Digital Marketing ( Unit 1 to 5 Study Material)

 

Unit -1

Introduction to Marketing – Market, Marketing, Marketer- Selling Concept, marketing concept, Social marketing concept – Need and Significance of Marketing in Business- Marketing environment –Identifying market segments – Basic for market segmentation

 

Marketing is defined by the American Marketing Association as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” If you read the definition closely, you see that there are four activities, or components, of marketing:

 

1. Creating - The process of collaborating with suppliers and customers to create offerings that have value.

 

2. Communicating - Broadly, describing those offering, as well as learning from customers.

 

3. Delivering - Getting those offerings to the consumer in a way that optimizes value.

 

4. Exchanging - Trading value for those offerings.

 

The traditional way of viewing the components of marketing is via the four Ps:

 

1. Product - Goods and Services (Creating offerings)

2. Promotion - Communication

3. Place - Getting the product to a point at which the customer can purchase it (delivering)

4. Price - The monetary amount charged for the product (exchanging)

 

What is Market?

A set up where two or more parties engage in exchange of goods, services and information is called a market.

What is marketing?

Marketing is the process of getting potential clients or customers interested in your products and services. The keyword in this definition is "process." Marketing involves researching, promoting, selling, and distributing your products or services.

 

 

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Who is Marketer?

Marketer is an individual who works to identify goods & services desired by a set of customers as well as promoting and marketing those goods and services on behalf of an organization. Marketer helps boost the sale of products and services which in turn boosts the revenue for the organization by creating effective marketing strategies. He has the authority to implement and change these marketing strategies as per the needs of the customers and individual markets.

 

Some of the jobs of marketer include setting goals, segmenting the target customer segment, studying the competition, addressing a target audience through modes of communication, nurturing the relationship with customers, creating content, budgets, setting priorities designing campaigns.

 

Importance of Marketer

Marketers help in improving the quality of life by spreading awareness among people of the organization’s products and services without which people may not know of the presence of particular products or services available in the market. They work on identifying the customer's needs, wants and demands. It is his identification of the market needs that lead to the innovation and introduction of thousands of new products and services In the market every now and then.

 

1. Marketer help in improving the quality of life spreading awareness among people.

2. Identifying the customers need, wants and demands.

3. Identification of the market needs that lead to the innovation and introduction of thousands of new products and services.

Types of Marketers

 

1. Brand Marketer

He or She works on building a good brand name for the business. He ensures that a customer’s perceived value of the brand is optimal. He may make use of online and offline marketing for the purpose.

 

2. Product Marketer

Product Marketer is responsible for marketing the goods and services of a company by planning and launching marketing events, working with advertising firms to execute outbound marketing.

 

3. Content Marketer

1. This type is similar to inbound marketer but a little more specialized.

2. Its job is to create high-quality content in a way that increases a company's search ability and online presence.

 

4. Inbound Marketer

Inbound marketer is concerned with converting potential customers into paying customers by providing useful information in the form of templates, materials, e-books, blog posts to the target customer segment.

 

5. Social Media Marketer

This type of marketers specializes in managing various social accounts of the company, ensuring constant updates and implementing marketing strategies to acquire more followers.

 

6. Digital Marketer

He or She deals with online aspects of marketing ranging from managing a company's social accounts, designing online marketing events to sending marketing emails to potential leads.

 

What is Selling Concept?

The selling concept essentially mirrors the thought that consumers will not purchase enough of the company’s products unless large-scale promotional and selling efforts are carried out by it. Selling concept is one of the ideologies in marketing like production concept, product concept, holistic concept etc.

 

Selling concept is used for goods which customers don’t buy normally, unsought goods like insurance etc. These goods are aggressively sold by tracking down the target segment and sold on the virtue of the product benefits. The final objective is to increase sales revenue and increase profits.

 

Importance of Selling Concept

The focus in the selling concept is more on selling the products of the company to consumers without comprehending the market needs and increasing sales transactions rather than building and enhancing relationships with customers.

 

MARKETING CONCEPT

 Definition of a marketing concept: “A strategy that companies and marketing agencies design and implement in order to satisfy customers’ needs, maximize profits, satisfy customer needs, and beat the competitors or outperform them.”

 

The main five include the production, product, selling, marketing, and societal concepts, and they have been evolving for decades. Not every concept is beneficial to every business, so here is a timely and convenient opportunity to learn more about each one.

 

The Production Concept

The production concept is focused on operations and is based on the assumption that customers will be more attracted to products that are readily available and can be purchased for less than competing products of the same kind. This concept came about as a result of the rise of early capitalism in the 1950s, at which time, companies were focused on efficiency in manufacturing to ensure maximum profits and scalability.

 

This philosophy can be useful when a company markets in an industry experiencing tremendous growth, but it also carries a risk. Businesses that are overly focused on cheap production can easily lose touch with the needs of the customer and ultimately lose business despite its cheap and accessible goods.

The Product Concept

The product concept is the opposite of the production concept in that it assumes that availability and price don’t have a role in customer buying habits and that people generally prefer quality, innovation, and performance over low cost. Thus, this marketing strategy focuses on continuous product improvement and innovation.

 

Example

Apple Inc. is a prime example of this concept in action. Its target audience always eagerly anticipates the company’s new releases. Even though there are off-brand products that perform many of the same functions for a lower price, many folks will not compromise just to save money.

 

The Selling Concept

Marketing on the selling concept entails a focus on getting the consumer to the actual transaction without regard for the customer’s needs or the product quality — a costly tactic. This concept frequently excludes customer satisfaction efforts and doesn’t usually lead to repeat purchases.

 

The selling concept is centered on the belief that you must convince a customer to buy a product through aggressive marketing of the benefits of the product or service because it isn’t a necessity.

 

An example is soda pop. Ever wonder why you continue to see ads for Coca Cola despite the prevalence of the brand? Everyone knows what Coke has to offer, but it’s widely known that soda lacks nutrients and is bad for your health. Coca Cola knows this, and that’s why they spend astonishing amounts of money pushing their product.

 

The Marketing Concept

The marketing concept is based on increasing a company’s ability to compete and achieve maximum profits by marketing the ways in which it offers better value to customers than its competitors. It’s all about knowing the target market, sensing its needs, and meeting them most effectively. Many refer to this as the “customer-first approach.”

 

 

Example

Glossier is a recognizable example of this marketing concept. The company understands that many women are unhappy with the way that makeup affects the health of their skin. They also noticed that women are fed up with being told what makeup products to use. With this in mind, Glossier introduced a line of skincare and makeup products that not only nourish the skin but are also easy to use and promote individualism and personal expression with makeup.

 

The Societal Concept

The societal marketing concept is an emerging one that emphasizes the welfare of society. It’s based on the idea that marketers have a moral responsibility to market conscientiously to promote what’s good for people over what people may want, regardless of a company’s sales goals. Employees of a company live in the societies they market to, and they should advertise with the best interests of their local community in mind.

 

Example

The fast-food industry is an example of what the societal concept aims to address. There’s a high societal demand for fast food, but this food is high in fat and sugar and contributes to excess waste. Even though the industry is answering the desires of the modern consumer, it’s hurting our health and detracting from our society’s goal of environmental sustainability.

 

Need and Significance of Marketing in Business

Marketing helps to boost the sales

Marketing is one way to give information to consumers. This way, consumers will have a basic idea of what is your product all about. They will also know the benefits of buying your products. Marketing educates many people about a certain product. When people are well-informed about your product, your sales will increase.

 

Marketing creates revenue options

Marketing is a great help for many business establishments to create revenue options. It is when business sectors use different marketing strategies to increase business profits. One way to increase the profit is to reduce the product costs. This way many customers will buy the product.

 

Reducing the product costs will increase the number of potential buyers, thus getting more sales. It is better to gain smaller profits but consistent sales.

 

Another way to increase the revenue is to run media advertisements and promotions. It is the easiest way to make people know about your products.

 

Set better goals for your business

The success of a business depends on its goals and objectives. Marketing can help a business set its goals. By practicing some marketing strategies it will lead to the popularity of their brand. By this, it will motivate the company to maintain its reputation. They will now set clear goals and objectives for their employees to know their targets. These goals will also reach their consumers.

 

Build a Reputation for your Brand

Another benefit of implementing marketing strategies is to build a reputation for your brand. But it is essential to ensure you are giving outstanding quality and useful products to your target market. This way, you won’t only build an excellent reputation for your product, but also your brand.

