecast for Regions, Branches, Territories & Customers
Build Up approach
Combined into Company Sales Forecast
Combined into Regional / Zonal Sales Forecasts
Combined into Area / Branch Sales Forecasts
Salesperson’s Sales Forecast of individual customers
Step 4 :
Step 3 :
Step 2 :
Step 1 :
Qualitative
Intuitive
Subjective
Judgemental
Used when little or no historic data isavailable – Horizon – Above 3 years
Qualitative
Qualitative Methods
Survey of buyer’s expectations
Expert Opinion
Sales Force Composite
Delphi Technique
Historical Analogy
Expert opinion
Services of Experts used
oMarketing Professionals
oDistributors / Dealers
oProfessional Bodies / Associations
oMarketing Consultants
Validity Questionable
Survey of Buyer’s Expectations
Also called as Market Research or Market Survey
Existing & Potential customers are asked about their likely purchases of the company’s product & services for the forecast period
Info. collected from buyers help the company to make effective decisions not only in sales & marketing areas, but also on Product, Research & Development
Forecasts based solely on this method tend to be overly optimistic
Sales Force Composite
Example of ‘grass roots’ or ‘bottom – up’approachOften used by industrial or business
marketing companiesSales representatives make the sales
estimate in consultation with customers & sales superiors & / or based on their experience & intuition
Sales Force Composite
Company sales forecast is made up (composite) of all the salesperson’s sales forecast
To encourage better forecasting, salespeople are given info. on their past forecast with actual sales
Discussions take place at different levels & cascaded upwards to arrive at the final forecast
Delphi Technique
Method similar to & improvement over the Executive opinion method
Panel of experts from within & outside the organisation is selected
Delphi coordination is also selected
Each member submits his / her forecast in writing anonymously
Delphi Technique
Coordination summarises these forecasts into a report that is sent to each panel member
Experts asked to make another prediction separately with the knowledge of the forecasts of the other experts
Process repeated until they arrive at some consensus
Process aims at gradual reduction of the variability in the forecasts
Historical Analogy
Used for forecasting the demand for a product or service for which there is no past demand data
Organisation might have marketed other products earlier with features similar to those of the new product
Marketing personnel use the historical analogy between the two products & derive the demand for the new product using historical data
Quantitative Methods
Moving Averages
Exponential smoothing
Naïve / Ratio method
Regression Analysis
Test marketing
Trend Method
Moving Averages
Relatively simple method
Forecast made based on average company sales for previous years
Two to three year average used for a stable environment
For an industry with cyclical variations, a longer duration average is used
Exponential Smoothing
Closely related to Moving Averages method
Sales in certain periods to influence the sales forecast more than sales in other periods
Exponential Smoothing Equation as under:
Sales Forecast for next year:
(L) ( Actual sales this year) + (1- L)( This year’s sales forecast)
L- Smoothing constant or Probability weighing factor
L is decided based on:
Review of Sales data
Knowledge & observations about the conditions in the forecasted period & conditions in previous period
Intuition
High value of ‘L’ – Most recent periods of actual sales influences more than sales in earlier periods
Naïve / Ratio Method
Time series method of forecasting
Assumption: What happened in the immediate past will continue to happen in the immediate future
Sales forecast for the next year:
Actual sales of this year * Actual sales of this year Actual sales of last year
Regression Analysis
Statistical Forecasting Method used to predict sales
If one independent variable, it is called linear (or simple) regression
SALES
SALES
Promotional Exp. Price xx
y y
Regression Analysis
In practice, co. sales influenced by several independent variables, price, promotional expenditure, population, etc.
Method used: Multiple Regression Analysis
Test Marketing
Useful for forecasting sales for a new product Can also be used for estimating sales for an
established product in a new territory Major methods are:Full – blown test marketsControlled test marketingSimulated test marketing
Test Marketing
For industrial products:
Alpha Testing (Within the co.)
Beta testing (Outside the co.)
Participation in trade - shows
Trend method
Forecast based on past patterns of dataData collected, observed & recorded at
regular intervals of timeHistorical correlation of sales levels over
time is studied.Sales Manager can identify a trend & find
a general indication of the possible continuation of the time series
Trend method
Time Series Analysis done in 4 ways:
Changes due to general tendency known as secular movements
Changes during a period of 12 months as a result of change in climate, weather conditions & festivals – termed as seasonal variations
Trend method
Changes as a result of booms & depressions – cyclical variations
Changes due to unpredictable forces –floods, earthquakes, etc.
