Marketing Management Marketing Management A Decision-making Approach Pingali Venugopal Copyright © Pingali Venugopal, 2010 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2010 by Response Books Business books from SAGE B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 33 Pekin Street #02-01 Far East Square Singapore 048763 Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in 12/15 Adobe Caslon by Diligent Typesetter, Delhi and printed at Chaman Enterprises, New Delhi. Library of Congress Cataloging-in-Publication Data Available ISBN: 978-81-321-0471-1 (PB) The SAGE Team: Qudsiya Ahmed, Swati Sengupta and Nand Kumar Jha Contents List of Tables ix List of Figures xi List of Boxes xiii Preface xv Acknowledgements xvii 1. Introduction 1 Section 1: Understanding the Basics 2. Needs, Wants and Need Hierarchy 11 3. Marketing Product 21 Section 2: Understanding the Market 4. Marketing Environment 39 5. SWOT Analysis 63 6. Purchase Process 79 7. Competitive Advantage: Building Entry Barriers 111 Section 3: The Decision-making 8. Segmentation and Targeting 145 9. Positioning 161 10. Marketing Planning Processs 187 vii Marketing Management Appendix 1: Indian Consumer 205 Appendix 2: Country of Origin: A Surrogate for Quality 209 Appendix 3: Do Consumer Loyalty Programmes Build Loyalty? 213 References 215 Index 229 About the Author 245 viii List of Tables 2.1 Wants satisfying different needs 16 2.2 First category of status goods sought by the consumers after satisfying a minimum level of lower order needs 17 3.1 Needs satisfied by bread 25 3.2 Marketing universe for different marketing products for yoga 33 3.3 Format for identifying the ideal marketing product 34 3.4 Coffee parlours as a marketing product 35 3.5 Marketing effort for different marketing products of fruit juice 36 4.1 Census of India (2003 est.) 44 4.2 India 2001 census: Percentage of population speaking major languages 45 4.3 Marketing environment for TV industry 52 5.1 SWOT for a hypothetical example 66 5.2 The opportunities and threats for the refrigerator industry 68 5.3 SWOT based on the prioritization of environmental variables 74 6.1 Sequence of decisions 101 6.2 Place utility: Store choice drivers across stores 103 6.3 Average attribute rating for a SUV on a 4-point score 108 ix Marketing Management 7.1 Profitability of IT training companies 123 7.2 Market performance of IT training companies 124 7.3 The prices of some of the super brands of the premium segment 139 8.1 Segmentation for two wheelers 157 8.2 Hypothetical example of segment attractiveness analysis 159 8.3 Segmentation for mobile phones 160 9.1 Intended and actual positioning of toothpastes 185 10.1 Factors influencing the brand decision process 191 10.2 Product characteristics and decision process 192 10.3 Attributes on which products are evaluated 202 10.4 Role of marketing planning process 203 x List of Figures 1.1 Marketing planning process 6 2.1 Hierarchy of needs: A marketing perspective 17 3.1 Traditional approach to marketing 24 3.2 Product–market fit 24 3.3 Marketing implications of marketing product 31 4.1 Environmental factors 43 5.1 Logic of prioritization of environmental variables 73 6.1 Types of decision processes 91 6.2 Place of purchase of formal footwear 101 7.1 Classification of entry barriers 115 7.2 IT training market share 117 7.3 IT training market 118 7.4 IT training segments 118 7.5 Five forces model for the VSNL industry 128 7.6 Competitive position of VSNL 132 8.1 Segmentation: The decision-making approach 153 xi Marketing Management 9.1 Generic positioning 166 9.2 Emergence of a new positioning matrix from the generic positioning 167 9.3 Quality price positioning matrix 168 9.4 New positioning matrix embedded in the perceived quality matrix 169 9.5 Attribute-based positioning of CEAT tyres 170 9.6 Perceptual map for shoes 174 9.7 Attributes: Normalized score and ranking 175 9.8 Flight timings/schedule and price perception of domestic airlines 176 9.9 Price and on-time performance perception of domestic airlines 176 9.10 Flight timing/schedule and on-time performance perception of domestic airlines 177 10.1 Product involvement v/s purchase involvement 195 xii List of Boxes 3.1 Needs satisfied by detergents 26 6.1 Utility 89 8.1 Segmenting and targeting: Mobile phones 158 9.1 Positioning green products 172 10.1 Saffola the ‘healthy oil’ 200 xiii Preface Most people think that marketing is only about advertising or selling. Even lots of business people perceive it to mean simply promotion and advertis- ing (Bizjobs 2009). Advertising is only one element of marketing, however, the most visible. Simply advertising would not ensure that the