 

Improves Decision-Making

When a company hires a market specialist, they will do everything to boost the sales of your products by making appropriate marketing actions. The first thing to consider in doing these activities is knowing your audience. When the company has known fully their audience, this will help them decide what lines and details they will create in convincing people to buy their products.

 

 

What is the marketing environment?

A marketing environment is a combination of internal and external environmental forces and factors that influences the business operation of a business and its ability to serve its customers. It is essential to know both internal as well as external environmental factors. Therefore, enterprises keep checking on them to do their business without any legal trouble and to generate maximum profit.

 

The internal marketing environment consists of factors like material, machines, workers, money, etc. All of these components are necessary to run a business successfully. For example, if the raw material is not available on time and in sufficient quantity, then the work of production will become slow, and the company will not be able to fulfill the demand of the product in the market.

 

On the other hand, the external marketing environment can be divided into two categories, such as macro external marketing environment and micro external marketing environment. The microenvironment is closely related to the business and constitutes all external business activities such as distribution and promotion of products of the company.

 

The macro-environmental components affect all the companies serving in a single industry similarly. For example, changes in the laws and rules related to production or doing business will apply to all companies likely. In the next section, you will learn about all the internal as well as external components of an organization.

 

 

1. Internal environment

The internal environment is formed of all the internal factors and forces of an organization. The internal environment of an organization is within the control of the marketer, and he can change or modify the environment as per the demand in the market and requirement of the business.

 

The following are the five factors that form the internal environment of an organization. These factors are also referred to as five Ms of a business.

Money

Men

Markets

Materials

Machinery

All the components of the internal environment are as important as that of the components of an external environment. However, the internal environment factors are changed according to the change in the external marketing components. For example, an organization is required to upgrade its technology if new technology in the market is introduced.

 

The internal environment of an organization also includes the marketing department, the sales department, the human resource department, and the manufacturing department.

 

2. External Marketing environment

The external marketing environment consists of all the external marketing factors that exist outside the organization, and the marketer has little or no control over the external marketing environment factors.

 

The external marketing environment can be divided into two categories, such as microenvironment and the macro environment.

 

Let us learn about both macro and micro environments one by one.

 

A. Microenvironment

The microenvironment of a business consists of all the factors and forces that are directly associated with the company. The micro components of the external environment are also known as task environments.

 

The following are the various components of the micro external environment.

 

1. Suppliers

 

Suppliers are an essential part of every organization. Suppliers supplies material and all other types of resources required for the production of products. A company can run its business successfully only if its suppliers supply material of good quality and on time.

 

2. Market intermediaries

 

Market intermediaries are the intermediary parties that help a business to distribute its products in the market. The market intermediaries can be wholesalers, retailers, and distributors. All of these market intermediaries are an essential part of the business as they are the face of the company in the market and represent the products of the company in the market.

 

3. Partners

 

Business partners are the business entities that conduct business with the organization. For example, advertising agencies, banking and insurance companies, market research organization s, brokers, and transportation companies, etc. A company is required to partner with several other companies to run a successful business.

 

4. Customers

 

Customers are the most crucial component of the business. Customers are the target audience of the product, and the preference of customers influences all the marketing and business efforts of a company.

 

5. Public

The public is people other than the target audience of the organization. The public plays a vital role in the success of the business as it can build or destroy the image of a company in the market. The public has the power to influence the purchasing decision of the target audience. Especially in the times of the internet, the ability to control the public has increased as they can share their views about your products and services on the internet freely.

 

6. Competitors

 

The last but not least component of the microenvironment is the competitors of a business. The competitors are the other businesses that sell similar products as your products or are part of the same strategic group in the industry.

 

B. Macro Environment

Macro components of a marketing environment consist of all external forces and factors that impact the whole industry rather than just changing an organization directly. Therefore, the macro marketing environment is also referred to as a large environment.

 

The following are the six components of the macro environment. Let us learn about them one by one.

 

1. Technological environment

 

Technology is one of the elements that have great potential to influence the business of an organization. It is dynamic, as it changes rapidly. Technology provides several threats and opportunities to the business environment.

 

The technological environment consists of research and development in technology, innovation, inducement of technology, and technical alternatives, etc.

 

2. Demographic environment

 

The demographic environment component of the macro marketing environment consists of people that form a market. The population of the demographic environment can be characterized based on various factors such as age, gender, density, size, location, race, and occupation, etc.

 

The demographic environment is a crucial component for business as the company design and builds its products based on the characteristics of the demographic environment.

 

3. Social-cultural environment

 

The social-cultural component of a macro environment is formed using values, lifestyle, culture, beliefs, and prejudices of the target audience of a business. The social-cultural environment varies from one region to another region.

 

People living in one area might prefer a different type of product than the preference of the product of the people of any other region. Businesses are required to have in-depth knowledge of the social-cultural environment to design a product or service that is preferred by most people.

 

4. Economic environment

 

The economic environment component is a type of component that influences all industries. The economic environment affects the purchasing power and spending patterns of the buyers.

 

The following are the different factors that form an economic environment.

 

Interest Rates.

Gross Domestic Products (GDP).

Gross National Product (GNP).

Inflation.

Subsidies.

Income distribution.

Government funding.

Other significant economic variables.

5. Political-legal environment:

The political-legal environment consists of laws and policies of a country. In addition to rules and procedures, the political-legal environment also includes agencies and pressure groups. All of these political entities impact the working capacity of the industry in society.

 

 

 

6. Physical environment:

 

The last component of the macro environment is the physical environment in which an organization exists. The following are the components of the physical environment.

 

·         Climate condition

·         Environmental change.

·         Availability of the raw material.

·         Natural resources like water.

·         Pollution.

 

What is market segmentation?

Market segmentation consists of sectioning the target market into smaller groups that share similar characteristics, such as age, income, personality traits, behavior, interests, needs or location.

 

These segments can be used to optimize products, marketing, advertising and sales efforts.

 

Segmentation allows brands to create strategies for different types of consumers, depending on how they perceive the overall value of certain products and services. In this way they can introduce a more personalized message with the certainty that it will be received successfully.

 

Types of Market Segmentation

1. Geographic Segmentation

Geographic segmentation consists of creating different groups of customers based on geographic boundaries.

 

The needs and interests of potential customers vary according to their geographic location, climate and region, and understanding this allows you to determine where to sell and advertise a brand, as well as where to expand a business.

 

2. Demographic segmentation

Demographic segmentation consists of dividing the market through different variables such as age, gender, nationality, education level, family size, occupation, income, etc.

 

This is one of the most widely used forms of market segmentation, since it is based on knowing how customers use your products and services and how much they are willing to pay for them.

 

3. Psychographic segmentation

Psychographic segmentation consists of grouping the target audience based on their behavior, lifestyle, attitudes and interests.

 

To understand the target audience, market research methods such as focus groups, surveys, interviews and case studies can be successful in compiling this type of conclusion.

 

4. Behavioral segmentation

Behavioral segmentation focuses on specific reactions, i.e. the consumer behaviors, patterns and the way customers go through their decision-making and purchasing processes.

 

The attitudes the public has towards your brand, the way they use it and their awareness are examples of behavioral segmentation. Collecting this type of data is similar to the way you would find psychographic data. This allows marketers to develop a more targeted approach.

 

 

 

 

 

 

 

 

 

 

 

 

Unit -2

Product and Product lines – Product hierarchy, Product classification , product mix decisions – product line decisions – Branding and Brand decisions, packing and labeling decision – product life cycle strategies.

 

Meaning of Product

Product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual or cyber form. Every product is made at a cost and each is sold at a price.

 

Product Line

A product line is a group of products that a company creates under a single brand. The products are similar and focus on the same market sector. Maybe their function or channel distribution are the same or similar. Perhaps their physical attributes, prices, quality, or type of customers are the same. We call the activity product lining.

 

A company can have more than one product line. The number of product lines it has reflects its resources, i.e., how powerful it is.

 

Example

·         Microsoft Corporation (MSFT) as a brand sells several highly recognized product lines including Windows, MS Office, and the Xbox.

·         Nike Inc. (NKE) has product lines for various sports, such as track and field, basketball, and soccer. The company's product lines include footwear, clothing, and equipment.

·         PepsiCo (PEP) owns, among many other lines globally, Frito Lay, Gatorade, Quaker Oats, and Tropicana.

 

 

 

 

 

Product Hierarchy:

Each product is related to certain other products. The product hierarchy stretches from basic needs to particular items that satisfy those needs. There are 7 levels of the product hierarchy:

 

 

 

 

 

1. Need family:

 

The core need that underlines the existence of a product family. Let us consider computation as one of needs.