Classified as irregular or erratic variations
How to improve ForecastingAccuracy
Use multiple forecasting Methods
Identify suitable methods
Develop a few factors
Obtain a range of forecasts
Use computer hardware & software tools
Quotas & Territory Management
Quotas & Territory ManagementQuotas1. Definition2. Objectives in using Quotas3. Procedure for setting Quota4. Types of sales Quota
o Sales volumeo Budget o Activityo Combination
5. Methods of setting Sales Quota6. Setting & Administration of Sales Quota7. Conclusion
Definition & What it means
Quotas are Quantitative Objectives assigned to Sales Organisational unitsEg: Individual Sales personnelQuotas specify desired performance levels
for : Sales volume Budgeted items as expensesGross margin / Net margin
Definition & What it means`
Quotas are also set for middle men such as Agents, Wholesalers & Retailers
Quotas have a time dimension
Quotas are devices for directing & controlling Sales Operations
Objectives in using Quotas
1. To control the sales effort
2. To provide Quantitative Performance Standards
3. Used in appraising performances
4. Sales control is tightened through setting of Quotas on expenses & profitability of Sales volume
Objectives in using Quotas
5. Expenses capped as a percentage of Sales Volume
6. To motivate personnel to achieve desired performance levels
7. Quotas to be attainable goals, achievable with justifiable pride
Objectives in using Quotas
8. Companies use Quotas to set sales contests. A ‘common denominator’feature is thus built into a contest
9. Helps to identify weak areas / sales people so that attention can be given to achieve the desired goals
10.Serves as a self supervisory mechanism in the organisation
Procedure for setting QuotaThree steps to be followed for Quota setting
Schedule Planning
Conferencing with each salesperson
Arriving at a summarised written quota statement
Meetings have to be formal, structured & run with scheduled discussion
Written & accepted goals become a
document of understanding for all purposes
Types of Sales Quota
Quotas fall into four different categories
Sales Volume
Budget
Activity
Combination
Sales Volume
Sales volume Quota communicate the Organisation’s expectations in terms of what amount of sales – what period
Sales can be in units or value or point sales Quotas can be set for geographical
territories, different product lines, different marketing intermediaries or a combination
In the ‘Points’ method, money or unit salesis converted into ‘Points’ as per norms set
Budget Quota
Budget Quotas are set to control expenses, gross margin or net profitExpense Quotas emphasise keeping
expenses in alignment with sales volume, thus indirectly controlling gross margin & net profit contributionsSales expenses are also controlledSometimes ‘contribution’ targets are set
Activity
Non – selling activities are set
Sales calls, missionary calls, product demonstrations, displays, road shows, etc.
Insurance, Pharma are examples
Adequate supervision & close contact with sales personnel are administrative necessities
Combination
Combination Quotas control performance of both selling & non – selling activities
Eg: Sales target of 1000 units, 20 new key accounts, identifying 100 prospects & bringing back 50 lost customers
Methods of setting Sales Quota
Based on:
Sales Forecasts & Potentials
Forecast without regard to Potential
Past sales or Experience
Executive Judgement
Salespeople Judgement
Compensation
Setting & Administration of SalesQuotas
Good Quotas are accurate, fair & attainable
Setting a fair Quota involves determining the proper blend of sales potential & previous experience
Management must make certain that sales personnel understand quotas & the quota setting procedure
Setting & Administration of SalesQuotas
Quotas setting method should be simple enough for sales personnel to understand, yet sufficiently sophisticated to permit acceptable accuracy
Sales personnel to be involved in Quota SettingSales personnel to be frequently informed about
their progress during the period Flexibility in administering the system is
important – If a quota is proving unrealistic, it should be adjusted
Conclusion
Quotas are Quantitative Objectives assigned to sales Personnel & other units of the selling organisationIntended to stimulate performance & also
to evaluate it – Performance measuresSpecial pains are taken in setting up
Quotas, using sales potential, planning data from sales forecast & sales budget
Conclusion
Sound judgement required for carrying out intermediate changes within a year
Requires continuous managerial review
When intelligently administered, Quotas are effective devices for directing & controlling Sales operations
