Marketing management

Course Material
Marketing Management
Prepared by
Ahmed Sabbir
Evening MBA Program,
Patuakhali Science & Technology University, Dumki, Patuakhali

Marketing Management, Course-MKT-309 Prepared by Ahmed Sabbir 2 |
Unit-I
Marketing Management: Introduction
1.1 Defining Marketing
Marketing is the delivery of customer satisfaction at a profit-it is the simplest definition.
The two fold goal of marketing are-
 To attract the new customers by promising superior value and
 To keep current customers by delivering satisfaction.
Marketing is an organizational function and a set of processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders.
1.2 Marketing Management
Marketing management is defined as the art and science of choosing target markets and
getting, keeping, and growing customers through creating, delivering, and communicating
superior customer value.
1.3 A broadened view of Marketing Tasks
Marketers are responsible for demand management, not creation of demand. A marketer
has to take into consideration different types of demand for his product before he comes up
with a strategy.
Eight different states of demand
1) Negative demand: If consumer dislikes the product and may even pay a price to avoid
it. For example, vaccinations, Dentist, many people avoid seeing the dentist.
Associated marketing task: The marketing task is to analyze the reasons for this dislike
and to find out whether a marketing program consisting of product redesign, lower
prices, and more positive promotion could change the customers belief and attitude.
Marketing approach is Conversational marketing.
Negative demand can be a positive one by doing:
 Try to create awareness rather than promotion.
 Inform the customers about the importance of your products.
2) Non-existent demand/No demand: Customers are unaware or uninterested in these
types of product.

Example: For example demand of boat in a city, where there is no lake or river or
farmers may be not interested in new farming method, or family planning is a non-
existent demand for rural people.
Associated Marketing Task: The marketing task is to find ways to connect the benefits
of the products to the person’s natural needs and interests. The task of marketing then
becomes one of stimulating demand for that product.
Technique: The marketing technique may be called stimulating marketing.
3) Latent demand: Many consumers may share a strong need that cannot be satisfied by
any existing product.
Example: Harmless cigarette, more fuel efficient car.
Task: The marketing task is to measure the size of the potential market and develop
effective goods and services that would satisfy the demand.
Technique: Developmental marketing– develop a marketing mix that announces the
product and stimulates demand for trial.
4) Declining demand: When demand for a product is declining day by day. The marketer
must analyze the causes of market decline and determine whether demand can be re-
stimulated by finding new target markets, changing the products features or
developing more effective communication. The marketing task is to reverse the
declining demand through creative remarketing of the product.
For example Cosco soap, CD Players, Walkman or mechanical watches. etc.
Associated marketing approaches are-
 Re-marketing
 Re-branding
 Re-positioning
5) Irregular demand: Demand varies on a seasonal, yearly, monthly, daily and even
hourly basis.
Example: For example, an umbrella, tourist spot, petroleum jelly, ice cream, etc.
The marketing task, called synchro marketing, is to find ways to alter the time pattern
of demand through flexible pricing, promotion and other incentives.
6) Full demand: Adequate demand for a product all over the year. Organizations face full
demand when they are satisfied with their volume of business. This is an ideal situation.
For example, medicines, soap etc.
Marketing tasks:
i. Maintain the current level of demand in the face of changing consumer preference.
ii. Maintain and improve the products quality and continuously measure consumer
satisfaction.
Technique: Maintenance marketing- develop a marketing mix that reinforces and
reminds customers why they follow or are loyal to the brand.

7) Overfull demand: Excess demand of a product. That means organizations face a
demand level that is higher than they can or want to handle. For example, electricity in
the summer, at the time of Eid, the price of train and bus ticket increase because of
artificial stock created by the sellers.
Task: Reduce demand
The marketing task called Demarketing, requires finding ways to reduce the demand
temporarily or permanently. General marketing and reducing promotion and service is
one way of handling this situation.
8) Unwholesome demand: Product that have undesirable social consequence i.e., not
acceptable by the society.
Example: Cigarettes, hard drinks, alcohol.
The marketing task is to help people give up the habit by using such tools as fear
communications, price hikes, and reduced availability.
Task: Destroy demand
Technique: Counter marketing, a marketing mix that emphasizes the downside of
product use and the benefits or product abandonment, public service announcements.
1.4 Key customer markets
1. Consumer Markets: consists of final consumers (who purchase for final
consumption)
2. Business Markets: who purchase of reselling or further processing.
3. Global Market: Companies in the global marketplace must decide
- which countries to enter;
- how to enter each (as an exporter, licenser, joint venture partner, contract
manufacturer, or solo manufacturer);
- how to adapt product and service features to each country;
- how to price products in different countries; and
- How to design communications for different cultures.
4. Nonprofit and Governmental Markets: consists of non-profit organization and
government. For example, churches, universities, charitable organizations, and
government agencies.
1.5 Market, Market Place, Market Space and Meta Market
 Market-Traditionally, a “market” was a physical place where buyers and sellers
gathered to exchange goods. Market is defined as set of actual and potential
customer.
 Market Place-Physical market.
 Market space-digital market. i.e., when one goes shopping on the Internet

 Meta Market-describes a cluster of complementary products and services that are
closely related in the minds of consumers but are spread across a diverse set of
industries. The automobile meta-market consists of automobile manufacturers, new
and used car dealers, financing companies, insurance companies, mechanics, spare
parts dealers, service shops, auto magazines, classified auto ads in newspapers, and
auto sites on the Internet.
1.6 Core Marketing Concepts
Customer Needs, Wants, and Demands
 Needs: Needs are states of felt deprivation. They include basic physical needs for
food, clothing, warmth, and safety; social needs for belonging and affection; and
individual needs for knowledge and self-expression. These needs were not invented
by marketers; they are a basic part of the human makeup. When needs is not
satisfied, people will try either to reduce the need or look for an objects that will
satisfactory.
 Wants: Wants are the form human needs take as they are shaped by culture and
individual personality. An American needs food but wants a hamburger, French
fries, and a soft drink. A person in Mauritius needs food but wants a mango, rice,
lentils, and beans. A person of Bangladesh needs foods but wants rice, fishes and a
glass of water. Wants are shaped by one's society and are described in terms of
objects that will satisfy needs. Wants are describes in terms of objects that will satisfy
needs.
 Demand: Human wants that are backed by buying power is defined as demand.
People have almost unlimited wants but limited resources. Thus, they want to
choose products that provide the most value and satisfaction for their money. When
backed by buying power, wants become demands.
Target Markets, Positioning and Segmentation
 Segmentation: Market segmentation involves dividing a market into distinct
groups of buyers who have different needs, characteristics, or behaviors and who
might require separate marketing strategies or mixes.
 Target Market: Consists of evaluating each market segment’s attractiveness and
selecting one or more market segments to enter. Market targeting is nothing but
selecting the best profitable segment
In India, Tata Motors launched Tata Nano especially for the lower income group.
 Market Positioning is arranging for a product to occupy a clear distinctive and
desirable place relative to competing products in the minds of target consumers.
For example,
 Pepsodent-long lasting protection from germs
 Close up-for fresh breath and whiter teeth

 Dutch Bangla Bank-Card based banking
 Brac Bank-SME Loan
 Differentiation: Actually differentiating the market offering to create superior
customer value.
It is the process of distinguishing a product or service from others to make it more
appealing to a specific target market. For example-features, warranty, performance
etc.
Value propositions differentiate one brand from another.
Value proposition is set of intangible benefits offered to the customer.
Offerings makes value proposition physical.
Offerings and Brands
Offerings means product.
Offering are products and services designed to deliver value to customers—either to fulfill
their needs, satisfy their “wants,” or both. The 10 basic offerings of goods, services,
experiences, events, persons, places, properties, organizations, information, and ideas.
Offerings for target buyers, delivering some central benefit(s).
Brand
A brand is an offering from a known source.
A brand name such as McDonald’s carries many associations in the minds of people:
hamburgers, fun, children, fast food, and golden arches. These associations make up the
brand image. All companies strive to build a strong, favorable brand image.
Value and Satisfaction
Value is a ratio between what the customer gets and what he gives.
Benefits
Value=----------------
Costs
Satisfaction: Judgment of a product’s perceived performance with expectation.
 If the product’s performance falls short of the customer’s expectations, the buyer is
dissatisfied.
 If performance matches expectations, the buyer is satisfied.
 If performance exceeds expectations, the buyer is delighted.
Marketing channel:
To reach a target market, the marketer uses three kinds of marketing channels.

