Philip Kotler Crasher
Defining Marketing for the
21st
Chapter 1
What is marketing???
Marketing is the process of identifying and meeting human needs,
wants and demands. Needs generally exist but wants and demands
can be generated through various marketing campaigns.
Things that can be marketed are:
Goods, services, events, experiences, people, places, properties,
organizations, information and ideas.
Need, Wants and Demands:
Needs-They are basic requirements like food, water, air, clothing,etc
Wants-They are specific needs eg. chapatti to satisfy need of food
Demand- A want that people are ready to pay for
Different types of Demand
Negative: Pay for avoiding something eg. Fat free milk
Non-existant: Unaware or uninterested in a product
Latent : Product doesn’t exist for a certain need
Declining: Frequency of purchasing decreases eg. diaries
Irregular: Seasonal at intervals eg. Umbrellas
Full: All products supplied being bought
Overfull: Supply cant match demand here
Unwholesome: Product bought despite being harmful eg.
Cigarette
HOLISTIC MARKETING
CONCEPT
4P’s of marketing or Marketing Mix
SERVICES INDUSTRY: 3 more P’s added for this industry People, Process and
Physical Evidence.
Evolution Of marketing
Production Concept: This concept holds that customers
prefer products that are inexpensive and widely available.eg.
Micromax
Product Concept: stresses the fact that customers prefer
products offering the best quality, performance or other
innovative features. Eg. High end smartphones
Selling Concept: Customers if left alone would not buy an
organization’s products. Credit Cards
Marketing Concept: This concept is to find the right
products for your customers rather than finding the right
customers for you product. Eg. Telecom offers
Developing Marketing
Strategies and Plans
Chapter 2
Value Creation
Customer Value: The gain which the consumer
receives from the benefit is weighed against the
cost which he pays to acquire that benefit. The
difference between this benefit and cost is called
Customer Value. For eg: To enjoy the benefit of
Subway Burger you pay Rs.100 as cost, the
satisfaction you gain from this is the customer
value which Subway has given to you.
Core Competency
Core competency is characterized by:
•Source of competitive advantage and makes maximum
contribution to perceive competitive advantage
•High application in a variety of markets
•Difficult for competitors to imitate
Eg:
•Apple’s core competency is Design, which its
competitors find impossible to imitate.
•Netflix’s core competency is Content Delivery.
•Nike’s core competency is Shoe design
Mission Statement
Difference between Mission Statement and Positioning Statement:
A mission statement describes an institution’s purpose and primary objectives.
An internally focused statement, it is meant to drive leadership’s decisions and
to provide measures of success.
Brand positioning statement, which is externally focused, describes an
institution’s primary and differentiating value in terms of how it addresses the
needs of its target audience. It aligns “selling” with the hopes and dreams of
its target market, i.e. buying.
Metaphor: Mission statements result from looking in the mirror, while brand
positioning results from looking out the window.
Mission Statements are best when they reflect a vision, have focus on limited
number of goals, stress on company’s policies and values which should be as
short, memorable and meaningful as possible.
It can be of two types: product defined or market defined.
Corporate Growth Strategies
Intensive Growth Strategy: Company in the
initial stages will go with the ‘Product–
market expansion grid’ as shown alongside
to tap existing opportunities.
Course of action ( when company grows in
revenue ):
Market penetration market development
product development diversification
Integration Growth Strategy: Company may increase its sales and profits through the following
integration within the industry:
Vertical Integration: Company owns one or more parts of the supply chain that gets the
product to the end user.
Purpose: Control over quality and costs at the most important segments of its product
manufacturing (Backward Vertical Integration)and distribution (Forward Vertical
Integration)model. Downside: It goes outside a company’s core competency and can be
expensive to administer.
Horizontal Integration: When two companies on same levels in the supply chain merge.
Purpose: To grow the company in size, increase product differentiation, achieve economies of
scale, reduce competition or access new markets
Automotive
Smartphones Acquiring
company
Acquired company
Porsche Volkswagen
Daimler Benz Chrysler
Kraft Foods Cadbury
Quaker Oats Snapple
PepsiCo Quaker Oats
Pfizer Wyeth
Pfizer Pharmacia
Corporation
Glaxo Wellcome
SmithKline Beecham
AT&T T-Mobile
AT&T Bell South
Mittal Steel Arcelor
HP Compaq
Oracle PeopleSoft
Delta Northwest Airlines
United Airlines Continental
JPMorgan Chase Bank One
Microsoft Taleo
Microsoft Yahoo!