Sales Territory Management
Sales Territories
1. Introduction
2. Sales Territory Concept
3. Reasons for establishing Sales Territories
4. Procedures for setting up or Revising Sales Territories
5. Assigning salespeople to Territories.
6. Managing Territorial coverage.
Introduction
Territorial assignments lend direction & control of sales operations
Establishment of sales territories facilitates Selling efforts with sales opportunities
Company consciously deploys people in territories with the knowledge of their strengths & weakness. Company attains a competitive position
Breaking down the total market into smaller units makes control of sales operations more effective
Comparisons of performances with sales opportunities present in each territory provide sound basis for
appraisal
Sales Territory Concept
Sales territory is a grouping of customers & prospects assigned to an individual salesperson
Products like, Insurance, Investment securities, automobiles, etc. – do not require geographical division of territories
Complex products require salesman to be specially trained & hence difficult to divide the area geographically
Generally in India, Geographical grouping of territories is followed for most products /
services
Reasons for Establishing orRevising Sales Territories
Major reasons are:
1. Increase market coverage
2. Control Selling Expenses
3. Better evaluation of sales force performance
4. Contribute to sales force morale
5. Aid in the coordination of Personal –Selling & Advertising efforts
1. Increase Market coverage
Design of territories should permit sales personnel to cover them conveniently & economically
Work load should be reasonable
Sales personnel should have sufficient time to spend with customers – less time on the road
Should be able to visit customers at the desired frequency
2. Control Selling Expenses
Design should be such that you have low selling expenses & high sales volumes
Sales personnel to spend fewer nights away from home
Customers or towns requiring frequent visits should be closer to the Headquarters
3. Better Evaluation of SalesPersonnel
Selling problems vary geographically & impact of competition differs widely
Depending on company’s strengths & weaknesses in different areas, appropriate adjustments can be made in selling strategies
Quotas can be set depending on Sales, market share, etc. & evaluation can be done accordingly
4. Contribute to Sales Force Morale
With good designing of territories, sales force’s workload is reasonable
All know what Management expects from themGood design plus assignment of sales force
done intelligently – results in making each person productive besides making him earn high, build up his self – confidence & also results in job satisfaction
Good design makes them spend less time travelling & helps in boosting their morale
5. Aid in coordination of PersonalSelling & Advertising
Sales personnel take ownership of Territory & customers
Ensure participation of customers in key promotional programmes
Certain promotions call for dealers to share costs & sales person plays an important role in coordination
Procedure for Designing SalesTerritories
1. Select geographical territorial base, also called control unit.e.g. City, Dt., town etc.
2. Find Sales Potential of Present & Prospective customers in each control unit.
3. Estimate the total sales potential for all customers in each control unit.
4. Decide on basic or fundamental territories using
Build up Method. Break down method.
Procedure for Designing SalesTerritories
Build Up MethodEqualises work load.Used by manufacturers of Industrial Products &
Services orBy customers that want selective distribution
strategy.Break Down methodEqualises sales Potential of territories.Generally used by manufacturers of consumer
products.
Build Up Method
Decide call frequencies.
Calculate total no. of calls in each control unit.
Estimate work load capacity of a sales person.
Make tentative territories.
Develop final territories.
Break Down Method
Estimate company sales potential.
Forecast sales potential for each control unit.
Estimate sales volume expected from each sales person.
Make tentative sales territories.
Develop final territories.
Assigning salespeople toTerritories
Consider salesperson’s competence / ability.
Consider salesperson’s effectiveness in a territory.
Marketing objectives for the territory.
Strength of main competitor in the territory.
Competence / Ability
Product Knowledge.
Market Knowledge.
Past Performance.
Selling skills.
Overall skills.
Effectiveness
Social, cultural characteristics.
Local language & customs.
Comfort level & Effectiveness with the customers / territory.
Managing Territorial Coverage.
Planning of efficient routes.
Scheduling salesperson’s time.
Use of Time Management tools.