 Communication channels deliver messages to and receive messages from target
buyers. They include newspapers, magazines, radio, television, mail, telephone,
billboards, posters, fliers, CDs, audiotapes, and the Internet.
 Distribution channels to display or deliver the physical product or service(s) to the
buyer or user.
 Service Channel-through which carry out transactions with potential buyers. For
example, Banks, Insurance etc.
Marketing Environment
The marketing environment is made up of the internal and external environment of the
business. While internal environment can be controlled, the business has very less or no
control over the external environment.
Internal Environment
The internal environment of the business includes all the forces and factors inside the
organisation which affect its marketing operations. These components can be grouped
under the Five Ms of the business, which are:
 Men
 Money
 Machinery
 Materials
 Markets
The internal environment is under the control of the marketer and can be changed with the
changing external environment.
External Environment
The external environment constitutes factors and forces which are external to the business
and on which the marketer has little or no control. The external environment is of two types:
 Micro Environment: factors those are close to the company, suppliers, competitors,
management, distributors. Micro environment examples include customers, banks
and trade unions as they all interact with the firm.
 Macro Environment: In general macro environment factors are not close to the firm.
Macro environment examples include legislation, the economy (e.g. recession,
inflation, VAT changes), and technological change such as the internet. Macro
environment factors are uncontrollable factors but still influence company strategy.
Supply Chain

The supply chain describes a longer channel stretching from raw materials to components to
final products that are carried to final buyers.
1.7 Marketing Management Philosophies/Marketing Management Orientations
 The Production Concept.
The production concept holds that consumers will favor products that are available and
highly affordable. Therefore, management should focus on improving production and
distribution efficiency.
This concept is one of the oldest orientations that guides sellers.
For example, both personal computer maker Lenovo and home appliance maker Haier
dominate the highly competitive, price-sensitive Chinese market through low labor
costs, high production efficiency, and mass distribution.
 The Product Concept.
The product concept holds that consumers will favor products that offer the most in
quality, performance, and innovative features. Under this concept, marketing strategy
focuses on making continuous product improvements.
Basically this concept is about to attract the customers by improving the quality and
performance on one hand and offer attractive prices on other. Similarly the design,
packaging and effective distribution channels of product are some of the important
tactics to attract the customers.
Example-mouse trap vs. chemical spray. The important drawback of product concept
is that it can lead to marketing myopia in which the organization overlooked the
importance of other substitutes available in the industry.
 The Selling Concept:
The selling concept holds that consumers will not buy enough of the organization's products
unless it undertakes a large-scale selling and promotion effort.
This concept is typically practiced with unsought goods (those that buyers do not
normally think of buying, such as encyclopedias or insurance.). Most firms practice the
selling concept when they have overcapacity. Their aim is to sell what they make rather
than make what the market wants. Such marketing carries high risks.
It focuses on creating sales transactions rather than on building long-term, profitable
relationships with customers.
 The Marketing Concept.
The marketing concept holds that achieving organizational goals depends on knowing
the needs and wants of target markets and delivering the desired satisfactions better
than competitors do.
Under the marketing concept, customer focus and value are the paths to sales and
profits. Instead of a product-centered make-and sell philosophy, the marketing concept
is a customer-centered sense-and-respond philosophy.

Unit-II
Holistic Marketing Concept
Holistic Marketing Concept is probably the newest approach to marketing and the latest
business concept.
A holistic marketing concept is based on the development, design and implementation of marketing
programs, processes and activities that recognize the breadth and interdependencies. Holistic
marketing recognizes that ‘everything matters’ with marketing and that a broad, integrated
perspective is necessary to attain the best solution.”
Holistic marketing is based on the philosophy that everything matters in marketing.
There are four dimensions of holistic marketing.
1. Relationship marketing,
2. Internal marketing,
3. Integrated marketing, and
4. Performance marketing.
Relationship Marketing
Relationship marketing includes of building mutual satisfaction with customers long term
relationships with key parties as well as go through profit of the business.
Key parties are
• Customers-People those who are the target market for a firm.

• Channel - Suppliers, distributors
• Partner- Dealers, agencies
Relationship marketing involves cultivating the right kind of Relationship with right kind
of groups.
Outcomes of Relationship marketing is to create marketing network which consist of
customers, employees, suppliers, distributors, retailer, agencies and so on.
Integrated Marketing
 The marketer task is to device marketing activities and assemble fully integrated
marketing programs to create, communicate and deliver value for customers.
 Marketing programs are the combination of decisions on value enhancing marketing
activities to use.
 Marketing activities are related with 4P or marketing mix.
 Product
 Price
 Place
 Promotion
Two key out comes of integrated marketing are-
 Many different marketing activities are employed to communicate and deliver
value and
 All corresponding activities are coordinated to maximize their joint effects
Internal marketing
Internal Marketing is the task of hiring, training and motivating to able employees who
want to serve customers well. Internal marketing must take place on two levels-

 At one level think the various marketing function-
 Sales forcing
 Advertising
 Customer service
 Product management
 Marketing research and so on
 Another level think about the customers wants, needs, demand and satisfaction.
Performance Marketing
Performance Marketing requires understanding the financial and nonfinancial returns to
business and society from marketing activities and programs.
Performance may be of two types-
 Financial Accountability
 Environmental and legal concern.
o Social Responsibility Marketing/ Societal marketing concept is fall under performance
marketing, build social and ethical consideration into their marketing parties.
o Focus on satisfying customer needs and wants while enhancing individual and societal
well-being.
o Consider the collective needs of society as well as customer desires and the
organization’s profits.
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Unit-III
Developing Marketing Strategies and Plans
3.1 The Value chain
Harvard’s Michael Porter has proposed the value chain as a tool for identifying ways to
create more customer value.