2. Product family:

 

All the product classes that can satisfy a core need with reasonable effectiveness. For example, all of the products like computer, calculator or abacus can do computation.

 

3. Product class:

 

A group of products within the product family recognised as having a certain functional coherence. For instance, personal computer (PC) is one product class.

 

4. Product line:

 

A group of products within a product class that are closely related because they perform a similar function, are sold to the same customer groups, are marketed through the same channels or fall within given price range. For instance, portable wire-less PC is one product line.

 

5. Product type:

 

A group of items within a product line that share one of several possible forms of the product. For instance, palm top is one product type.

 

6. Item/stock-keeping unit/product variant:

A distinct unit within a brand or product line distinguishable by size, price, appearance or some other attributes. For instance, LCD, CD- ROM drive and joystick are various items under palm top product type.

 

Product Classification

Product classification organizes products into four categories based mostly on consumer buying behavior, similarity to competing brands, and price range. Classifying products helps marketers develop strategies that target consumers' specific needs.

 

 Classification of Products

 

There are four types of products and each is classified based on consumer habits, price, and product characteristics: convenience goods, shopping goods, specialty products, and unsought goods.

 

Let's dive into each one in more detail.

 

1. Convenience Goods

Like the Crest toothpaste example, convenience goods are products that consumers purchase repeatedly and without much thought.

 

Once consumers choose their brand of choice, they typically stick to it unless they see a reason to switch, such as an interesting advertisement that compels them to try it or convenient placement at the checkout aisle.

 

These products include gum, toilet paper, soap, toothpaste, shampoo, milk, and other necessities that people buy regularly.

 

2. Shopping Goods

Shopping goods are commodities consumers typically spend more time researching and comparing before purchase.

 

They can range from affordable items, like clothes and home decor, to higher-end goods like cars and houses.

 

These are more one-off purchases with a higher economic impact.

 

3. Specialty Goods

A specialty good is the only product of its kind on the market, which means consumers typically don't feel the need to compare and deliberate as much as they would with shopping products.

 

A good example of this? iPhones.

 

I've been purchasing new iPhones for years, and I haven't paused to consider other smartphone models — because of Apple’s strong brand identity and the perception I have of its product quality.

 

4. Unsought Goods

Finally, unsought products — goods that people aren't typically excited to buy. Good examples of unsought goods include fire extinguishers, batteries, and life insurance.

 

People will typically buy an unsought good out of a sense of fear or danger. For instance, you wouldn't go on the market looking for the "new and best" fire extinguisher. You'd only purchase one due to the fear of a potential fire. Alternatively, some unsought goods, like batteries, are bought simply because the old ones expired or ran out.

 

What is Product Mix?

Product mix, also known as product assortment or product portfolio, refers to the complete set of products and/or services offered by a firm. A product mix consists of product lines, which are associated items that consumers tend to use together or think of as similar products or services.

 

Dimensions of a Product Mix Decisions

 

1. Width

Width, also known as breadth, refers to the number of product lines offered by a company. For example, Kellogg’s product lines consist of: (1) Ready-to-eat cereal, (2) Pastries and breakfast snacks, (3) Crackers and cookies, and (4) Frozen/Organic/Natural goods.

 

2. Length

Length refers to the total number of products in a firm’s product mix. For example, consider a car company with two car product lines (3-series and 5-series). Within each product line series are three types of cars. In this example, the product length of the company would be six.

 

3. Depth

Depth refers to the number of variations within a product line. For example, continuing with the car company example above, a 3-series product line may offer several variations such as coupe, sedan, truck, and convertible. In such a case, the depth of the 3-series product line would be four.

 

4. Consistency

Consistency refers to how closely related product lines are to each other. It is in reference to their use, production, and distribution channels.

What is A Product Line?

According to Philip Kotler, a product line can be defined as “a group of products that are closely related because they function in a similar manner, and sold to the same customer groups, are marketed through these same types of outlets, fall within given price range.”

 

In the above definition, Philip Kotler emphasizes a few points, which I want to discuss below:

 

Closely Related Products. In any product line, the products are closely related. For example, Pepsi has a Beverages product category which includes Pepsi, Dew, Aquafina, Brisk, and many more. These products are related and target a specific group of people and preferences.

 

Product line Decisions

The following types of product line decisions are related to the product line strategies that are planned activities of adding and deleting a particular product from the line.

 

Line Stretching Decision. Product line stretching means to lengthen the current product line. It has three dimensions downward, upward, and both-ways.

 

Downward Stretching means adding a new product to the current line, but at a lesser price, for example, Mercedes in a joint venture with Swatch, introduced a $10,000 Smart Micro Compact Car.

Upward Stretching means adding new products but at higher prices. Companies stretch upward because they want prestige, growth rate, or high-profit margins. For instance, General Electric successfully added its current Monogram premium kitchen appliance to target the higher-end consumer.

Two-way Stretching means adding new products in both directions. Marriot did this significantly and started the Renaissance Hotel target high-end consumer and Town suites to cater to the needs of lower-end consumers.

Line Filling Decisions means adding new products to the same product range to use excess capacity, increase customer base, extra profit, and keep competitors away. Sony added waterproof and solar-powered Walkman to its current Walkman line.

 

Line Pruning Decision means to reduce the depth of a product line by removing unprofitable products from the existing lines. Crystal Pepsi launched in the market and discontinued after some time. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit-3

Pricing: Setting the price, pricing process, pricing methods, Adapting price: Geographical pricing, price discounts and allowances, promotional pricing, discriminatory pricing, product mix pricing.

 

Meaning of Pricing:

Pricing is a process of fixing the value that a manufacturer will receive in the exchange of services and goods. Pricing method is exercised to adjust the cost of the producer’s offerings suitable to both the manufacturer and the customer. The pricing depends on the company’s average prices, and the buyer’s perceived value of an item, as compared to the perceived value of competitors product.

 

Every businessperson starts a business with a motive and intention of earning profits. This ambition can be acquired by the pricing method of a firm. While fixing the cost of a product and services the following point should be considered:

·         The identity of the goods and services

·         The cost of similar goods and services in the market

·         The target audience for whom the goods and services are produces

·         The total cost of production (raw material, labour cost, machinery cost, transit, inventory cost etc).

·         External elements like government rules and regulations, policies, economy, etc.,

Objectives of Pricing:

Survival- The objective of pricing for any company is to fix a price that is reasonable for the consumers and also for the producer to survive in the market. Every company is in danger of getting ruled out from the market because of rigorous competition, change in customer’s preferences and taste. Therefore, while determining the cost of a product all the variables and fixed cost should be taken into consideration. Once the survival phase is over the company can strive for extra profits.

Expansion of current profits-Most of the company tries to enlarge their profit margin by evaluating the demand and supply of services and goods in the market. So the pricing is fixed according to the product’s demand and the substitute for that product. If the demand is high, the price will also be high.

Ruling the market- Firm’s impose low figure for the goods and services to get hold of large market size. The technique helps to increase the sale by increasing the demand and leading to low production cost.

A market for an innovative idea- Here, the company charge a high price for their product and services that are highly innovative and use cutting-edge technology. The price is high because of high production cost. Mobile phone, electronic gadgets are a few examples.

 

What is Price Setting?

Price is the amount of money charged for a product/service or Total sum value of exchange the consumer offers for using a product/service. Price is one of the main factors which affect the consumer’s buying decision. Particularly in price sensitive segments proper price setting plays a major role in the success of the product or the service offered. High price will make the buyer to look for other options. On the other side low price might give an impression that the product might be of low quality. So marketers must be very careful in setting the correct price.

 

Pricing Process

 

The following steps comes under pricing process

 

Step 1: Selecting the pricing objective

Pricing can make reaching the company’s positioning goals easier. If the company has to work over its capacity or handle tough competition, the price of the product would need to take into account two factors. The variable costs and a part of the fixed cost.

 

Although short-term, this strategy can help boost initial performance for companies who are introducing revolutionary products or services.

 

If a company is looking to analyze in the profit, it can set a higher price by considering costs and the competition. On the other hand, if a company is looking to improve and analyze in its market share, it will set a lower price to generate maximum volume.

 

However lucrative, this strategy can be risky, as it can cause consumer-related or legal issues.

 

Step 2: Determining demand

According to the law of economics, there’s a definite demand for a product at every price level. However, this law depends on the nature of the product in question. For instance, demand rises with the price increase for luxury goods, while the demand for a commodity will fall as the price rises.

