Fundamentals of Marketing Management CBMMM3T03

Syllabus topics (RTMNU)

• Market Segmentation, Targeting and positioning
• Market segmentation
• Importance and Bases for segmentation
• Market Targeting
• Various Targeting Strategies
• Positioning
• De-Positioning and Repositioning

Market Segmentation, Targeting and Positioning (STP)

Meaning: STP is a three-step process used to find the right customers and present the product to them in the right way. A company first divides the market (Segmentation), then selects one or more groups (Targeting), and finally creates a clear image of the product in the minds of those customers (Positioning).

Market Segmentation

Definition: Market segmentation is the process of dividing a large, mixed (heterogeneous) market into smaller groups of buyers who have similar needs, wants and buying behaviour.

Example: Maruti Suzuki sells Alto for budget buyers, Swift and Baleno for middle-class families and its NEXA range for higher-income buyers.

Requirements of good segments:

1. Measurable – size and buying power can be measured.
2. Substantial – large enough to earn profit.
3. Accessible – can be reached through media and shops.
4. Differentiable – each segment reacts differently to the marketing mix.
5. Actionable – the firm has resources to serve it.

Importance of Market Segmentation

1. Better understanding of customers – the firm studies needs of each group closely.
2. Right product design – products are made to suit each group, e.g. sachets of shampoo for rural buyers.
3. Efficient use of resources – money is spent only on promising groups.
4. Effective promotion – advertisement language and media match the group.
5. Finding new opportunities – unserved groups become visible.
6. Competitive advantage – a firm can lead in a niche even if it is small.
7. Customer satisfaction and loyalty – customers get what they really want.

Bases for Segmentation

Industrial (B2B) markets are also segmented by industry type, company size, order size and location.

Market Targeting and Various Targeting Strategies

Definition: Market targeting is the process of evaluating each segment's attractiveness and selecting one or more segments to serve.

A segment is judged by its size and growth, competition in it, and whether it fits the firm's objectives and resources.

Targeting strategies:

1. Undifferentiated (mass) marketing – one product and one marketing mix for the whole market. Low cost, but ignores differences. Example: common salt or sugar sold the same way to all.
2. Differentiated marketing – different products and mixes for different segments. Higher sales but higher cost. Example: Hindustan Unilever's many soap brands (Lux, Lifebuoy, Dove, Pears).
3. Concentrated (niche) marketing – full focus on one small segment. Good for small firms; risky if that segment declines. Example: a brand making only premium organic baby food.
4. Micro-marketing – products and offers designed for a local area (local marketing) or even one person (individual or one-to-one marketing). Example: online stores showing offers based on a user's past searches.

Positioning

Definition: Positioning means creating a distinct, clear and valued place for a product in the mind of target customers compared to competitors' products.

Bases of positioning: attributes/features (Volvo – safety), benefit (Colgate – strong teeth), price and quality (Big Bazaar – "value for money" in its time), use or occasion, user (Johnson's – babies), and against a competitor.

Steps: (1) identify possible competitive advantages, (2) choose the right differences, (3) frame a positioning statement, (4) communicate and deliver it through all 4Ps.

De-Positioning and Repositioning

De-positioning means changing the image of a competitor's product in customers' minds, usually by showing its weakness, so that one's own product looks better. Comparative advertising between brands of detergent or toothpaste is an example.

Repositioning means changing the existing position of one's own product to reach new customers or to recover falling sales.

Reasons for repositioning: falling sales, change in customer tastes, new competition, entry into new segments, or an outdated image.

Example: Cadbury Dairy Milk was moved from a "children's chocolate" to a treat for all ages and celebrations; Bournvita and Horlicks were repositioned from health drinks for the sick to nutrition drinks for growing children.

Likely exam questions

1. (Long, 8/16 marks) What is market segmentation? Explain its importance and the various bases for segmenting a consumer market.
2. (Long, 8/16 marks) Define market targeting and positioning. Explain the various targeting strategies and distinguish between positioning, repositioning and de-positioning with examples.
3. (Short, 4 marks) Explain the concept of STP.
4. (Short, 4 marks) What is repositioning? Give two reasons for it.
5. (Short, 4 marks) Write a short note on concentrated (niche) marketing.

Syllabus topics (RTMNU)

• Product Strategy
• Product Classification
• Product Mix
• Product Line Strategies
• Product Life Cycle

Product Strategy – Meaning

Product: A product is anything that can be offered to a market to satisfy a need or want. It may be a physical good, a service, an idea, a place or a person.

Product strategy is the plan a firm makes about which products to offer, how many varieties, their features, quality, brand, packaging and how to manage them over time.