Value Chain is a synthesis of activities performed to design, produce, market, deliver, and
support its product.
2.2 Activities of Value Chain
Nine strategically relevant activities—five primary and four support activities
The primary activities are
(1) Inbound logistics- bringing materials into the firm.
(2) operations, or converting materials into final products;
(3) outbound logistics, or shipping out final products;
(4) marketing, which includes sales; and
(5) Service means after sales service.
Specialized departments handle the support activities—
(1) Procurement,-acquisition of goods and service from outside suppliers.
(2) Technology development- pertains to the equipment, hardware, software, procedures
and technical knowledge brought to bear in the firm's transformation of inputs into
outputs.
(3) Human resource management- consists of all activities involved in recruiting, hiring,
training, developing, compensating and (if necessary) dismissing or laying off
personnel.
(4) Firm infrastructure- It refers to an organization's structure and its management,
planning, accounting, finance and quality-control mechanisms. Infrastructure covers
the costs of general management, planning, finance, accounting, legal, and government
affairs.
3.2 Corporate and Division Strategic Planning
There are four planning activities:
1. Defining the corporate mission
2. Establishing strategic business units
3. Assigning resources to each strategic business unit (SBU)
4. Assessing growth opportunities

3.2.1 Defining the corporate mission
The mission clarify the purpose of the business, what a company want to
accomplish. It defines what an organization is, why it exists, and its reason for being.
It should be market oriented or product oriented.
To define its mission, a company should address Peter Drucker’s classic questions.
 What is our business?
 Who is the customer?
 What is of value to the customer?
 What will our business be?
 What should our business be?
These simple- sounding questions are must be asked and answered by the
successful companies.
Company’s mission shaped by History (of Aims/ policies/ Achievements), Current
preferences of owners/ management, Market environment, Resources, Distinctive
competencies (company should base its mission on what it does best).
A clear, thoughtful mission statement, developed collaboratively with and shared with
managers, employees, and often customers, provides a shared sense of purpose, direction,
and opportunity.
IBBL mission Statement: To establish Islami Banking through the introduction of a welfare
oriented banking system and also ensure equality and justice in the field of all economic activities,
achieve balanced growth and equitable development through diversified investment operations
particularly in the priority sectors and less development areas of the country.
Mission Statement of Apple: “Apple is committed to bringing the best personal computing
experience to students, educators, creative professionals and consumers around the world through
its innovative hardware, software and Internet offerings.”
Mission Statement of SQUARE Pharmaceuticals: Our Mission is to produce and provide
quality & innovative healthcare relief for people, maintain stringently ethical standard in
business operation also ensuring benefit to the shareholders, stakeholders and the society
at large.
3.2.2 Establishing strategic business units
A strategic business unit, popularly known as SBU, is a fully-functional unit of a business
that has its own vision and direction. Typically, a strategic business unit operates as a
separate unit, but it is also an important part of the company.
For example, Square group has the SBUs-

An SBU has three characteristics:
1. It is a single business, or a collection of related businesses, that can be planned
separately from the rest of the company.
2. It has its own set of competitors.
3. It has a manager responsible for strategic planning and profit performance, who
controls most of the factors affecting profit.
The purpose of identifying the company’s strategic business units is to develop separate
strategies and assign appropriate funding.
3.2.3 Assigning Resources to Each SBU:
Once it has defined SBUs, management must decide how to allocate corporate
resources to each. Resources may be:
 Financial resources
 Human Resources
 Technologies
Management could decide to grow, “harvest” or draw cash from, or hold on to the
business. BCG’s Growth-Share Matrix used relative market share and annual rate
of mark growth as criteria for investment decisions, classifying SBUs as dogs, cash
cows, question marks, and stars.
3.2.4 Assessing growth opportunities
Assessing growth opportunities includes planning new businesses, downsizing, and
terminating older businesses.
If there is a gap between future desired sales and projected sales, corporate management
will need to develop or acquire new businesses to fill it.

The first option is to identify opportunities for growth within current businesses (intensive
opportunities). The second is to identify opportunities to build or acquire businesses related
to current businesses (integrative opportunities). The third is to identify opportunities to
add attractive unrelated businesses (diversification opportunities).
3.3 What is Strategic Planning Gap? Discuss the methods to fill the gaps?
Strategic Planning Gap means the gap between future desired sales and projected sales.1
Figure: The Strategic-Planning Gap
Figure illustrates this strategic-planning gap for a hypothetical manufacturer of blank DVD
discs called Cineview. The lowest curve projects expected sales from the current business
portfolio over the next five years. The highest describes desired sales over the same period.
Evidently, the company wants to grow much faster than its current businesses will permit.
There are three ways to fill the strategic planning gap:
1. Intensive Strategy:
Corporate management should first review opportunities for improving existing
businesses. One useful framework is a “product-market expansion grid,” which considers
the strategic growth opportunities for a firm in terms of current and new products and
markets. There are four strategies:
1
A sales projection is a forecast used to estimate sales for defined time in the future.

i) Market-penetration strategy-Increasing sale of existing product in existing
market and gain more market share by attracting competitors’ customers or
non- users or by encouraging the current customer to buy more. The strategies
are-
 Price reduction
 Making available in more location
 Packaging in different size
 Advertising stressing many benefits of the product.
ii) Market-development strategy-Finding new market for the existing product. For
example, Walton finds new market in Nepal and Bhutan.
iii) Product-development strategy: It develop new products for the existing
market/current market. E.g., Unilever introduce new Pepsodent Charcoal.
iv) Diversification strategy.-Developing new products and finding new market.
For example, Canon diversified from Camera making company into producing
new range of office equipment.
2. Integrative Strategy
A business can increase sales and profits through backward, forward, or horizontal
integration within its industry.
 Backward Integration: Integration (acquiring or partnering) with one or more of its
suppliers.
 Forward Integration: Integration with one or more of its distributors/middleman.
 Horizontal Integration: Merger or integration with its competitors.
A car manufacturer may acquire tire and electrical-component factories (backward
integration) or open its own showrooms to sell its vehicle models or provide after-sales
service (forward integration).

One of the examples of horizontal integration is the acquisition of Instagram by Facebook
and Burger King by McDonald’s.
3. Diversification Strategy
A diversification growth strategy is a growth strategy in which a business grows by
offering products or services that are different from its core business.
Diversification growth makes sense when good opportunities exist outside the present
businesses—the industry is highly attractive and the company has the right mix of
business strengths to succeed.
There are several types of diversification growth strategies:
 Synergistic/ concentric Diversification: A growth strategy in which a business
adds new products or services that are related to its existing products or services
is a synergistic diversification. For example, when a computer company that
primarily produces computers starts manufacturing laptops.
 Horizontal Diversification: A growth strategy in which a business adds new
products or services that are not related to its existing products or services but
appeal to its existing target market is called horizontal diversification. Companies
depend on current market share of loyal customers in this strategy. For example,
Apex, the largest shoe manufacturer introduce clothing items.
 Heterogeneous (conglomerate) diversification: Conglomerate diversification involves
adding new business that are significantly unrelated and with no technological or
commercial similarities. For example, Akij, producer of biri now starting the
business of food and beverage.
3.4 Goal Formulation
What do you mean by “goal”? Discuss the criteria of setting of goal.
Goal: Goals are objectives that are specific with respect to magnitude and time.
Retailer
Backward
Integration
Forward
Integration
Supplier
Manufacturer
Wholesaler
Customer