 

What companies must do is plan the demand curve while understanding price sensitivity. It is possible to estimate the demand curve by analyzing historical data or performing price-related tests. That way, a company can gain a deeper insight into how much the consumers are willing to pay for a specific product or service.

 

Step 3: Estimating costs – ensuring profits

In order to continue working successfully, companies need to manage their costs so that they are left with a good profit margin. Therefore, to achieve this, a company needs to establish a production level at which it will be able to maintain its fixed and variable costs.

 

In general, the cost per unit decreases as production level increases. That is simply due to the learning curve effect that comes with increased experience. So to ensure you profit with this strategy, you need to allocate the costs and set the price accordingly.

 

Step 4: Analysing Competitors’ Costs, Prices, and Offers

Every company has to track its competitors carefully. That especially goes for pricing, costs, and promotional offers. Companies need to know just how much their competitors’ prices can fluctuate in comparison to their own. They also need to be ready to adjust to those fluctuations with their own offers.

 

Step 5: Choosing your pricing method

There are several ways to set the price for your products or services.

 

These are the most popular ones:

·         The markup method means that you’re setting a price based on your desired profit level.

·         Target return means that you’re setting a price based on the company’s desired ROI.

·         Perceived value is as simple as setting a price based on how much your consumers believe your product or service is worth to them in reality.

·         There are also auction type pricing and group pricing methods, but they are less popular.

 

Step 6: Determining the final price

The previous steps will help you set a price, but the final word goes to your consumers. Do market research to make sure that you’re not under or overcharging for your products or services.

 

What is Pricing Method?

Pricing method is a technique that a company apply to evaluate the cost of their products. This process is the most challenging challenge encountered by a company, as the price should match the current market structure and also compliment the expenses of a company and gain profits. Also, it has to take the competitor’s product pricing into consideration so, choosing the correct pricing method is essential.

 

Types of Pricing Method:

The pricing method is divided into two parts:

 

1. Penetration pricing

It’s difficult for a business to enter a new market and immediately capture market share, but penetration pricing can help. The penetration pricing strategy consists of setting a much lower price than competitors to earn initial sales. These low prices can draw in new customers and take away revenue from competitors. While your company will likely take a loss at first, you can earn new customers and turn them into loyal customers once you start raising your prices again. Companies like internet and smartphone providers use this strategy to gain market share.

 

Pro: Market penetration is much easier than entering with an average price, and you can quickly earn new customers.

 

Con: It’s not sustainable in the long run and should only be a short-term pricing strategy.

 

Example: A new cafe opens up in town and offers coffee that is 40% cheaper than any other cafe in the area.

 

2. Skimming pricing

Businesses that charge maximum prices for new products and gradually reduce the price over time follow a skimming strategy. Prices drop as products end their life cycle and become less relevant. Businesses that sell high-tech or novelty products typically use price skimming.

 

Pro: You can maximize profits of new products and make up for production costs.

 

Con: Customers may become frustrated that they purchased at a higher price and watch as the price gradually declines.

 

Example: A home entertainment store starts selling the latest, most advanced television well above market price. Prices then gradually decrease over the year as newer products come to market.

 

3. High-low pricing

High-low pricing is similar to skimming, except the price drops at a different rate. With the high-low pricing method, the price of a product drops significantly all at once rather than at a gradual pace. Retail businesses that sell seasonal products typically use a high-low strategy.

 

Pro: You can rid your inventory of out-of-date products by discounting them and putting them on clearance.

 

Con: Customers may wait for impending sales rather than purchasing at full price.

 

Example: A boutique clothing store sells women’s sundresses at a high price during the summer and then puts them on clearance once autumn arrives.

 

4. Premium pricing

Premium pricing occurs when prices are set higher than the rest of the market to create perceived value, quality, or luxury. Customers are willing to pay a premium price when they know the brand name and have a positive brand perception. Companies that sell luxury, high-tech, or exclusive products—like businesses within the fashion or tech industry—often use the premium pricing technique.

 

Pro: Profit margins are higher since you can charge much more than your production costs.

 

Con: This type of pricing strategy only works if customers perceive your product as premium.

 

Example: A beauty salon builds up credibility within its market and offers its services for 30% higher than its competitors.

 

5. Psychological pricing

Psychological pricing strategies play on the psychology of consumers. In a way, you are luring in customers by slightly altering price, product placement, or product packaging. Some psychological pricing techniques include setting the price to $9.99 rather than $10, or offering a “buy one, get one free” deal. For example, 90% of retail prices end with either “9” or “5.” Nearly any type of business can use this strategy, but retail and restaurant businesses most commonly employ this method.

 

Pro: You can sell more products by slightly tweaking your sales tactics without losing profits.

 

Con: Some customers may perceive it as being tricky or salesy, which could potentially tarnish your reputation or lead to missed sales.

 

Example: A restaurant sets a gourmet hamburger’s price at $12.95 to lure customers into purchasing at a perceived lower price compared to $13.

 

6. Bundle pricing

Bundle pricing is selling two or more similar products or services together for one price. Bundling is an effective way to upsell additional products to customers or add value to their purchase. Restaurants, beauty salons, and retail stores are among the many businesses that apply this strategy.

 

Pro: Customers discover new products they weren’t initially planning to buy and may end up purchasing them again.

 

Con: Products that are sold within a bundle will be bought less often individually since consumers are saving money on a bundled purchase.

 

Example: A taco cantina sells tacos, tortilla chips, and salsa individually, but offers a discounted price if customers buy an entire meal with all of these items.

 

7. Competitive pricing

The competitive pricing strategy sets the price of your products or services at the current market rate. Your pricing is determined by all other products in your industry, which helps you stay competitive if your business is in a saturated industry. You can also decide to price your products above or below the market rate, as long as it’s still within the range of prices set by all competitors in your industry.

 

It’s worth noting that 96% of consumers compare prices before purchasing, which gives you an opportunity to win over customers with a price slightly below the market average.

 

Pro: You can maintain market share in a competitive market and attract customers who are interested in paying slightly less than your competitors’ rates.

 

Con: You need to diligently watch average market prices to maintain a competitive advantage for price-conscious consumers.

 

Example: A landscaping company compares its prices to local competitors and sets its prices below the market average to attract price-sensitive customers.

 

8. Cost-plus pricing

Cost-plus pricing involves taking the amount it cost you to make the product and increasing that amount by a set percentage to determine the final price. You can work backwards to determine your markup percentage by first figuring out how much you want to profit from each product sold.

 

Pro: Profits are more predictable since you’re setting your markup price to a fixed percentage.

 

Con: Since this approach doesn’t account for external factors, like your competitors’ pricing, or market demand, you may miss out on sales if you set your markup percentage too high.

 

Example: A pizza shop adds up the cost of its ingredients and labor, then sets the pizza price to receive a 20% profit margin.

 

9. Dynamic pricing

Dynamic pricing matches the current market demand for a product. This pricing strategy most often occurs when the product at hand fluctuates on a daily or even hourly basis. Industries like hotels, airlines, and event venues set different prices daily and apply this strategy to maximize profits.

 

Pro: You can increase overall revenues by raising prices when demand is on the rise.

 

Con: Dynamic pricing requires complex algorithms that small businesses may not have the ability to produce.

 

Example: A boutique hotel raises its room rates for one weekend because there is a popular summer festival in town.

 

Adapting Price

Price Adaptation Strategies

Price is not only an element that displays the value of the product; it is more. It can generate interest among customers and is a great way to do promotion.

 

As a good marketer, you should understand the changing market's nuances and changing consumer behaviour and come up with pricing strategies that can best suit your customer. Understanding price adaptation strategies can help you do that.

 

Let us see what are the various approaches to pricing, along with some interesting examples.

 

Geographical Pricing

Geographical Pricing is a way of pricing your product depending upon the location of your buyer. You can sell your product at different prices in different locations.

 

For example, a product being sold in India at ₹100 can be charged at $2.47 (₹180) in the US. Not only price can differ within countries, but it can also vary within cities or districts.

 

Geographical pricing is affected by the following aspects:

 

·         Transportation or shipping cost

·         Consumption levels of the consumers

·         Price sensitivity of the consumers

·         Presence of competitors

·         Exchange rates

Example: Coca Cola

 

Coca Cola is a well-known brand all over India. A 600 ml bottle of Coca Cola is priced at ₹38. However, the Indian rural market is far more different than the urban market in terms of purchasing power and consumption levels. To cater to the needs of India's rural market, Coca Cola adopted a geographical pricing strategy and priced a 200 ml bottle for ₹5.