Levels of a product (Kotler): (1) core benefit – the basic need (rest in a hotel), (2) actual product – features, design, brand, packaging (room, bed, name), (3) augmented product – extra services such as warranty, free delivery, after-sales service.

Product Classification

A. Consumer products – bought by final consumers for personal use.

1. Convenience products – bought often, quickly and with little effort; low price. Example: soap, toothpaste, biscuits, newspapers. They include staples, impulse items (chocolates at the billing counter) and emergency items (umbrella in rain).
2. Shopping products – bought less often; buyer compares price, quality and style. Example: clothes, furniture, mobile phones.
3. Speciality products – unique brand or features; buyer makes special effort and does not accept a substitute. Example: Rolex watch, Royal Enfield motorcycle.
4. Unsought products – the buyer does not know of them or does not normally think of buying them. Example: life insurance, funeral services. They need personal selling.

B. Industrial products – bought for further processing or for running a business.

1. Materials and parts – raw materials (cotton, iron ore) and component parts (tyres for car makers).
2. Capital items – installations (factory building, machines) and accessory equipment (computers, tools).
3. Supplies and services – lubricants, stationery, repair and maintenance, consulting.

Products are also classified by durability: durable goods (TV, refrigerator), non-durable goods (milk, soap) and services (banking, hair-cut).

Product Mix

Definition: The product mix (product portfolio) is the complete set of all product lines and items that a company offers for sale.

Product line: a group of closely related products (e.g. all soaps of a company). Product item: one specific version (e.g. a 125 g Lifebuoy soap).

Dimensions of product mix:

1. Width (breadth) – number of product lines. Example: soaps, shampoos, tea, detergents = width 4.
2. Length – total number of items in all lines.
3. Depth – number of variants (sizes, flavours) of each product in a line.
4. Consistency – how closely the lines are related in use, production or distribution.

Product mix strategies: expansion (adding new lines – ITC entering foods and personal care), contraction (dropping weak lines), alteration (improving existing products), and trading up / trading down.

Product Line Strategies

1. Line stretching – adding items beyond the present range.
   • Downward stretch – adding lower-priced items (a premium car brand launching a small car).
   • Upward stretch – adding higher-priced items (Maruti's NEXA range).
   • Two-way stretch – adding at both ends.
2. Line filling – adding more items within the present range to fill gaps, e.g. new sizes or flavours.
3. Line pruning (contraction) – removing weak or loss-making items.
4. Line modernisation – updating style, design or technology of the line.
5. Line featuring – promoting one or a few items to attract customers to the whole line.

Note: Too long a line causes higher cost and confusion (cannibalisation – one item eating the sales of another); too short a line leaves profit opportunities to rivals.

Product Life Cycle (PLC)

Definition: The product life cycle is the series of stages through which a product passes from its introduction in the market till its withdrawal: Introduction, Growth, Maturity and Decline. The sales curve of a product over time is usually S-shaped (bell-shaped when decline is included).

Strategies in maturity: modify the market (new users, new uses), modify the product (quality, features, new pack), modify the marketing mix (offers, new channels).

Strategies in decline: continue (milk the product), harvest (cut cost), or drop the product.

Indian example: Landline phones and pagers have moved to decline, while UPI-based payment apps grew very fast in recent years.

Importance of PLC: helps in planning price, promotion and distribution for each stage; warns management to develop new products in time; helps in sales forecasting.

Limitations: stage lengths cannot be predicted; some products never decline (salt); the shape differs for fads and fashions.

Likely exam questions

1. (Long, 8/16 marks) What is a product? Explain the classification of consumer and industrial products with examples.
2. (Long, 8/16 marks) Explain the concept of Product Life Cycle. Describe the features and marketing strategies at each stage of PLC.
3. (Short, 4 marks) Explain the dimensions of product mix.
4. (Short, 4 marks) What is line stretching? Explain its types.
5. (Short, 4 marks) Distinguish between convenience products and speciality products.

Syllabus topics (RTMNU)

• Price Strategies
• Pricing Methods and Strategies
• Pricing Strategies: Cost-Based, Value-Based, and Competitive Pricing
• Psychological Pricing
• Dynamic Pricing

Price Strategies – Introduction

Price: Price is the amount of money a customer pays to get a product or service. It is the only element of the marketing mix that brings revenue; the other three (product, place, promotion) create cost.

Pricing strategy is the plan a firm uses to fix and change the price of its product so as to meet its objectives, such as profit, market share, survival or image.

Factors affecting price:

1. Internal: cost of production, marketing objectives, product life cycle stage, the rest of the marketing mix.
2. External: demand and customer's ability to pay, competitors' prices, government rules (e.g. drug price control, MRP printing under Legal Metrology rules), economic conditions.