For example, Increase sales by 5% within 2 years. Objectives example: Profit Maximization,
Increase Productivity, Maximize Sales etc.
Four criteria for goal formation:
1. Goals must be arranged hierarchically, from most to least important
2. Objectives should be quantitative whenever possible. The objective “to increase
the return on investment (ROI)” is better stated as the goal “to increase ROI to 15
percent within two years.”
3. Goals should be realistic. Goals should arise from an analysis of the business unit’s
opportunities and strengths, not from wishful thinking.
4. Objectives must be consistent. It’s not possible to maximize sales and profits
simultaneously.
3.5 Strategic Formulation
Goals indicate what a business unit wants to achieve; strategy is a game plan for getting
there. Every business must design a strategy for achieving its goals, consisting of a
marketing strategy and a compatible technology strategy and sourcing strategy.
Porter’s Generic Strategies
Michael Porter has proposed three generic strategies that provide a good starting point for
strategic thinking: overall cost leadership, differentiation, and focus
 Overall cost leadership.
- Firms work to achieve the lowest production and distribution costs so they
can underprice competitors and win market share.
- They need less skill in marketing.
- Superior profits through lower costs.
- E.g. : WalMart, Tesco, Banglalink, Robi.
 Differentiation.
- The business concentrates on achieving superior performance in an
important customer benefit area valued by a large part of the market.
- Creating a product or service that is perceived as being unique “throughout
the industry”
- This strategy is usually associated with charging a premium price for the
product - often to reflect the higher production costs and extra value-added
features provided for the consumer.
- E.g., Apple, Mcdonald, FedEx
 Focus.
- The business focuses on one or more narrow market segments, gets to know
them intimately, and pursues either cost leadership or differentiation within
the target segment.
- Concentrating on a limited part of the market.

- Focus strategy is two types-Differentiation Focus strategy where it is focus
on narrow market segment with differentiated and unique product. These
companies work to find as unique of a market as possible in order to maximize
efforts. For example, Nike, Mercedes Benz etc.
- A focused cost leadership strategy requires competing based on price to
target a narrow market. Here, companies are looking to find a cost
advantage in their intended market segment. Claire’s, for example, seeks to
appeal to young women by selling inexpensive jewelry, accessories, and ear
piercings.

Unit-IV
Connecting with Customers
Customer-Perceived Value
It means that the prospective customer’s evaluation of all the benefits and costs related to
competing offer.
Determinants of customer Perceived Value
Total customer benefit is the perceived monetary value of the bundle of economic,
functional, and psychological benefits customers expect from a given market offering
because of the product, service, people, and image.
Total customer cost is the perceived bundle of costs customers expect to incur in
evaluating, obtaining, using, and disposing of the given market offering, including
monetary, time, energy, and psychological costs.
Customer-perceived value is thus based on the difference between benefits the customer
gets and costs, he or she assumes for different choices.
Customer Satisfaction
What do you mean by “Satisfaction”? Discuss satisfaction measurement techniques?
Definition:
The extent to which product’s perceived performance matches with buyer’s satisfaction.
 If the product’s performance falls short of the customer’s expectations, the customer
is dissatisfied.
 If performance matches expectations, the customer is satisfied.

 If performance exceeds expectations, the customer is highly satisfied or delighted.
Customer assessments of product or service performance depend on many factors,
including the type of loyalty relationship the customer has with the brand. Consumers often
form more favorable perceptions of a product with a brand they already feel positive about.
A highly satisfied customer generally stays loyal longer, buys more as the company
introduces new and upgraded products, talks favorably to others about the company and
its products, pays less attention to competing brands and is less sensitive to price, offers
product or service ideas to the company, and costs less to serve than new customers because
transactions can become routine
Satisfaction Measurement Techniques
 Periodic surveys can track customers’ overall satisfaction directly and ask
additional questions to measure repurchase intention, likelihood or willingness to
recommend the company and brand to others, and specific attribute or benefit
perceptions likely to be related to customer satisfaction.
 Monitoring customer loss rate: Contact with previous customers or those who have
stopped buying or who have switched to another supplier to find out why.
 Mystery shoppers: to pose as potential buyers and report on strong and weak points
experienced in buying the company’s and competitors’ products.
Customer-Product Profitability Analysis
A customer profitability analysis is an evaluation process that focuses on assigning cost and
revenues to segments of the customer based, instead of assigning revenues and cost to
actual products, or the units or departments that compose the corporate structure of the
producer.
A profitable customer is a person, household, or company that over time yields a revenue stream
exceeding by an acceptable amount the company’s cost stream for attracting, selling, and serving
that customer.
Figure Customer-Product Profitability Analysis

Customers are arrayed along the columns and products along the rows. Each cell contains
a symbol representing the profitability of selling that product to that customer.
 Customer 1 is very profitable; he buys two profit-making products (P1 and P2) of
the firm.
 Customer 2 yields mixed profitability; he buys one profitable product (P1) and one
unprofitable product (P3).
 Customer 3 is a losing customer because he buys one profitable product (P1) and
two unprofitable products (P3 and P4).
Strategies
1. The company should retain the high value customers.
2. The company can encourage customer-2 and customer -3 to purchase both
profitable products.
3. The company can increase the price of unprofitable product to make this profitable.
4. All customers are not valued customers for the firm. Unprofitable customers who
defect should not concern the company. Company should encourage them to switch
to competitors.

Unit-V
Customer Relationship Management (CRM)
Customer relationship management (CRM)
Customer relationship management (CRM) is the process of managing detailed information
about individual customers and all customer “touch points” to increase customer loyalty.
The purpose of CRM is to create loyalty.
By using CRM to understand customers better, companies can provide higher levels of
customer service and develop deeper customer relationships.
It is a core practice of marketing especially for service firm-bank, insurance, Cell Phone
Company, etc.
Customer touch point:
Customer touch point is any occasion of interaction between customers and the brand or
company.
Example, help desk, terminal of payment, /payment counter, company website,
advertisement etc.
For a hotel, the touch points include reservations, check-in and checkout, frequent-stay
programs, room service, business services, exercise facilities, laundry service, restaurants,
and bars.
Customer loyalty refers to customers coming back for more repeatedly.
One-to-one marketing.
It is a CRM strategy that focuses on personalized interactions with customers or potential
customers. We also use the terms personalized marketing and individual marketing with
the same meaning as one-to-one marketing. We sometimes refer to one-to-one marketing
as a ‘segment of one.’
When a company creates an entirely unique product or marketing program for each customer in the
target segment, it employs one-to-one marketing. This approach is common in business markets
where companies design unique programs and/or systems for each customer.
Dell was a revolutionary company in terms of one to one marketing. Its success was
founded on the principles of customization, allowing each customer to tailor their personal
computer to their own personal needs and preferences.

Martha Rogers and Don Peppers first mentioned the term in their 1994 book ‘The One to
One Future.’ They proposed the idea of one-to-one marketing as a CRM approach.
Advantages of one to one marketing:
 The ability to identify the most profitable customer.
 The ability to create long-term relationships with customers.
 The ability to target marketing efforts only to those people most likely to be
interested.
 The ability to offer varied messages to different consumers.
 Increased knowledge about the customer.
Framework/steps in One-to-One Marketing:
One-to one marketing is not for every company. It is for expensive product. There are 4
steps to start a one-to-one marketing campaign.
1. Identify your Customers and Prospects (potential customer):
The Company must be able to locate and contact a fair number of its customers
directly, or at least a substantial portion of its most valuable customers and collect
detailed information about the customers.
2. Differentiate the customer’s according to their needs and value to your firm.
Customers are different in two ways. They represent different levels of value to the
company and they have different needs. Once each customer’s needs and value are
found out, it is possible to tailor the company’s behavior to each customer in order
to reflect the customer’s value and needs. Conduct customer profitability analysis
(CPA) to find out the most valuable customer.
3. Interact with your customers to improve your knowledge.
By interacting with individual customers one can improve knowledge of them. This helps in
building strong relations with the customer.
4. Customize your offerings/message for the customer.
A customer’s needs would be unique, i.e., it would be substantially different from
those of other customers. And hence the company would have to design and
produce a unique solution for him. For example, banks have a large number of
financial products target a different segment of customer.