Apple AuthenTec
BP Amoco
VERTICAL INTEGRATION STRATEGY EXAMPLES
HORIZONTAL INTEGRATION STRATEGY EXAMPLES
Media
Oil
Diversification Growth Strategy: It makes sense only when good opportunities exist
outside present business –the industry is highly attractive and the company has the right
business strength mix to succeed. Most of the big conglomerates follow diversification
strategy. Remember only when a company is secure with its core competency then it
follows diversification strategy.
Eg: ITC, Aditya Birla Group, Walt Disney Company.
WHEN DO YOU FOLLOW WHICH STRATEGY?
SWOT Analysis
What is it?
A SWOT analysis is an organized list of
business’s greatest Strengths, Weaknesses,
Opportunities, and Threats.
Strengths and weaknesses are internal to the
company (eg: reputation, patents, location).
Opportunities and threats are external (eg:
suppliers, competitors, prices)
When do you use SWOT?
Existing businesses can use a SWOT analysis,
at any time, to assess a changing
environment and respond proactively.
New businesses should use a SWOT analysis
as a part of their planning process. There is
no “one size fits all” plan for businesses, and
so unique “SWOTs” saves a lot of cost and time.
Examples of SWOT Analysis
SWOT Analysis of P&G
Strength
1.
P&G has over 300 brands globally which are available in over 180 countries
2.
Strong focus on research and development
3.
Diversified and strong product portfolio.
4.
Its brand have a high recall, high visibility due to excellent marketing and advertising.
5.
High quality products, processes and procedures.
Weakness
1.
Fake products sold under the name of their brands
2.
Increasing instances of product recall
3.
Its undifferentiated
products have stiff competition from big domestic players and international brands
Opportunity
1.
Tap rural markets and increase penetration in urban areas
2.
Mergers and acquisitions to strengthen the brand.
3.
Increased purchasing power of people thereby increasing demand
4.
Growing Indian FMCG market.
5.
Future Growth plans
Threats
1.
Intense and increasing competition amongst other FMCG companies
2.
FDI in retail thereby allowing international brands
3.
Competition from unbranded and local products
4.
Global economic conditions
5.
Counterfeit goods
SWOT Analysis of HUL
Strength
1. Strong and well differentiated brands with leading share positions
2. Distinctly placed products providing reach to every segment of society.
3. Consumer understanding and systems for building consumer insight
4. Integrated supply chain and well spread manufacturing units
5. Distribution structure with wide reach, high quality coverage
– The launch of project “Shakti” has helped
HUL to create brand awareness and extensive reach in rural India.
6. Access to Unilever global technology, capability and sharing of best practices from other Unilever
companies.
7. Very
well placed to take advantage of growth in rural India and lower strata of the society through
“Shakti”.
8. Introducing products from its parent company like margarine in order to cater to changing consumer
tastes and opportunities in food sector.
9. Leader in exports by positioning itself
Weakness
1. Price positioning in some categories by competitors increases space
for low price competition.
2. Limited success in changing eating habits of people.
3. Competitors focusing on a particular product and eating up HUL’s share, like
Nirma
focusing on soaps and
detergents
Opportunity
1. Growing consumer base due to increasing income levels and new consumers from lower strata of the
society
2. Untapped market in branded
Ayurvedic medicines and other such consumer products.
3. Opportunity in Food sector: changing consumer tastes
4. Expansion of horizons towards more and more
Threats
1. Unfavourable raw material prices due to inflation, reducing profitability.
2. Heavy onslaught of competition in the core categories from emerging players like ITC will result in higher
advertising expenditure
3. Spurious/counterfeit products in rural areas and small towns.
4. Reduction in real income of consumers due to high inflation
SWOT Analysis of MARICO
Strength
1.
Products are leader in their segment. E.g. Parachute hair oil (48% share), Saffola,
Medicare, Revive.
2.
Company’s strong overseas presence.(Bangladesh, Egypt, South Africa, Middle East,
Vietnam, Malaysia)
3.
Company’s aggressive M&A policy.
4.
Marico has strong distribution network, more than its competitor P&G.
5.
Fastest growth rate in industry.
6.
Company’s consistent innovation and business idea
Weakness
1.
Major sales are from its two brand Parachute Hair oil and Saffola. Other brand’s profit is
very low.
2.
The company has seen a constant decrease in their income per share ratio.
3.
There is wide difference in Health care market share to its nearest competitor Agro Tech
foods.(Marico=23% and Agro tech34%)
Opportunity
1.