Advertising
Advertising Decisions
1. Role of PM in Advertising2. Target Audience3. Advertising Objectives4. Advertising & Marketing Mix5. Advertising Budget6. Evaluating ad copy7. Media Selection8. Evaluating Advertising Effects9. Summary
Role of PM in Advertising
1. Identifying Target Audience
2. Advertising Objectives
3. Setting the Budget
4. Developing the general Advertising Strategy
5. Working closely with the ad Agency
6. Media Plan
7. Carry out an evaluation on the plan executed
Target Audience
PM already has a Marketing Strategy in place Product & segment are identifiedTarget audience is now finalised Industrial Products may have a larger target
audience who can be the decision makersAll need to be addressed
Target audience may be selected based on Product behaviour & in specific terms that facilitate media planning
Advertising Objectives
Customer: For a new product, the objective is to increase
awareness & spread knowledge about the product To increase sales & profits To generate leads for conversion Direct response ads – to get immediate benefit To increase awareness, create interest, positive
attitude & induce intention to buy the product To shorten cycle time between Advertising & Buying Strategic Advertising Objectives may be to differentiate
between High Involvement and Low Involvement Decisions
Advertising Objectives
Exposure: Reach Frequency Gross Rating Points Target audience to be linked to the aboveOther objectives: Ads to specify objectives Incentives from 40% to 60% Improve attitude by 1 point in a 7 point scale Increase consumption by ___ % Reach 80% Target audience during a time period
Advertising & Marketing Mix
According to Frank Jefkins, Advertising is related to different elements of Marketing Mix as follows:
• Volume, emphasis & timing of an advertisement depends on the stage of the PLC
• Marketing research will throw light on motives, preferences & attitudes which can help in deciding on the theme & the media
• Branding shall play an important part in advertisement design
• Desired Product Image can be projected by an Advertisement
Advertising & Marketing Mix
5. Marketing segment will decide the tone or style of advertising & the choice of Media
6. Pricing plays an important role in the formulation of the copy
7. Packaging - when projected – is itself a form of advertisement to identify the product at the point of sale
8. Distribution – Participation in exhibitions9. Maintenance of customer interest & loyalty achieved
through repeated advertisements10.Even test marketing – will require a small advertising
campaign
Relationship Between Reach &Frequency
Reach: It is a measure of how many prospective customers the
typical advertisement is able to reach No. of distinct target market members who are exposed
at least once to a media vehicle in a given period of timeFrequency: The average no. of times, the target audience was
exposed to a message in any medium As frequency increases, Effective Reach decreases Marketer may choose media with smaller audience &
insert the advertisement more frequently or vice versa
Advertising Budget
Advertising is in many ways an investmentMarketing oriented firms view advertising
as a long term investment in the BrandPM needs to estimate quantitatively the
impact of advertising on Sales & ProfitsPM needs to determine optimal spending
levels analytically for a simple model or by trial & error
Advertising Budget
1. Budgeting by Objectives: PM first decides on advertising objectivesTarget audience, Reach & Frequency
Plan & consequently Budget is made2. % of sales: Convenient & safer Useful starting point for trying to put together a
budget from scratch3. Competitive Parity: Based on Market share Higher the market share, lesser the spend4. Affordable: Depends on level of sales However, company tends to spend less
Advertising Budget
Points for consideration1. Higher the market share, higher should be the
spend to protect it.2. New products require higher ad support3. Markets growing at 10 % or more annually, require
higher than average ad investment4. Increase ad budget if your production is less than
two thirds of your capacity5. Higher quality products generally require higher ad
spending6. Standard, off the shelf products need more support
than customised products
Evaluating Ad copy PM should be involved in testing the Ad campaign
before a substantial amount of money is committed to it.
Lab tests are done to evaluate Ads & these have a very high internal validity. Environment is controlled.
Disadvantage : Situation is not realistic Other tests include :
Consumer JuryPortfolio Tests- Portfolio of Ads shown &
feedback obtained.Readability Tests- For print audiencePhysiological Methods- For TV commercialsTheater Tests
Media Selection
Media Plan is often left to the AgencyMain factors are : Where and WhenWhere Matching the Media to the Target Audience Foll. Factors are considered during selection:
Language Rating & circulation figures Cost
Choice of general media fit & Ad context should also be examined.
When Seasonality & Spending pattern Depending on the product, the Ad campaign may start prior to
the season / event Studies have found that Ad spending during the early life cycle
is more effective.
Evaluating Advertising Effects
Very little effort is spent in assessing the result / effect of advertising
1. Tracking studies:A set of simple surveys carried over a
period of time to get ‘Top of mind’ recall on the advertisements Focus is more on the objectives than on
sales
Evaluating Advertising Effects
2. Post sales Advertising:
Past advertising & sales are used for comparing the effect of the recent campaign
3. Evaluation on objectives:
PM’s goals on different objectives is evaluated separately before & after the campaign
Summary
Selection of Target Audience is Primary.PM should have the objectives very clearly laid
out in line with the Marketing PlanAd Budgets should be made using the
guidelines with Sales, Profits & Brand Building in mind.
Coordination with the Ad agency & choice of Media Plan to achieve the objective is also an important activity of the PM
Evaluation, before and after the Plan is a must.