 

Promotional Pricing

A promotional price adaptation strategy is the approach of reducing the price of the product on a temporary basis to attract customers to buy your product.

 

The types of promotional price adaptation strategy are as follows:

 

Loss-leader pricing: This pricing is mainly adapted to get consumers in the store and increase brand awareness. In this case, the prices of the products might be even lower than the cost of their production, but the strategy is such that the lower price of the product is what bring consumers in the store and they buy in volume. Look at the following video to understand more about loss-leader pricing.

 

Special Event Pricing: Remember headlines like “This Diwali Season, get everything at 50% off” or “Enjoy a candlelight dinner with your Valentine under just ₹999”. This pricing is changed or adapted based on any special event to bring customer traffic.

Special Customer Pricing: This is based on the type of customers. Generally, loyal customers are said to gain the most benefits. For example, a gold card member at Pantaloons might get larger discounts than a green cardmember.

Cash Rebates: This pricing includes giving refunds to customers who buy from you within a specified time. For example, you give a 20% discount to the customer at the time of purchase of a cell-phone.

Low-Interest Financing: Here, you do not cut the price of your product, but you give low-interest financing. An example of this is smartphone companies providing easy EMIs with a low-interest rate.

Warranties and Service Contracts: You can increase your sales by giving extended, low cost or free warranties and service contracts to the customers. Look at the image below for example,

 

Psychological discounting: Her you play with the customer’s mind a little by excessively increasing the price of the product and then giving heavy discounts. The following image will give you an idea of psychological discounting.

 

Price Discounts and allowances

You can give discounts and allowance on your product to make it more affordable to the consumers or make the product more competitive in the market.

 

Discounts and allowances can lead to early payments, bulk purchases, and off-season purchases. This price adaptation strategy is also very useful in increasing the brand or product awareness, increasing consumer traffic and pushing sales.

 

There are various types of price discount and allowances can you can adapt as your price adaptation strategy which are as follows along with examples:

 

Quantity Discounts: You may offer a quantity discount to your buyer who buys in large volumes. Remember asking for a discount on 2 kg apples like “Bhaiya 100 rupaiye lelo 2 kg apple lugi (I will give 100rs for 2kg rather than 70rs for 1kg)”, quantity discount works like that.

Volume purchases reduce the unit cost of manufacturing, marketing and transporting.

Example of Quantity Discount is as follows:

 

Functional Discounts: The discounts you give to various members across the distribution channel are called functional discounts. They are also called as trade discounts.

In simple terms, functional discounts are those that you give to a distributor or a retailer as incentives to buy from you.

 

Seasonal Discounts: That discounts you might give to your buyers to increase sales in the off-season is called a seasonal discount.

For example, a “Happy Hour”. Restaurants give discounts during lunch hours or tea-time hours when traffic to the restaurant is at the least.

 

Cash Discounts: The discount that you might give to a buyer who pays all bills punctually.

Take a look at your monthly electricity bill; you will see the following column in there.

 

I hope the image makes it quite clear what discount price adaptation strategy means.

Discriminatory Pricing

Another form of price adaptation strategy is discriminatory pricing. In this, you will be charging the same product or service at different prices depending upon the consumer segment, channel, form of the product, location etc.

 

By looking at the types of discriminatory pricing below, you will be better able to understand the discriminatory price adaptation strategy.

 

Customer Segment Pricing: The practice of charging different customer segments, different pricing is called as customer segment pricing. These can be based on gender, age, income etc. For example, look at the image given below, it is purely a gender-based customer segment pricing, where discounts are offered only to the ladies.

 

Product-form Pricing: Pricing based on the different versions or forms of the product is called product-form pricing. For example, a 100gm bottle of Nescafe Classic coffee is priced at ₹290, but the same coffee is priced at ₹10 for a 100mg sachet.

Image Pricing: Giving different prices based on image differences is called image pricing. For example, a company selling something called as moisturizer classic for ₹100, and the same product called as moisturizer crème for ₹200.

Channel Pricing: Prices might differ across various channels such as offline or online, retailer or wholesaler. For example, when you visit a restaurant, a dish would be priced higher than the same dish ordered on Zomato.

Location Pricing: Prices might differ based on location even if the cost of production of the product is the same. An example of this would be, movie theatres, where prices of the seats differ based on their location such that seats in the front row are priced much lower than the seats at the back of the theatre.

Time Pricing: Ever observed that the price of roses goes up like crazy during Valentines, or the concert tickets priced lowered for those who buy one week just after the launch of the tickets. Here, prices are dependent on timing, the timing of when you buy the product.

 

Product-Mix Pricing

The logic of setting or charging a price on an individual product has to be modified when the product is a member of a product mix.

 

Six situations may be distinguished involving product-mix pricing;

 

1. Product-­line pricing,

2. Optional-feature pricing,

3. Captive-product pricing,

4. Two-part pricing,

5. Byproduct pricing, and

6. Product-bundling pricing.

 

Product-Line Pricing

If a company maintains a product line instead of a single product, it may set various prices for a single product in the line to develop different images in the minds of the buyer.

 

For example, an electronics company may carry 21 inches of color television at three price levels. Customers will thus associate three price levels with three types of quality.

 

Optional Feature Pricing

If a company offers optional products or features along with its main products, it can go for optional-feature pricing.

 

For example, a hotel can charge a low price for accommodation and charge high for car rental service being offered by it since guests require transport service in addition to accommodation facilities.

 

Captive-Product Pricing

There are some products that require ancillary or captive products to be used properly, such as a battery for battery-operated toys or films for cameras.

 

Producers of main products may charge high prices for the captive products and warning customers not to use ancillary products manufactured by other companies for guaranteed performance.

 

Two-Part Pricing

This type of pricing is practiced mostly by service firms. They charge a fixed price for the basic service and a variable usage fee for other services.

 

For example, a museum may charge a fixed entry fee and variable fees for seeing different objects or events. Normally the fixed fee is charged low to encourage the purchase of the basic fee, which in turn induce buyers to purchase other services.

 

Byproduct Pricing

Byproducts are sometimes an automatic outcome of the production of certain items such as petroleum from a paint manufacturing plant.

 

A company can price byproducts low to increase its revenue and support its main operation.

 

Product-Bundling Pricing

A seller may offer its bundle of products at a reduced price than the individual prices added together.

 

For example, a tool manufacturer may combine a number of tools together and price the bundle low compared to the individual gadgets’ total price. It will induce buyers to buy the bundle instead of buying a particular one or two items and thus saving money.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit – 4

 

Marketing Channels: The Importance of Marketing channels – Channel design decisions- Channel management decisions – Channel Conflict: Types, Causes and managing the conflict .

 

Marketing Channels

 

Marketing channel is a system which ensures the distribution of the merchandise from the producer to the consumers by passing it through multiple levels known as middlemen. It is also known as channels of distribution. Every product is different from one another and so are their channels of distribution.

Let us take the example of Mondelez India Foods Limited (Cadbury India Limited).

 

Cadbury is India’s most popular chocolate brand and we can easily buy it from any of our next-door grocery stores. But do you know how it reaches each and every part of the country, even to the villages?

 

All this possible because of marketing channels. Cadbury has limited manufacturing units in India. With the help of a well-designed marketing channel, the product reaches the depots located in the various states. From these depots, it is sent to the C&F agents and from there it reaches the distributors located in different cities.

 

The distributors sell the product to the wholesalers and the retailer who finally makes it available to the customers.

 

Definition of Marketing Channels

 

According to Philip Kotler” Every producer seeks to link together the set of marketing intermediaries that best fulfill the firm’s objectives. This set of marketing intermediaries is called the marketing channel”.

 

According to William J Stanton” A channel of distribution for a product is the route taken by the title to the goods as they move from the producer to the ultimate consumers or industrial user”.

 

Nature of Marketing Channels

1.      Pathway or Route: Distribution channel is the route through which goods and services are transmitted from the manufacturers to the consumers.

2.      Flow: In a distribution channel, the goods and services flow in a sequential, smooth and unidirectional manner.

3.      Composition: The channel comprises of intermediaries like agents, distributors, retailers, wholesalers, etc.

4.      Function: The functions of distribution channel are performed by intermediaries. They assist in the transfer of title, ownership, and possession of goods and services between manufacturers and consumers.

5.      Marketing Tool: Distribution channel acts as a medium for screening the external aspects of the marketing organization and for bridging the physical and non-physical gaps which occur while transferring goods from the manufacturers to the consumers.

6.      Supply-Demand Linkage: It bridges the gap between the manufacturers and consumers by eliminating all the spatial and temporal discrepancies related to supply and demand.