Huge customer base in India. FMCG industry is directly related to population.
2. Cheap labour, Quality product and service in have helped India to gain an advantage over
other countries. So, high export potential.
3.
Improving living standard of Indian people which reflects the increase in personal care
products.
4.
Development of rural infrastructure will improve rural income.
5.
High growth rate possibility in rural area (40%) and urban area (25%) in terms of sales
Threats
1.
Market is full of fake and cheap products which is affecting sells.
2.
Strong competition from international and domestic players.
3.
Unorganised market leads to negative growth.
4.
Difference in price of low and premium priced brands.
5.
Low profit margin over similar products in industry, leading to low price
CREATING LONG TERM
LOYALTY
RELATIONSHIPS
Chapter 3
Modern Consumer
Well educated and informed
Can easily verify claims and compare products
Tend to maximize value
Companies need to concentrate on exceeding rather than just
meeting the customer expectation
Customer Perceived value
Total customer benefit : Perceived value of the bundle of
economic, functional and psychological benefits customer
expects from a product.
When someone buys a Bentley, it is not just for transport
function. He pays for the comfort, social status, differentiation
etc.
Total customer cost : Perceived bundle of costs in evaluating,
obtaining, using and disposing off a product.
The time spent in comparing the Bentley to a Rolls-Royce,
the effort it took to visit the showroom, the waiting time for
delivery are all bundled under customer cost.
Customer perceived value
Customer perceived value =
(Total customer benefit –Total customer cost)
3 ways to improve CPV
1. Improve total customer benefit
2. Reduce the non-monetary costs involved
3. Reduce the monetary cost of the product
Loyalty
A deeply held commitment to re-buy or re-patronize a preferred
product or service in the future despite situational influences
and marketing efforts having the potential to cause switching
behavior.
Product/service quality
The totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or implied needs.
Conformance quality : Every car in a product line of Honda
would have identical features. They all confirm to a standard
Performance quality: A phone made by Apple offers the
customer many unique features like screen quality, processing
speed, camera quality etc. The performance of the product is
what differentiates it from competitors.
Customer lifetime Value
Net profit attributed to the entire future relationship with a
customer.
When we purchase a printer from HP, it is not just the printer that
we pay for. The printer ink which is a consumable will also be paid
for by the customer throughout the life time of the product.
When a customer walks into a KFC, the manager has to see all
the potential future buying of the customer when seeing his CLV.
Obviously the CLV of a customer keeps increasing as his
satisfaction increases.
Customer profitability
A profitable customer is an entity that over time yields a
revenue stream exceeding the company costs by an
acceptable amount.
Every customers buying habits are different and so each
customer has different profitability to the firm.
For example, a customer buying a home theatre system is
more profitable to Bose or JBL than someone who buys a pair
of earphones.
Customer relationship
management
1. Identify your
prospects and
customers
2. Differentiate
customers in terms of
their needs and their
value to the firm
3. Build strong
relationships with
customers by
constant interactions
4. Customize
products services and
messages to each
customer
1-to–1
Marketing
Framework
1-to-1 Framework of MCD
1. Customers : People
looking for cheap, tasty
and quick meal options
2. Differentiated menu
with quick to-go menu as
well as special gourmet
burgers made to order
3. Well trained waiters.
Orders taken with a
smile. Personal touch
and relationships with all
4. Happy meals provided
for kids. Menu varied as
per the geography of
operation
Attracting and retaining customers
More cost effective to retain customers than to attract new
one
Customer Churn : The number of customers leaving the
brand
Modern customers have multiple options. Customer churn
rates –High
Marketing Funnel : Different stages between a loyal customer
and an unaware person.
Marketing funnel of axe
deodorants
Target market
Aware
Open to trial
Trier
Recent User
Regular
User
Most
Used
Loyal
Building loyalty
Three marketing techniques to foster loyalty:
1. Interacting with customers
Aftersales calls, Feedback forms, Customer care calls etc.
2. Developing loyalty programs
Air miles programs, Frequency programs, Club membership
programs etc.
3. Creating institutional ties
Cash back offers, special deals for prior users, bundled services
etc.
Customer Databases
Database marketing is the process of building, maintaining
and using customer databases and other databases to
contact, transact with and build relationship with customers.
Data warehouses are systems on which data collected from
every customer touch point is catalogued and maintained.
Data mining is the process of utilizing the collected data to
analyze and address customer wants and needs in the most
optimal fashion.
Downside of database marketing
1. Not useful in case of once–in-a-lifetime purchases like real
estate.