Unit-VI
Market Segmentation and Targeting
Market segmentation involves dividing a market into distinct groups of buyers who have
different needs, characteristics, or behaviors and who might require separate marketing
strategies or mixes. The major segmentation variables for consumer markets are
geographic, demographic, psychographic, and behavioral. Marketers use them singly or in
combination.
Levels of Segmentation
1) Mass Marketing: The seller engages in mass production, distribution and promotion of
one product for all buyers.
 In mass marketing, the seller offers the same product for all the buyers with
different needs.
 In this marketing, the size of the market will be larger and the promotion and
advertising expenses become generic to attract the entire customers.
 For example, mass marketing would be Coca-Cola, etc.
 The problem of mass marketing is it can’t satisfy most of the customer.
2) Segment Marketing: A segment is a group of customers who share similar types of
need.
 The marketers’ task is to identify segment not to create segments.
 Under segment marketing, a firm will develop products and services with separate
marketing mix strategies for each of the segments chosen by the firm.
3) Niche Marketing:
 Narrowly defined customer group seeking a distinctive mix of benefits within a
segment.
 Characteristics:
 The customers in niche market must pay a premium price.
 The niche is fairly small but has size, profit, and growth potential.
 Niche customers have a distinct set of needs
 Customers may require a special type of services
 The niche market should not attract competitors.
 The marketer needs more skill and specialized knowledge.
 For example, Hamdard.
4) Local Marketing
 Tailoring products and marketing program to the needs and wants of the local
customer group.-Cities, Neighborhoods, stores.
 For example, Baskin Robbin’s “3 mile marketing” program, emphasizing local
events and promotions close to its local store locations.
5) Individual Marketing
 Tailoring products and marketing programs to the needs and preferences of
individual customers.

 Individual marketing is also known as one-to-one marketing or customized
marketing and micromarketing.
 It’s the segmentation level where the seller offers a customized product to the
consumer.
 This is mostly used in business-to-business where more attention is given to market
the product or service. It may require product demonstration to the individual
customers and home services and installation.

Unit-VII
Brand and Brand Management
Definition of Brand
The American Marketing Association defines a brand as-
“A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the
goods and services of one seller or group of seller and to differentiate them from those of
competitors.”
A brand is something that resides in the minds of consumers.
A brand is thus a product or service whose dimensions differentiate it in some way from
other products or services designed to satisfy the same need.
The Role of Brands
Brands’ Role for Consumers
 A brand is a promise between the firm and the consumer.
 It is a means to set consumers’ expectations and reduce their risk.
 Consumers may evaluate the identical product differently depending on how it is
branded.
 Brands can act as Sources of Information
 Brands bring with them a certain level of quality assurance.
 It helps in taking purchase decision easily and quickly.
 It creates confidence to the customers.
Brands’ Role for Firms
Brands also perform valuable functions for firms.
 First, they simplify product handling by helping organize inventory and accounting
records.
 For a firm, the brand provides legal protection2 towards unique features or aspects
of the product.
 Firms can charge a premium for owning a brand boosting profit on every sale.
 Product can be copied, but brand cannot. Once a brand is established, it’s the
invaluable asset for an organization.
 A well established brand adds towards the overall value of the firm while
calculating its net worth.
 Branding can be a powerful means to secure a competitive advantage.
2
The brand name can be protected through registered trademarks, manufacturing processes can be
protected through patents, and packaging can be protected through copyrights and proprietary
designs.

Branding
Branding is the process of endowing products and services with the power of a brand.
Branding creates mental structures that help consumers organize their knowledge about
products and services in a way that clarifies their decision making and, in the process,
provides value to the firm.
Brand Equity
Brand equity is the added value endowed on products and services due to a brand. Brand
equity may be reflected through consumer perception, price difference, market share and
profitability.
For example,
“Brand equity” refers to the value of a brand.
Branding Strategy
A firm’s branding strategy—often called its brand architecture—reflects the number and
nature of common and distinctive brand elements applies to the products.
A firm has three main choices:
1. It can develop new brand elements for the new product.
2. It can apply some of its existing brand elements.
3. It can use a combination of new and existing brand elements
Non-branded toothpaste Branded toothpaste
Pepsodent
Added Value

There are various branding strategy that firms can consider:
1. Brand Extension:
 When a firm uses an established/existing brand to introduce a new product,
the product is called a brand extension.
 Dettol is one of the examples of Brand Extension with Dettol hand wash,
Dettol Antiseptic Cream, Dettol soap etc.
 Another Example of Meril with meril petroleum jelly, meril beauty soap, Olive
oil, meril baby lotion etc.
 When a new brand is combined with an existing brand, the brand extension
is called as sub-brand. Sub-brands are typically created as an opportunity to
reach a new audience. Apple, Inc. has sub brands like iPhone, iPad, iPod,
etc.
 The existing brand that gives birth to a brand extension or sub-brand is the
parent brand
 If the parent brand is already associated with multiple products through
brand extensions, it can also be called a master brand or family brand.
Family branding is also known as umbrella branding. For example, Pran is
a family brand.
Brand extension is of two types:
a) Line Extension: The parent brand gives birth in existing product category by
color change or introducing new color, flavors, ingredients, size, and form etc.
For example, Lifebuoy introduce new fragrance or color soap such as Lifebuoy
total, Lifebuoy Neem, Lifebuoy turmeric having different color and flavor or
Coca-Cola of various flavor.

b) Category Extension: When parent brand is used to enter a different product
category. For example, Swiss Army watches, Colgate toothbrush, mouthwash etc.
2. Multi-brands: When in a given product category a company has many
brand than it is called multiband.
A perfect example of multiband is Unilever Bangladesh Ltd. has many
bathing soaps brands like lux, dove, lifebuoy etc. Multiband are existing
product category in New brand to introduce.
Multi-brand
Toothpaste
Line Extension

3. New brands: When a company introduces a totally new brand in a new
product category than it is called new brands. When a company wants to
enter a new market in a new product category they sometime create a totally
new brand. For example, Unilever’s Pureit brand.
Brand line, Brand Mix
A brand line consists of all products—original as well as line and category extensions—sold
under a particular brand.
A brand mix (or brand assortment) is the set of all brand lines that a particular seller offers
to the buyer.
All the brand lines that Unilever offers like products Dove, Surf Excel, Sunsilk, Rin, Axe,
Lakme etc. would constitute the brand mix of Unilever in Bangladesh.
Branded variants: when a single brand line offered to a particular seller/retailer/distributor is called
Branded variants.
What do you mean by “brand portfolio”?
Brand Port folios
The brand portfolio is the set of all brands and brand lines a particular firm offers for
sale in a particular category or market segment.
Brand portfolio is generally created because each brand has certain boundary beyond
which it cannot fulfill all the needs of different market segments.