Importance of Marketing Channels

1.      Relive from Marketing Problems: They help the producer in his production function by relieving him of marketing problems. Thus, the producer can pay his full attention towards organizing the production function only smoothly to earn a high rate of return.

2.      Information to the Producer: The channels of distribution provide information to the producer regarding the taste and needs of consumers, competition in the market, current market trend and the product conditions for the increased volume of sales because they have complete knowledge of the market.

3.      Storage of Finished Goods: The channels of distribution keep the producer free from the problems of storage of finished goods.

4.      Finance the Producer: Channels of distribution finance the producer as well as the consumer.

5.      Fixing the Price: Channels of distribution assist the producer in fixing the price of a product.

 

Channel Design Decisions

 

Channel design is presented as a decision faced by the marketer, and it includes either setting up channels from scratch or modifying existing channels. This is sometimes referred to as re-engineering the channel and in practice is more common than setting up channels from scratch.

 

The term design implies that the marketer is consciously and actively allocating the distribution tasks to develop an efficient channel. Finally, channel design has a strategic implication, as it will be used as a strategic tool for gaining a differential advantage.

 

Who Engages in Channel Design?

 

Producers and manufacturers, wholesalers, and retailers all face channel design decisions. Producers and manufacturers “look down” the channel. Retailers “look up” the channel while wholesaler intermediaries face channel design from both perspectives. In this chapter, we will be concerned only from the perspective of producers and manufacturers.

 

A Paradigm of the Channel Design Decision

 

The channel design decision can be broken down into six phases or steps. These are:

 

1. Recognizing the need for a channel design decision

 

2. Setting and coordinating distribution objectives

 

3. Specifying the distribution tasks

 

4. Developing possible alternative channel structures

 

5. Evaluating the variable affecting channel structure

 

6. Choosing the “best” channel structure

 

 

Phase 1: Recognizing the Need for a Channel Design Decision

 

Many situations can indicate the need for a channel design decision. Among them are: Developing a new product or product line, Aiming an existing product to a new target market, Making a major change in some other component of the marketing mix, Establishing a new firm, Opening up new geographic marketing areas, Facing the occurrence of major environmental changes and Meeting the challenge of conflict or other behavioral problems

 

Phase 2: Setting and Coordinating Distribution Objectives

 

In order to set distribution objectives that are well coordinated with other marketing and firm objectives and strategies, the channel manager needs to perform three tasks: Become familiar with the objectives and strategies in the other marketing mix areas and any other relevant objectives and strategies of the firm. Set distribution objectives and state them explicitly. Check to see if the distribution objectives set are consistent with marketing and the other general objectives and strategies of the firm.

 

Phase 3: Specifying the Distribution Tasks

 

The job of the channel manager in outlining distribution functions or tasks is a much more specific and situational y dependent one. The kinds of tasks required to meet specific distribution objectives must be precisely stated. In specifying distribution tasks, it is especially important not to underestimate what is involved in making products and services conveniently available to final consumers.

 

Phase 4: Developing Possible Alternative Channel Structures

 

The channel manager should consider alternative ways of allocating distribution objectives to achieve their distribution tasks. Often, the channel manager will choose more than one channel structure in order to reach the target markets effectively and efficiently. Whether single or multiple channel structures are chosen, the allocation alternatives (possible channel structures) should be evaluated in terms of the following three dimensions: Number of levels in the channel, Intensity at the various levels: refers to the number of intermediaries at each level of the marketing channel and Type of intermediaries at each level.

 

Phase 5: Evaluating the Variables Affecting Channel Structure

 

The channel manager should evaluate a number of variables to determine how they are likely to influence various channel structures.

 

These Five basic categories are most important: Market variables, Product variables, Company variables and Intermediary variables

 

1) Market Variables •Market variables are the most fundamental variables to consider when designing a marketing channel. Including: market geography, market size, market density, and market behavior.

 

A) Market Geography: Market geography refers to the geographical size of the markets and their physical location and distance from the producer and manufacturer.

 

B) Market Size :The number of customers making up a market (consumer or industrial) determines the market size. From a channel design standpoint, the larger the number of individual customers, the larger the market size.

 

C) Market Density :The number of buying units per unit of land area determines the density of the market. In general, the less dense the market, the more difficult and expensive is distribution. 

 

D) Market Behavior: Market behavior refers to the following four types of buying behaviors: Like How customers buy, when customers buy, where customers buy and who does the buying? Each of these patterns of buying behavior may have a significant effect on channel structure.

 

2) Product Variables: Product variables such as bulk and weight, perishability, unit value, technical versus nontechnical, and newness affect alternative channel structures.

 

3) Company Variables: The most important company variables affecting channel design are: size, financial capacity, managerial expertise, and objectives and strategies. 

 

A) Size: In general, the range of options for different channel structures is a positive function of a firm’s size. Larger firms have more options available to them than smaller firms do.

 

B) Financial Capacity: Generally the greater the capital available to a company, the lower its dependence on intermediaries.

 

C) Managerial Expertise: For firms lacking in the managerial skills necessary to perform distribution tasks, channel design must of necessity include the services of intermediaries who have this expertise. Over time, as the firm’s management gains experience, it may be feasible to change the structure to reduce the amount of reliance on intermediaries.

 

D) Objectives and Strategies: The firm’s marketing and general objectives and strategies, such as the desire to exercise a high degree of control over the product, may limit the use of intermediaries. Strategies emphasizing aggressive promotion and rapid reaction to changing markets will constrain the types of channel structures available to those firms employing such strategies.

 

4) Intermediary Variables: The key intermediary variables related to channel structure are: availability, costs, and the services offered.

 

A) Availability: The availability (number of and competencies of) adequate intermediaries will influence channel structure.

 

B) Cost: The cost of using intermediaries is always a consideration in choosing a channel structure. If the cost of using intermediaries is too high for the services performed, then the channel structure is likely to minimize the use of intermediaries.

 

C) Services: This involves evaluating the services offered by particular intermediaries to see which ones can perform them most effectively at the lowest cost.

 

5) Environmental Variables: Economic, socio-cultural, competitive, technological, and legal environmental forces can have a significant impact on channel structure.

 

Phase 6: Choosing the “Best” Channel Structure

 

In theory, the channel manager should choose an optimal structure that would offer the desired level of effectiveness in performing the distribution tasks at the lowest possible cost. In reality, choosing an optimal structure is not possible.

 

Why? First, as we pointed out in the section on Phase 4, management is not capable of knowing all of the possible alternatives available to them.

 

Second, even it were possible to specify all possible channel structures, precise methods do not exist for calculating the exact payoffs associated with each alternative.

 

 

Channel Conflict

 

Channel conflict can be explained as any dispute, difference or discord arising between two or more channel partners, where one partner’s activities or operations affect the business, sales, profitability, market share or similar goal accomplishment of the other channel partner.

 

Types of Channel Conflict

The channel conflict can be classified majorly into the following four categories depending upon its flow and the parties involved:

 

Vertical Level Conflict

 

In the vertical level conflict, the channel partner belonging to a higher level enters into a dispute with the channel member of a lower level or vice-versa.

 

For instance, channel conflict between dealers and retailers or wholesalers and retailers.

 

Vertical Level Conflict

 

In the vertical level conflict, the channel partner belonging to a higher level enters into a dispute with the channel member of a lower level or vice-versa.

 

For instance, channel conflict between dealers and retailers or wholesalers and retailers.

 

Horizontal Level Conflict

 

The conflict among the channel partners belonging to the same level, i.e., issues between two or more stockists or retailers of different territories, on the grounds of pricing or manufacturer’s biases, is termed as horizontal level conflict.

 

Inter-type Channel Conflict

 

These type of conflicts commonly arise in scrambled merchandising, where the large retailers go out of their way to enter a product line different from their usual product range, to challenge the small and concentrated retailers.

 

Multi-channel Level Conflict

 

When the manufacturer uses multiple channels for selling the products, it may face multi-channel level conflict where the channel partners involved in a particular distribution channel encounters an issue with the other channel.

 

 

Causes of Channel Conflict

What are the reasons responsible for a channel conflict?

 

Following are some of the key reasons for which the organizations need to face channel conflict:

 

1.      Role Ambiguity: The uncertain act of an intermediary in a multi-channel arrangement may lead to disturbance in the channel of distribution and cause conflict among the intermediaries.

 

2.      Incompatible Goals: When the manufacturer and the intermediaries do not share the same objectives, both work in different directions to meet their ends, this results in channel conflict.