Pricing Methods and Strategies

Pricing methods are the ways of calculating a price. Pricing strategies are the broad approaches used in different market situations. They are usually grouped into three: cost-based, value-based (customer-based) and competition-based.

Strategies for a new product:

1. Price skimming – a high price at launch to earn more from early buyers who are ready to pay, then lowered step by step. Example: new flagship smartphones.
2. Penetration pricing – a low price at launch to capture a large market share quickly. Example: Reliance Jio's free and very cheap data plans at launch in 2016.

Other common strategies: discount pricing (cash, quantity and seasonal discounts), geographical pricing (uniform delivered price vs. zone price), product-bundle pricing (combo meals, broadband + OTT packs), captive-product pricing (cheap printer, costly ink cartridges) and premium/prestige pricing.

Cost-Based Pricing

Meaning: Price is fixed by adding a margin of profit to the cost of the product.

1. Cost-plus pricing – Price = Cost per unit + fixed percentage of profit.
   Example: cost ₹200, mark-up 25% → price = 200 + 50 = ₹250.
2. Mark-up pricing – used by retailers: a mark-up is added to the purchase price. Example: shirt bought at ₹400 with 30% mark-up on cost → ₹520.
3. Break-even / target-return pricing – price is fixed so that total revenue covers total cost and gives the desired return.
   Break-even point (units) = Fixed cost ÷ (Selling price − Variable cost per unit).
   Example: fixed cost ₹1,00,000, price ₹50, variable cost ₹30 → BEP = 1,00,000 ÷ 20 = 5,000 units.

Merits: simple, covers cost, seen as fair. Demerits: ignores demand and competitors; cost may be hard to estimate.

Value-Based Pricing

Meaning: Price is fixed on the basis of the value the customer sees in the product (perceived value), not on cost. The firm first studies what customers are willing to pay, then designs the product and cost to match.

Types:

1. Good-value pricing – good quality at a fair price. Example: D-Mart's everyday low prices.
2. Value-added pricing – adding features and services to justify a higher price instead of cutting price. Example: premium airline seats with meals and extra legroom.

Merits: higher profit, focus on customer. Demerits: perceived value is hard to measure; needs market research.

Competitive Pricing

Meaning: Price is fixed mainly by looking at the prices of competitors.

1. Going-rate pricing – charging the same as the market price. Common for steel, cement, petrol pumps and kirana goods.
2. Below-market pricing – slightly lower than rivals to attract price-sensitive buyers.
3. Above-market pricing – higher than rivals, supported by brand or quality.
4. Sealed-bid (tender) pricing – in government tenders, firms quote prices based on what they expect rivals to bid.

Merits: easy, avoids price wars in stable markets. Demerits: ignores own cost; may lead to price wars.

Psychological Pricing

Meaning: Pricing that uses the emotions and thinking habits of buyers rather than pure economics.

1. Odd / charm pricing – ₹99, ₹499, ₹1,999 look much cheaper than ₹100 or ₹2,000. Used widely by Bata and online stores.
2. Prestige pricing – a high, round price signals high quality (luxury watches, designer clothes).
3. Reference pricing – showing the "MRP" crossed out beside the offer price so the deal looks good.
4. Price lining – a few fixed price points (₹299, ₹599, ₹999 shirts) to make choice easy.
5. Buy-one-get-one and "free" offers – the word "free" attracts buyers strongly.

Caution: misleading price claims are unfair trade practices under the Consumer Protection Act, 2019.

Dynamic Pricing

Meaning: Dynamic (real-time or surge) pricing means changing the price frequently, even minute by minute, based on demand, supply, time, customer and competition, usually with the help of software.

Indian examples: Ola and Uber surge fares in rain or peak hours; airline fares on IndiGo rising as seats fill; Indian Railways' flexi-fare and Tatkal tickets; hotel rooms costlier in festival season; e-commerce prices changing during sale days.

Merits: higher revenue, better use of capacity, balances demand and supply.

Demerits: customers may feel cheated; complaints of unfairness; needs data and technology.

Likely exam questions

1. (Long, 8/16 marks) What is pricing? Explain the factors affecting pricing and the cost-based, value-based and competitive pricing strategies.
2. (Long, 8/16 marks) Explain psychological pricing and dynamic pricing with suitable Indian examples. State their merits and demerits.
3. (Short, 4 marks) Distinguish between price skimming and penetration pricing.
4. (Short, 4 marks) What is cost-plus pricing? Illustrate with an example.
5. (Short, 4 marks) Write a short note on going-rate pricing.