Role of Brands in Brand Portfolio:
Brands can play a number of specific roles as part of a portfolio.
1. Flanker brands:
 These are also known as “Fighter brands”. These brands will fight with
competitor’s brand, so that ‘flagship brand' can maintain the market share.
 Flanker brand is an extension to a brand in the same product category from the
same company. This is primarily done for the increased market share as well as
to cater to the need of all the segments of customers.
 The advantages of flanker brand
o Attracts new set of customers which is not served by existing product
o Protects the company, in case of one of the brands fail, other brands survive
o Can introduce lower quality brand without compromising on existing high
quality brands
 Example of flanker brand is P& G’s Tide in Indian market. In order to appeal to
consumers who desired a lower-cost detergent, P&G (Proctor and Gamble)
introduced tide which became successful. Now both Ariel and Tide drive sales
of P&G in detergent market.
2. Cash-Cow Brand:
 These brands will provide enough cash and maintain profitability, virtually
without marketing support.
 These may be showing falling sales but still command decent profits despite less
marketing support.
 For example, Tibbet 570 soap of Kohinur Chemical Co. Ltd.
 Another example is Gillette Company that is keeping the old brands viz.
Gillette Atra, Gillette sensor and Gillette Trac II in its brand portfolio despite
new razor technology such as Mach III turbo and Gillette Fusion.
3. Low-end entry level:
 The role of a relatively low-priced brand in the portfolio often may be to attract
customers to the brand franchise.
 Retailers like to feature these “traffic builders” because these customers can later
be “traded up’ to higher-priced brands.
 For example, Toyota’s Scion, with its quirky design and low prices, having
specific marketing mission is to capture buyers who have not purchased
anything from Toyota to move them into the franchise.
4. High-End Prestige Brand:
 The role of a relatively high-priced brand often is to add prestige and credibility
to the entire portfolio.

 Other brands in the portfolio also get the recognition because of the premium
brand and its quality do have a halo effect on each product line.
 For example, Corvette sports car. Corvette’s technological image and prestige
cast a halo over the entire Chevrolet line.
What do you mean by “Point of Difference” and “Point of Parity?”
Points-of-difference (PODs) are attributes or benefits that consumers strongly associate
with a brand, positively evaluate, and believe they could not find to the same extent with
a competitive brand.
Example,
Grameenphone Bangla Link Robi
Network Call Rate Flexible Data Plan
Bata Apex
Durable Luxury
DBBL IBBL
ATM Card Service
Points-of-parity (POPs
Points-of-parity (POPs), are attribute or benefit associations that are not necessarily
unique to the brand but may in fact be shared with other brands.
For example, two bank have some point of parity, such as cash counter, Help desk etc.

Unit-VIII
COMPETITIVE MARKETING STRATEGIES
Typically there are four types of market dominance strategies that a marketer will consider:
1. Market leader
2. Market challenger
3. Market follower, and
4. Market nicher.
Market Leader
A market leader has the largest market share and usually leads in price changes, new-
product introductions, distribution coverage, and promotional intensity.
Some historical market leaders are Microsoft (computer software), Gatorade (sports
drinks), Best Buy (retail electronics), McDonald’s (fast food), BlueCross BlueShield (health
insurance), and Visa (credit cards) etc.
Competitive strategy of Market Leader
1. Expanding total market:
 Total market may be expanded by
(i) Finding out new customer
A company can search for new users among three groups:
o those who might use it but do not (market-penetration strategy),
o those who have never used it (new-market segment strategy), or
o those who live elsewhere (geographical-expansion strategy).
(ii) More Usage
o Increasing the amount of consumption.
o Increasing frequency of consumption.
In general, increasing frequency of consumption requires either
(1) identifying additional opportunities to use the brand in the
same basic way or (2) identifying completely new and different
ways to use the brand.
2. Protecting/Defending Market Share
 A leader firm has to do everything possible to defend its current market
share. Continuous innovation, better customer service, distribution
effectiveness, and cost-cutting can increase competitiveness.
 Sometimes, leading firm has to apply the military principle – The best
defense is a good offense. There are six defense strategies:

(i) Position defense: Position defense means occupying the most desirable
position in consumers’ minds, making the brand almost impregnable.
Procter & Gamble “owns” the key functional benefit in many product
categories, with Tide detergent for cleaning, Crest toothpaste for cavity
prevention, and Pampers diapers for dryness.
(ii) Flank defense. Here, the purpose is to protect weak sides or fronts. Flank
defense consists of erecting/setting outposts to protect weak fronts that are
vulnerable to be attacked. Such protection attempts serve as invasion base
for counterattack, if needed. Quality improvement, introduction of low-
price products, aggressive sales force, etc., can make sense. For example,
Tide detergent of P&G.
(iii)Preemptive defense. A more aggressive maneuver is to attack first, perhaps
with guerrilla action across the market—hitting one competitor here,
another there—and keeping everyone off balance. The basic idea of
preemptive defense is to launch the attack before the enemy starts attacking.
The essence of preemptive defense is attack is the best defense. For example,
Bank of America.
(iv)Counteroffensive defense. In a counteroffensive, the market leader can
meet the attacker frontally and hit its flank or launch a pincer movement so
the attacker will have to pull back to defend itself. Another form of
counteroffensive is the exercise of economic or political clout.
 The leader may try to crush a competitor by subsidizing lower
prices for a vulnerable product with revenue from its more
profitable products, or
 it may prematurely announce a product upgrade to prevent
customers from buying the competitor’s product. Or
 the leader may lobby legislators to take political action to inhibit
the competition or initiate appropriate legal actions.
 Tech leaders like Apple, Intel, and Microsoft have aggressively
defended their brands in court.
(v) Mobile defense. In mobile defense, the leader stretches its domain over new
territories through market broadening and market diversification. Market
broadening shifts the company’s focus from the current product to the
underlying generic need. Market diversification shifts the company’s focus
into unrelated industries.
(vi)Contraction defense. Sometimes large companies can no longer defend all
their territory. In planned contraction (also called strategic withdrawal),
they give up weaker markets and reassign resources to stronger ones.

3. Increasing Market Share
 There are several ways to expand market share:
 Adding New Product Lines
 Expanding Existing Product Lines
 Improving Product Qualities
 Increasing Promotion Efforts
 Improving Distribution System
 Deploying Aggressive Sale Force
 Applying Price-cut
Market Challenger
A market challenger is a firm that has a market share below that of the market leader, but
enough of a presence that it can exert upward pressure in its effort to gain more control.
Market challengers are the firms trying to catch the leader’s position and fighting hard to
increase their market shares.
Pepsi is a good example of a challenger brand.
Generally, the market challengers are those firms, which have a good reputation in the
market and enjoys a strong financial position. These firms target the market leader or the
competitor at the same level with the objective, to reach the first position in the market or
become an industry leader.
Market Challenger Strategies
The Market Challenger Strategies are the marketing strategies adopted by the firms to
attack the leader or the immediate competitor with the intention to capture a greater market
share. The following are the general attack strategies adopted by the market challengers
with a view to becoming a market leader and increase the market share.
1. Frontal Attack:
 In this strategy, attacker matches its opponent’s price, advertising methods,
and distribution.
 The one which has better and more resources wins the market.
 Examples: Pepsi v/s Coke, P&G v/s HUL, Hero motor corp. v/s Bajaj, Maruti
V/s Hyundai
 The market challenger can even cut the price of the product, provided he
convinces the customers that the quality is not compromised and is as good
as the high priced products.
2. Flank Attack:
 The flank attack means, attacking the competitor on its weak points.