 

3.      Marketing or Strategic Mis-Alignment: Sometimes, two-channel partners promote the manufacturer’s product in a different manner, which created two different images of the same product in the consumers’ mindset, which creates conflicting brand perception.

 

4.      Difference in Market Perception: The manufacturer’s understanding of the potential market and penetration into a specific region or territory, may vary from the perception of the intermediaries, which can create conflict and reduce the intermediary’s interest in capturing that particular market.

 

5.      Change Resistant: When the channel leader plans to modify the distribution channel, the intermediaries may or may not accept this change. Thus, it may result in a condition of discord or non-cooperation.

 

6.      Improper Geographic or Demographic Distribution: If the sales territory has a narrow consumer base, and the channel leader allows many selling partners, they tend to lose interest soon because of low profit and limited sales.

 

Managing Channel Conflict

Consider following these steps when attempting to manage a channel conflict:

 

1. Establish a minimum advertised price

Since a significant number of channel conflicts arise because of ambiguous pricing, creating a minimum advertised price is typically the first step you can take to manage potential channel conflicts. This can motivate distributors by ensuring them you're not planning to undercut them by selling the products online. You can use your brand to enforce minimum advertising prices across the markets in which your company operates, creating a sense of consistency and trust among channel partners.

 

2. Reduce your distribution channels

After ensuring price consistency, you need to take control of your products' distribution. Although it may be tempting to work with as many distributors as possible, this might dilute the market, make them harder to control and ultimately affect your supply chain. A reduced distribution that aims to cover the market's potential through as few partners as possible gives you more control and limits the odds of a channel conflict occurring.

 

3. Control your supply chain

An uncontrolled supply chain may cause unauthorized distributors to sell your products. While this may not seem like a major issue since the products are being sold, they're not motivated to maintain a healthy relationship with you and may ignore your minimum advertised price policy, leading to channel conflict. Working to limit your supply chain to authorized distributors is an effective way of managing channel conflicts.

 

4. Strengthen your brand by offering exclusive products

If you build a powerful brand, you may reduce the chance of channel conflicts occurring. A way to do this without undermining your distributing partners is by launching certain exclusive products on your e-commerce site. This way, you strengthen your own brand and avoid creating a channel conflict because you're not selling the same products as your partners and you're not undercutting them on price.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unit – 5

Introduction to Digital Marketing – Meaning, Definition, Need of Digital Marketing, Scope of Digital Marketing, History of Digital Marketing, Concept and approaches to Digital Marketing, Examples of good practices in Digital Marketing.

Email Marketing – Need for Emails, Types of Emails, options in Email advertising, Mobile Marketing-Overview of the B2B and B2C Mobile Marketing and Social Marketing.

 

 

What Is Digital Marketing?

Digital marketing is an all-encompassing term that consists of digital channels, such as content marketing, SEO, email marketing, social media marketing, mobile marketing and so on, to create elaborate strategies to reach and connect with prospects and customers. An average user consumes content via the television, computer, tablet, smartphone, radio, and other traditional media. This constant exposure to various types of media has led to information overload, further complicating the buyer’s journey. Digital marketing has allowed brands to stay relevant by making themselves visible through different channels and touchpoints. Apart from traditional marketing channels, such as television, newspapers, billboards, and so on, marketers use these digital channels to guide prospects through their purchase journey and keep in touch with their existing customers.

 

Definition

Digital marketing is defined by the use of numerous digital tactics and channels to connect with customers where they spend much of their time: online. The best digital marketers have a clear picture of how each digital marketing campaign supports their overarching goals. And depending on the goals of their marketing strategy, marketers can support a larger campaign through the free and paid channels at their disposal.

 

Need of Digital Marketing

 

1. The Need To Be Seen Online

The primary goal of digital marketing is to make your business visible online. Digital marketing agencies enable your brand to be seen by millions of internet and social media users. Companies need someone to ensure that they have the right and compelling presence on all the online platforms available worldwide.

 

When millions of people see your brand, it enhances the chances of business growth. Otherwise, your business will be static and will not grow in size and scope. To ensure constant and vast growth, digital marketing is inevitable.

 

2. Spread Awareness about The brand

 

Once your brand becomes visible to the masses, the first step is taken. The next crucial step is to tell those people and familiarize them with what your business is all about and what you offer and what you don’t.

 

Doing this will inform your general audience and internet surfers and entice potential clients to enter your business’s sales funnel. The more people that know about your business the better are the chances of converting people into real customers.

 

3. Informing People about New Offers

Hiring a digital marketing agency it is not a one-time thing. Many services of such an agency is a continuous and repetitive thing that you need. One such occasion when you need such services is when you launch a new offer or a range of products.

 

Suppose you don’t have an active social media and internet presence. In that case, most of your followers will not notice the update on your website or social media profile. You may lose the opportunity to grab many potential customers’ attention.

 

4. Being Dynamic In Your Marketing Strategy

 

The classic marketing strategies and methods are not as dynamic and easy to customize and change as digital marketing platforms and plans are. Digital marketing services offer you highly customizable and flexible options to change the plan every time you feel the need.

 

With time, you will need to change your marketing strategy. There can be so many factors that may make you change the way you promote your business. Some elements may be internal such as if you were to change leadership roles or your organization’s culture.

 

Other factors can be external, for instance, a new trend in the world that your competitors are following and gaining success. In these situations, you need to make changes to your strategies. Only the digital world will allow you to make abrupt changes swiftly and efficiently to accommodate these changes.

 

5. Breaking Geographical Barriers

 

Only the digital means of marketing can break physical and geographical barriers. There are no limitations and restrictions of regions and countries to which you can market your brand.

 

Digital platforms make the entire world your potential buyers and customers, no matter where you and your business are located. You can reach the global market without investing a hefty amount in marketing and making millions worldwide familiar with your brand.

 

Scope of Digital Marketing

 

Digital marketing scope in the future is undoubtedly towering as in today’s internet world; online marketing is seen as the most preferred way of marketing to carry on the communications.

 

If you closely observe the statistics, internet marketing boomed between 2005 and 2008 and has never stopped growing ever since. So, you can analyze what future businesses will look like in digital marketing.

 

By following today’s trend, five key channels play a vital role in deciding the scope of digital marketing in the future, and they are:

 

·         Video Marketing

·         Email Marketing

·         SEO

·         Mobile Marketing

·         Social Media Marketing

 

History of Digital Marketing

 

The term Digital Marketing was first invented and used in the year 1990. At that time Web 1.0 platform was developed which helped users to find out their necessary information. But, it did not allow them to share this information over the web. This time the marketers and the experts are unaware the uses of digital marketing. They were not sure whether their strategies would work or not because at that time the internet had not yet seen widespread deployment.

 

Then, in 1993, the first clickable web-ad banner went live.  At that time, HotWired purchased a few banner ads for their promotion and advertising. This marked the beginning of the digital marketing era.

 

In 1994, some new technologies (First e-commerce transaction was done over the internet) were invented and entered the market with a new mission. Yahoo was also launched in this year. Within one year of its launching, it received 1 million hits. Yahoo has changed the definition of digital marketing, and the companies have tried to optimize their websites so that they can get a better rank in search engine.

 

In 1996, some more search engines and tools like HotBot, LookSmart, and Alexa were launched.

 

The first social media site Sixdegrees.com was launched in the year 1997.

 

The year 1998 was the golden year for digital marketing as Google was launched in this year. Moreover, in this year also Microsoft launched MSN, and Yahoo launched Yahoo web search.

 

Two years later (in 2000), the internet bubble burst and all the smaller search engines were wiped out. This creates more space and opportunities for the giants in the business.

 

Then, the professional social media network LinkedIn was launched in 2002.

 

The year 2003 was witnessed the release of WordPress and the launch of MySpace.

 

In 2004, Gmail was launched. The same year Facebook has gone live, and Google went public.

 

Next, YouTube was launched in the year 2005.

 

The year 2006 was another remarkable year because search engine traffic was reported to have grown to about 6.4 billion in a single month. This year Microsoft launched an MS live search and simultaneously, Twitter was also launched. At the same time, Amazon e-commerce sales have crossed near about $10 billion.

 

In 2007, Tumblr was launched. Moreover, web streaming service Hulu was also founded in this year. Mobile giant Apple launched its iPhone in the same year.

 

In the year 2008, Spotify was launched and Groupon went live.

 

In 2009, Google launched Instant for real-time search engine results. Google introduced products like AdWords, which are 3 line ads that show up at the top or to the right of search engine results, and AdSense which is a cost-per-click advertising scheme. In time, Google started to target ads based on the interests of the customers and thus became a key player in the world of digital business.