product sells. Advertising has to be supported by other activities of marketing. Unnecessary advertise- ments may be seen as a nuisance. Selling is another element of marketing. Completing a sale does not en- sure good marketing. Selling has a short-term orientation whereas market- ing has a long-term orientation. Customers should be satisfied with what they are buying; they should not feel cheated after the purchase and create a negative propaganda for the product. An unsatisfied customer is the worst advertisement for a brand. Marketing is about understanding customers’ needs and finding ways to provide products or services, which customers demand. Marketing should start by creating a want for the product by associating it to a need and con- verting a technical product into a marketing product. Having developed the marketing product, marketing plans need to be formulated to satisfy the needs of the customer in a better way than the competing products. Factors which could help or deter the company in marketing the product must be taken into account considering the marketing environment. Finally, looking at marketing from the company’s perspective, the company has to market the product at the lowest cost. xv Marketing Management The book, therefore, discusses marketing to include all activities associ- ated with identifying the needs of target customers and making them ‘want’ the product (by satisfying the customers better than the competitor) at the lowest possible cost. The book is divided into three sections. Section 1 focuses on the basics. Here the ‘hierarchy of needs’ is redefined to suit marketing requirements. The book also introduces the concept of rebel need, which could provide a basis for introducing new products that are not currently accepted by the society. This section also discusses the pro- cess of modifying technical products into several marketing products, thus, providing an option of choosing the ideal marketing product. Section 2 focuses on information required for the marketing planning process. Environmental analysis and SWOT (Strengths, Weaknesses, Op- portunities and Threats) analysis are integrated to give a more meaningful analysis of this information. Similarly, consumer behaviour and competition are discussed to provide inputs for decision-making. Section 3, covering marketing decisions, describes a process of developing loyal customers by building a multilayered positioning process. The book is unique as it: • redefines the need hierarchy to suit the marketing context; • develops the marketing product concept, which would allow marketers to convert a technical product into more than one marketing product; • integrates marketing environmental variables and SWOT analysis to give a better understanding of information for making marketing decisions; • suggests a multilayered positioning strategy for companies. xvi Acknowledgements I began developing the concepts and frameworks discussed in this book several years ago. Gaps in these concepts and frameworks were rectified only with the help of the valuable comments given by my students over these years. It may be difficult to name the students individually. I sincerely thank each one of them for making this possible. XLRI has always supported me through my endeavours. Their culture of encouraging flexibility, helped me to try innovative ideas and develop new concepts and frameworks. Special thanks to Fr Abraham, Director; Fr George, Dean (Administration and Finance); and all the faculty and staff for their support. Veni, my wife, helped immensely during the preparation of the manu- script. I extend special thanks to her. Sincere thanks to Reema Singhal for her valuable comments on the initial manuscript. Thanks also to Vivek Mehra, Sugata Ghosh, Qudsiya Ahmed, Swati Sengupta, and others at SAGE Publications who made this possible. I also thank Sanjay Saha and Anjelina who helped me in the preparation of the manuscript. I am grateful to my father and mother-in-law for their moral support. xvii Introduction1 consumer-oriented economy is emerging in India. The IndianA consuming class is also expanding. As a result of market capitalism and globalization, India has seen a dramatic rise in its middle class and a significant reduction in its low income, deprived group. The McKinsey Global Institute study titled ‘The Rise of India’s Con- sumer Market’ (May 2007) shows that: • The ‘deprived group’ is expected to decrease from 77 per cent of the Indian population (1985) to only 3 per cent by 2025. • India’s middle class is expected to increase from 8 per cent of the population (1985) to almost 60 per cent of the population in 2025.