Syllabus topics (RTMNU)

• Developing Distribution and Promotional Strategies
• Distribution Channel: Types, Importance
• Channel Intermediaries: Wholesalers and Retailers
• Promotion mix
• Introduction to personal selling
• Sales Promotion
• Public Relations and Publicity

Developing Distribution and Promotional Strategies

A good product at a right price fails if customers cannot find it or do not know about it. Distribution (Place) makes the product available at the right place and time; Promotion informs, persuades and reminds customers about it. Together they complete the 4Ps.

Distribution Channel: Meaning and Types

Definition: A distribution channel (channel of distribution) is the path or set of independent firms through which goods move from the producer to the final consumer.

Types of channels (consumer goods):

Industrial goods mostly use direct sale or industrial distributors. Many firms today use multichannel (omnichannel) distribution – shops plus online apps.

Factors affecting choice of channel: nature of product (perishable, bulky, technical), market (number and location of buyers), company resources and control desired, middlemen available, and competitors' channels.

Importance of Distribution Channels

1. Bridges the gap between place of production and place of consumption.
2. Breaking bulk – large lots are split into small quantities buyers want.
3. Assortment – goods of many producers are brought together at one place.
4. Storage and transport – goods are made available throughout the year.
5. Financing – middlemen give credit to retailers and buyers.
6. Risk bearing – middlemen bear risk of damage, price fall and bad debts.
7. Information – channel members pass market feedback to the producer.
8. Promotion – shops display and recommend products.

Channel Intermediaries: Wholesalers

Meaning: A wholesaler buys goods in large quantities from producers and sells them in smaller lots to retailers or industrial users, not to final consumers.

Services of wholesaler:

• To manufacturers – bulk buying, storage, financing by advance or quick payment, market information, saving on selling cost.
• To retailers – supply in small lots, credit facility, variety of goods, information on new products, no need for large stocks.

Indian example: wholesale markets such as Itwari in Nagpur and cash-and-carry stores like Metro Cash & Carry (now owned by Reliance) serve kirana shops. B2B apps like Udaan also do this job online.

Channel Intermediaries: Retailers

Meaning: A retailer buys goods from wholesalers or producers and sells them in small quantities to final consumers for personal use. Retailer is the last link in the chain.

Services of retailer: regular supply near the consumer, variety and choice, credit to known customers, home delivery, after-sales service, information and advice, and feedback to producers.

Types of retailers: small-scale (hawkers, kirana shops, general stores) and large-scale (departmental stores, supermarkets like D-Mart, chain stores like Reliance Trends, malls, e-retailers such as Amazon and Flipkart, quick-commerce apps such as Blinkit and Zepto).

Promotion Mix – Introduction

Definition: Promotion mix is the combination of tools a company uses to communicate with customers: advertising, personal selling, sales promotion, public relations/publicity and (today) direct and digital marketing.

Factors deciding the mix: type of product (consumer or industrial), stage of PLC, budget, target market, and push or pull strategy (push = through middlemen; pull = advertising so that customers ask for the brand).

Personal Selling

Meaning: Personal selling is face-to-face, oral presentation by a salesperson to one or more prospective buyers to make a sale.

Features: two-way communication, personal touch, flexible message, builds long-term relationships, immediate feedback; but costly per contact.

Process: prospecting → pre-approach → approach → presentation and demonstration → handling objections → closing the sale → follow-up.

Example: LIC agents, medical representatives visiting doctors, car showroom sales staff.

Sales Promotion

Meaning: Sales promotion means short-term incentives offered to encourage quick buying of a product.

Tools: consumer promotion – free samples, discounts, coupons, cashback, buy-one-get-one, contests, exchange offers; trade promotion – extra margin, free goods, display allowance to dealers; sales-force promotion – bonuses, contests for salespeople.

Example: festival sales like Flipkart's Big Billion Days; "extra 20% free" packs.

Public Relations and Publicity

Public relations (PR) is a planned and continuous effort to build and keep goodwill and a good image of the company among the public – customers, employees, investors, government and media. Tools: press releases, events, sponsorships, CSR activities, annual reports, handling of crises.

Publicity is non-paid news about the company or product in the media. The firm does not pay for it and cannot fully control it; it may be positive or negative. Example: news coverage of a new car launch or of a company's relief work in floods.

Likely exam questions

1. (Long, 8/16 marks) What is a channel of distribution? Explain the different types of distribution channels and their importance.
2. (Long, 8/16 marks) What is promotion mix? Explain personal selling, sales promotion and public relations as elements of the promotion mix.
3. (Short, 4 marks) Distinguish between a wholesaler and a retailer.
4. (Short, 4 marks) State the services of a wholesaler to manufacturers.
5. (Short, 4 marks) Distinguish between advertising and publicity.