2. Large investment needed to maintain the systems that can
deal with big data.
3. Stream lining all employees to be customer oriented is a
tough task
4. Customers sometimes perceive data collection unethical
and as an infringement of their privacy.
Chapter 4
Analyzing Consumer
Markets
Factors influencing consumer behavior
A few examples:
•Social – HUL offers Tresemme
to cater specifically to the
needs of the high-end
consumer and sunsilt for mid-
range segment
•Culture –McDonalds offer
McMaharaj with spicy tastes
for its Indian audience
•Personal –Sporty Bikes like
KTM are preferred by
youngsters while Middle-aged
people are the target market
for Hero Splendor
•Social Media – “United breaks
Guitars” video on Youtube
created a huge impact on
United Airlines stock prices
The following factors affect consumer behavior and influence his/her buying
decisions directly/ indirectly.
Consumer Psychology
Consumer Psychology is an important aspect of understanding consume behavior.
Consumer psychology is said to consist of 5 key processes:
1. Motivation –An aspirational person could be motivated to buy an Apple product
to get identified as a high-end user
2. Perception –Perception is how we select, organize and interpret information.
Example –Consumers perceived Godrej as an old-fashioned brand which
caused revamping of its branding strategy recently
3. Learning –Learning theory states that marketers can build demand by
associating products with motivating cues.
4. Emotions –Consumers are not always rational. Their emotions influence their
buying decisions a lot. Example –People feeling attached to Hero Splendor
5. Memory –How consumers remember a brand and what thoughts do they
associate the brand with plays a very important role. Example –The Maggi fiasco
can affect the brand image of Nestle
Model of Consumer Behavior
The Buyer Decision Process
Five stages in the buyer decision process
•Need recognition
•Information search
•Evaluation of alternatives
•Purchase decision
•Post-purchase behavior
The Buyer Decision Process
Need Recognition
•Need recognition occurs when the buyer recognizes
a problem or need triggered by:
•Internal stimuli
•Thirst causes a person to buy Pepsi
•External stimuli –Seeing an ad or TV commercial
•Seeing a TV commercial about Levis drives the
consumer to buy a pair of jeans
The Buyer Decision Process
Information Search
Information search is the amount of information needed
in the buying process and depends on:
•The strength of the drive,
•The amount of information you start with,
•The ease of obtaining the information,
•The value placed on the additional information, and
•The satisfaction from searching.
The Buyer Decision Process
Information Search
Sources of information:
•Personal sources—family and friends
•Commercial sources—advertising, Internet
•Public sources—mass media, consumer organizations
•Experiential sources—handling, examining, using the product
The Buyer Decision Process
Evaluation of Alternatives
Evaluation of alternatives is how the consumer
processes information to arrive at brand choices.
Example –A consumer planning to buy a car will
compare and asses different models available in the
market based on his priorities.
The Buyer Decision Process
Purchase Decision
•The purchase decision is the act by the consumer to buy the
most preferred brand.
•The purchase decision can be affected by:
•Attitudes of others
•Unexpected situational factors
•Expectancy Value model posits that consumers evaluate
products and services by combining their brand beliefs –
positive and negative
•Example –A middle-aged person while choosing a bike
model will give more weights to Mileage, cost and less
weights to style and top speed and select based on it
The Buyer Decision Process
Post-Purchase Decision
•The post-purchase decision is the satisfaction or
dissatisfaction the consumer feels about the
purchase.
•Relationship between:
•Consumer’s expectations
•Product’s perceived performance
•The larger the gap between expectation and performance,
the greater the consumer’s dissatisfaction.
•Cognitive dissonance is the discomfort caused by a post-
purchase conflict
The Buyer Decision Process
Post-Purchase Decision
•Customer satisfaction is a key to building profitable
relationships with consumers—to keeping and
growing consumers and reaping their customer
lifetime value.
Few more concepts to understand consumer behavior
Behavioral Decision Theory:
Behavioral Decision Theory states that consumers make seemingly irrational choices in
many occasions
Example –Consumers being ready to pay double the cost for the same specifications in
case of an iPhone
Decision Heuristics:
Heuristics are the rules of thumb that consumers use in their decision process
Availability Heuristic –Consumers base their predictions on how quickly and easily a particular
example comes to mind. Example –The recent Maggi crisis might influence a consumer to stop
buying noodles
Representativeness Heuristic –Consumers base their predictions on how similar the outcome is
to other examples. Example –Many brands have similar packaging to make the consumer
believe that their products are representative of the category