 Here the market challenger determines the weak areas of the competitor in
terms of two strategic dimensions i.e. Geographic and segmental.
 Examples: Titan v/s Timex, Apple v/s Micromax, Samsung vs Symphony,
Hp v/s Dell
3. Encirclement Attack:
 In the encirclement attack, a firm decides to attack his opponents suddenly.
The attack is launched simultaneously on all fronts.
 Capturing a wide slice of territory by launching a grand offensive on
several fronts.
 Examples: Fashion Industry.
4. Bypass attack.
 Bypassing the enemy altogether and attacking easier spots.
 The bypass attack is the indirect attack, wherein the market challenger does
not attack the leader directly, but broaden its market share by attacking the
easier markets.
 The challengers can bypass the leader by following any of the strategies viz.
expanding into the untapped markets, diversifying into the unrelated
products, modernizing the existing product with the invention of
technology.
 E.g. Pepsi adopted this strategy when it launched its mineral water brand
“Aquafina” very well before the Coca Cola’s mineral water brand.
5. Guerrilla Warfare:
 Small, intermittent attacks to harass and demoralize the opponent and
eventually the challenger may get a permanent footholds.
 It may conduct in 2 ways: conventional and unconventional
 Conventional:
 Sudden price cuts,
 intense promotional blitzes,
 Creative promotions
 Un-conventional:
 Occasional legal action-make a petition against a company.
 Example manhole marketing or Pizza hut in Russia, advertise in spaceship
 One must maintain ethical standard in case of guerilla warfare.

Market follower
A market follower is a company that follows what the leader in its sector does. A market
follower does not like taking risks, rather it waits and observes the others’ strategies and
implement only the successful ones.
This type of company never challenges the leader. However, it can usually maintain market
share with significantly lower investment costs than the market leader.
Theodore Levitt argues that a strategy of product imitation might be as profitable as a
strategy of product innovation.
A successful follower is the future market challenger.
Market Follower Strategy
‘Market Follower strategy’ is a strategy of product imitation. The innovator bears the
expense of developing the new product, bringing in the technology, breaking entry barriers
and educating the market. However, another firm can come along and copy or improve on
the new product.
The four follower strategies are as given below
1. Counterfeiter:
 Duplicate the leader’s product and packages and sell them on the black
market or through disreputable dealers.
 High-tech firms like Apple and luxury brands like Rolex have been plagued
by the counterfeiter.
2. Cloner:
 The cloner emulates the leader’s products, name, and packaging with slight
variations.
 Technology firms are often accused of being cloners:
 For example, Bata—Rata, Apex—Apox.
3. Imitator
 The imitator copies some things from the leader but differentiates on
packaging, advertising, pricing, or location.
 The leader doesn’t mind as long as the imitator doesn’t attack aggressively.
 Example Tata sky vs. Reliance
4. Adapter
 The adapter takes the leader’s products and adapts or improves them.
 The adapter may choose to sell to different markets, but often it grows into
a future challenger, as many Japanese firms have done after improving
products developed elsewhere.
 For example, Dell laptop and Sony Vaio laptop.
Market Nicher
 A niche is a small market whose needs are not being well served by the existing
products.
 A niche may be identified by dividing a segment into sub-segments or by defining
a group with a different set of characteristics who may look for a special
combination of benefits of attributes in the product.

Unit-XI
Marketing Communication
What do you mean by “Marketing Communication”?
Marketing communications are the means by which firms attempt to inform, persuade,
and remind consumers-directly or indirectly—about the products and brands they sell.
Marketing Communication can be described as all the messages and media you deploy to
communicate with the market in order to reach your target audience.
Role of Marketing Communications
 Voice of the Company: Represent the voice of the company and its brands. The goal is
to stimulate a dialogue that will lead to a succession of purchases
 Contribute to Customer Equity: Means by which a firm can establish a dialogue and
build relationships with consumers.
 Contribute to Brand Equity: By creating brand awareness and brand image in
consumer’s memories, Every brand delivers an impression that can strengthen or
weaken a customer’s view of a company
 Provide product information: Companies can tell or show consumers how and why a
product is used, by whom, when and where. Consumers can also learn who makes the
product, and what the company and brand stand for.
 Lead to purchase: They boost sales, strengthen brand loyalty, and can act as a catalyst
for business growth
 Create brand awareness: Marketing Communication helps in the creating and
providing the required impetus to the brand awareness to the potential customers
Marketing Communications Mix
The marketing communications mix—also called its promotion mix— specific blend of
promotion tools that the company uses to persuasively communicate customer value and
build customer relationships. The marketing communications mix consists of eight major
modes of communication.
1. Advertising:
 Any paid form of non-personal presentation and promotion of ideas, goods, or
services by an identified sponsor. This is done through
 print media (newspapers and magazines),

 broadcast media (radio and television),
 network media (telephone, cable, satellite, wireless),
 electronic media (audiotape, videotape, videodisk, CD-ROM, Web page),
 Social media (Facebook, Twitter or YouTube) and
 display media (billboards, signs, posters).
2. Sales promotion:
 Short-term incentives to encourage the purchase or sale of a product or service.
 It includes-
 consumer promotions (such as samples, coupons, and premiums),
 trade promotions (such as advertising and display allowances), and
 Business and sales force promotions (contests for sales reps).
 For example gift, Premium, Contests, games, lotteries, coupon, money-off
promotions, discount, rebate, Buy One Get One Free, free accessories (such as
free blades with a new razor), introductory offers (such as buy digital TV and
get free installation), tie-ins, and so on.
3. Events and experiences
 Company sponsored activities and programs designed to create brand-related
interactions with consumers
 It includes sports (IPL or world cup Cricket), festivals (Boishakh), arts,
entertainment, and cause events as well as less formal activities.
4. Public relations and publicity
 A variety of programs to promote or protect a company’s image or its individual
product.
 For example, annual report, charatible donation (Shikha Birti for poor
meritorious student)
 Public relations perform the following five activities:
 Press relations
 Product publicity
 Corporate communication
 Lobbying
 Counseling
5. Direct and digital marketing
 With the intent of technology, the companies make use of emails, fax, and
mobile phones, to communicate directly with the prospective customers
without involving any third party in between.
 Direct mail is very highly focused upon targeting consumers based upon a
database.

6. Interactive marketing
 Online activities and programs designed to interact with customers or
prospects.
 In interactive marketing, the customers can interact with the firms online and
can get their queries resolved online.
 Web site, Facebook and Twitter messages, YouTube channels and videos.
7. Personal selling
 Face-to-face interac775`tion with one or more prospective purchasers for the
purpose of making presentations, answering questions, and procuring orders.
 Personal Selling is an effective way to manage personal customer relationships.
 Personal selling involves an alive, immediate and interactive relationship between two or
more persons
 For example, trade show, sales meeting etc.
8. Word-of-mouth marketing (WOM)
 People-to-people oral, written, or electronic communications that relate to the
merits or experiences of purchasing or using products or services.
 Coca-cola’s “Share a Coke With Friends” campaign, where asked for consumers to
participate by sharing a personalized soda bottle with friends, in person and on
social media.

Unit-XII
Pricing
In the narrowest sense, price is the amount of money charged for a product or a service.
More broadly, price is the sum of all the values that customers give up to gain the benefits
of having or using a product or service.
 Reference Price- comparing an observed price to an internal reference price they
remember or an external frame of reference
Possible Consumer Reference Prices
 “Fair Price” (what consumers feel the product should cost)
 Typical Price
 Last Price Paid
 Upper-Bound Price (reservation price or the maximum most consumers would
pay)
 Lower-Bound Price (lower threshold price or the minimum most consumers
would pay)
 Historical Competitor Prices
 Expected Future Price
 Usual Discounted Price
Pricing Objective
Pricing objectives can be partitioned into 5 major heads:
1. Survival:
 Companies set survival as their major objective, when they plagued with
overcapacity, intense competition, or changing consumer wants.
 Survival is a short-run objective; in the long run, the firm must learn how to
add value or face extinction.
 The company might lower the prices in order to increase sales by taking a
hit on profitability or undergoing losses to keep the business going.
2. Maximum Current Profit:
 Company estimate demand and cost associated with alternative prices and
set the price that will provide maximum current profit, cash flow, or rate
of return on investment.
 This strategy assumes the firm knows its demand and cost functions; in
reality, these are difficult to estimate.
3. Maximum Market Share:

 Companies set this objective by charging a lowest price which can ensure a
higher sales volume.
 It can be applied when market is price sensitive.
 The low price must discourage the actual and potential competitor. This is
known as market penetration pricing.
 It has been widely witnessed in cell phone industry wherein Symphony,
lava, micromax, intel, and many players fight for a majority market share in
the low cost cell phone market in Bangladesh.
Conditions favor adopting a market-penetration pricing strategy:
(1) The market is highly price sensitive and a low price stimulates market
growth;
(2) Production and distribution costs fall with accumulated production
experience; and
(3) a low price discourages actual and potential competition.
4. Maximum Market Skimming:
 Set a maximum price to skim the revenue from the market.
 Companies unveiling a new technology favor setting high prices to maximize
market skimming.
 Sony has been a frequent practitioner of market-skimming pricing, in which
prices start high and slowly drop over time. When Sony introduced the
world’s first high-definition television (HDTV) to the Japanese market in
1990, it was priced at $43,000. So that Sony could “skim” the maximum
amount of revenue from the various segments of the market, the price
dropped steadily through the years—a 28-inch Sony HDTV cost just over
$6,000 in 1993, but a 42-inch Sony LED HDTV cost only $579 20 years later
in 2013.
Condition for skimming price
(1) A sufficient number of buyers have a high current demand;
(2) the unit costs of producing a small volume are high enough to cancel
the advantage of charging what the traffic will bear;
(3) the high initial price does not attract more competitors to the market;
and
(4) The high price communicates the image of a superior product.
5. Product-Quality Leadership
 The companies who want to be product quality leader can follow this
objective.

 Some companies try to provide “affordable luxuries”—products or services
characterized by high levels of perceived quality, taste, and status with a
price just high enough not to be out of consumers’ reach.
 E.g., BMW, Starbucks, Vikings etc.
6. Other Objectives
 Partial cost recovery- rely on private gifts and public grants to cover its
remaining costs. E.g., University, Library, govt. hospital
 Full cost recovery-Only objective is to draw full cost but not make profit. e.g.,
Hospital
Pricing Methods
1. Markup Pricing
 The most elementary pricing method
 Adding a standard markup with the product’s cost.
 If cost of a product is Tk.16 and the manufacturer wants to earn a 20 percent
markup on sales, the markup price of the product will be Tk. 20.
 Advantage:
 It is a simple method for setting prices;
 Requires little information as information on demand and costs
 Markup pricing provides the means by which fair prices can be easily found.
 When all firms in the industry use this pricing method, prices tend to be
similar and price competition is minimized
 Disadvantages of Markup Pricing: Some of the drawbacks of markup pricing are:
 This pricing method does not take into account competition, current
demand, and perceived value.
2. Target-Return Pricing
 The Target-Return Pricing is a method wherein the firm determines that will yield
its target rate of return on investment.
 General motors using this approach they can earned 15-20%return on investment.
 Example for calculating Target Return Pricing: suppose a pen manufacturer has
invested 1 million Tk. in the business and wants to set a price to earn a 20% ROI.
The manufacturing cost of per pen is Tk.16. Assuming that the sales can reach 50,000
units, the Target return price will be = 16 + (0.2 * 1000000)/ 50,000 = Tk.20
 The target-return pricing is easy to calculate and understand.
 Pricing products in such a manner has certain disadvantages.
 This method does not take into account price elasticity and competitor’s
prices.

3. Perceived-Value Pricing
 Pricing based on customer’s perceived value about the product.
 In Perceived-Value Pricing method, a firm sets the price of a product by
considering what product image a customer carries in his mind and how much he
is willing to pay for it.
 The perceived value is made up of several elements such as
 buyer’s image regarding the product performance
 Channel deliverables (dealer/retailer)
 Warranty quality
 Supplier’s Reputation
 Caterpillar uses perceived value to set prices on its construction equipment. It might
price its tractor at $100,000, though a similar competitor’s tractor might be priced at
$90,000. The additional amount pay for:
Competitor’s Price 90,000
Durability 7000
Warranty 2000
Reliability 6000
Superior Customer Service 5000
Normal Price cover Caterpillar’s superior value 110000
Discount 10000
Final price 100000
 Disadvantage:
 The buyers may suspect the company exaggerating the benefits of the
product.
 You have to provide superior value than the competitor.
4. Value Pricing
 Charging a fairly low price or a high-quality offering.
 Companies that adopt value pricing win loyal customers
 The objectives of Value Pricing are-
 Capture Market share
 Get customer’s confidence
 EDLP-everyday low pricing-charges a constant low price with little or no price
promotion or special sales. Example: Walmart promises everyday low prices on
everything it sells.
 High-Low Pricing-In high-low pricing, the retailer charges higher prices on an
everyday basis but runs frequent promotions with prices temporarily lower than
the EDLP level.

o The most important reason retailers adopt EDLP is that constant sales and
promotions are costly and have eroded consumer confidence in everyday
shelf prices.
o EDLP is not a guarantee of success, competitor may be benefited when they
offer discount.
5. Going-Rate Pricing
 Charges based on competitor’s price
 It may be charged same, more or less than the competitor.
 This type of pricing is mostly followed in Oligopolistic industries3 where they deal
in homogenous goods, and in which less variation is seen from one producer to
another. Such products are steel, aluminium, paper, fertilizer, etc. is charged same.
 Smaller firms “follow the leader,” changing their prices when the market leader’s
prices change rather than when their own demand or costs change
 Going-rate pricing is quite popular. Where costs are difficult to measure or
competitive response is uncertain, firms feel it is a good solution because they
believe it reflects the industry’s collective wisdom.
 With a going-rate pricing method, companies feel secure as they are sure to get the
customers because of the same rates prevailing in the industry. But however, it is
difficult to determine the changing trends of the competitor and often it is not
possible to match the cost of a product with the price that others are following.
6. Auction-Type Pricing
 This type of pricing method is growing popular with the more usage of internet.
Several online sites such as eBay, Quikr, OLX, etc. provides a platform to customers
where they buy or sell the commodities.
 There are three types of auctions:
 English auctions (ascending bids)-There is one seller and many buyers. The
seller puts the item on sites and the buyer /bidders raise the price until the top
price reached. For example, e-bay, and Amazon.com.
 Dutch auctions (descending bids) feature one seller and many buyers or one
buyer and many sellers. In the first kind, an auctioneer announces a high price
for a product and then slowly decreases the price until a bidder accepts. In the
other, the buyer announces something he or she wants to buy, and potential
sellers compete to offer the lowest price.
 Sealed-Bid Auctions: This kind of method is very common in the case of
Government or industrial purchases, wherein tenders are floated in the market,
and potential suppliers submit their bids in a closed envelope, not disclosing
the bid to anyone.
3
Only a few sellers and large buyers

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