 

In 2010, Whatsapp was launched along with Google Buzz.

 

In 2011, Google+ and Google Panda were launched. People have already started to spend time on these mediums, and these mediums have surpassed the television viewership too.

 

2012 is the year of social media. The companies have increased their social media budget up to 64%, and Google knowledge graph has also launched. Myspace and Facebook are the popular social media sites among the people. The companies have realized that these sites will help them in spreading up their businesses over the internet and thus, they were desperately trying to promote their products and brands on various social media channels. They have also tried to leverage social media to their businesses.

 

In 2013, Yahoo acquired Tumblr.

 

In 2014, the number of mobile and smartphone users had surpassed the number of PC users. Facebook messenger app along with tailored ads on LinkedIn and iWatch was launched. During this year, Facebook acquired Whatsapp.

 

In 2015, Snapchat has launched its Discover feature. In this year several new technologies like analytics, wearable tech, and content marketing have also invented. Facebook has also launched its “Instant articles” in this year.

 

The cookie was another significant milestone in the field of digital marketing. The first cookie was designed to record user habits. The use of the cookie has changed over the years, and cookies today are coded to offer marketers a variety of ways to collect literal user data.

 

Popular social networking sites in 2017 are Facebook, YouTube, Instagram, Twitter, Reddit, etc. Facebook has a user base of 2.01 billion (as per the record of June 30, 2017).

 

What is Email Marketing?

 

Email marketing is using e-mail as a means of promoting your products or services. This can be direct one to one e-mails but typically it relates to sending e-mails to a group of people that have subscribed to a mailing list.

 

Email marketing is a digital marketing channel that engages prospects at various stages of the funnel, engaging and maintaining their interest. Because of its versatile nature, email is a vital tool for online retailers who want to stay top of mind with consumers. Email marketing is a good and cheaper alternative to sending direct mail (via the post).

 

For example some people may subscribe to receive a regular newsletter from you. In general the

term “Email marketing” is used to refer to:

➢  Sending promotional e-mails in order to acquire new customers or convincing current customers to purchase something immediately.

➢  Sending emails specifically designed to enhance relationships with current or previous customers, to encourage customer loyalty and repeat business.

➢  Adding advertisements to others companies’ e-mails (on a partnership basis) to gain exposure within a new market.

 

Need of Emails

 

Checklist for an Effective Marketing Email:

 

Individual needs  for e-commerce businesses vary, but the following  elements of marketing emails have been proven to improve the overall conversion rate.

 

         One Topic: Emails with multiple marketing messages are seen as "busy." Restricting them to one topic focuses the reader on the actual message and tends to result in measurably higher revenue per message.

         Attractive  Design: Simple designs  that  complement  the message without  distracting from it are best. Remember that many emails will be opened on mobile devices and many accounts have disabled images.

         A Clear Call To Action: Readers should never be wondering what to do next, especially when you want them to purchase something.

         The Result of Experience: Every campaign should teach something new about customer behavior and what elements (designs, offers, etc.) they are responsive to. Use this experience to improve the messages on a regular basis.

 

Types of Email:

 

1.   Promotional Email:

Promotional email is to promote a product or service, usually to entice customers to make a purchase. Every Business almost would enjoy this benefit. Promotional emails are short and sweet. You might want to create a special graphic to complement your email copy; otherwise, it’s not a time consuming process.

 

2.   New inventory email

Its Purpose is to let your customers know about new items. It falls under the promotional email umbrella. You’re updating customers, but also hoping for a sale. Any business can tell customers about a new item in stock. Fashion and retail businesses may get the most bang for their buck. Time is spent taking a good picture of the new product, but these don’t require a lot of text.

 

3.   Newsletter email

Newsletter email purpose is to inform customers about company news, improve brand awareness and build a relationship with your core audience. Almost Business would benefit with this type of email. It takes a bit of time to create a solid newsletter, but it’s a valuable marketing tool.

4.   Welcome email

Its purpose is to welcome new email subscribers to the family and establish a good relationship. Creating the email doesn’t take long, but you need to know when a new customer signs up.

5.   Product advice email

The purpose of this mail is to offer your customers advice on how to get the most from your business or product. At the same time, to establish your authority in the industry. This kind of email has  more information, so  your time will go toward writing and proofreading.

 

6.   Educational email

Educational Email provide customers with industry knowledge that’s connected to your business or product. It helps build relationships and trust between your business and your customers. It takes time to brainstorm ideas and to create a sharp email.

7.   Reorder email

Reorder  Email  is  To  remind  customers  that  it’s  time  to  reorder  a  certain  product. Any business that sells products or services needed on a regular basis would benefit. Examples include products like printer cartridges, contacts, pet medications and vitamins. Basic text and images are needed.

8.   Testimonial Email:

Its Purpose is to reinforce how valuable your business or product is through customer feedback. Every business would benefit with this mail and It takes a bit of time to collect testimonials. You may need to be persistent to get customers to give them to you.

9.   Survey email

Survey Email is to collect helpful information you can use to improve the customer experience.    Any    business    looking    to    better    itself    can    use    this    email. We have to spend time creating the survey and writing an email with a link to the survey.

 

Opt- In E-mail Advertising

 

What Is Opt-In Email Marketing?

 

Opt-in email marketing is a marketing campaign that uses permission-based email-collection methods to capture email addresses from willing consumers. Once you have a potential customer’s email, you can add it to a marketing list based on the customer’s position in the sales funnel.

 

For instance, if your prospect signs up for your email list during his or her first interaction with your brand, you might segment that consumer into a list that introduces your online courses and provides actionable tips for interested consumers.

 

However, if your prospect joins after buying a course, you could send emails about getting the most out of your course material or about applying the information you teach to the real world.

 

Opt-in email marketing isn’t just a way to capture email addresses so you can blast prospects

with sales copy. In fact, that’s the worst way to use it.

 

Instead, use opt-in email marketing to nurture your prospects through the sales process.

 

➢  Invite prospects to interact: Let your email marketing recipients know where to find you online, from your social media accounts to your blog.

➢  Encourage customers to convert: Provide sound reasons why a prospect should buy one of your courses. Use real-world examples to illustrate your points whenever possible.

➢  Follow up with prospects: If a prospect abandons his or her shopping cart or goes inactive for a while, reconnect with a nurturing email that reminds him or her that you exist.

➢  Send promotions: Offer discounts and other promotions that encourage prospects to buy your course for the first time or to buy a subsequent course.

➢  Set up your opt-in email marketing campaign based on your specific objectives. Every course creator has different goals, so you don’t want to copy someone else’s campaign. Instead, think of the goals you want to reach, then design emails that help push customers to help you reach them.

➢        Gain brand visibility: If you want to establish yourself as an authority figure in your industry and make more people aware of your brand, encourage your email opt-ins to share your messages. The more people forward your emails, the more signups you get.

➢    Boost sales: Use promotions, bundles, and discounts to get people to finally hit the “buy”

button

➢  Increase  upsells: Encourage  customers  to  buy  multiple  courses  and  other  digital products.

➢Check on progress: Find out where your customers are in their online courses and whether they need any assistance or have any feedback.

➢Solicit reviews: Ask your customers to review your courses online. You’ll get backlinks as well as more brand visibility. Plus, prospective customers will feel more comfortable buying from you.  In  fact,  nearly  85  percent  of  respondents  to  a  study  stated  that they trusted online reviews as much as they valued recommendations from friends.

 

 

You’ll continually adjust your email marketing campaign as you gain more subscribers and measure the results. Even though you’re using an opt-in email approach, you can’t always predict whether customers will open, read, or engage with your emails.

 

Keeping track of key metrics can help.

 

➢  Open  rates: If  customers  don’t  open  your  emails,  you  might  need  to  create  more compelling subject lines or introduce an incentive early in your emails.

➢  Engagement rates: Customers open your emails, but they don’t do anything else. If this happens, add more attractive calls to action using freebies and discount codes. Get people to click on links through incentives.

➢  Conversion rates: Do customers buy your online courses after reading your emails? You can track conversions through email and landing pages to figure out how well you’re converting.

 

 

Mobile Marketing

 

Meaning of Mobile Marketing

 

Mobile marketing is a way to promote products or services through mobile devices. With this strategy, target consumers access location and time-sensitive customized content that promotes certain products, services, or ideas.

 

Definition

 

According to Andreas Marcus Kaplan, Marketing Professor at the ESCP Europe School of Business, mobile marketing refers to all marketing endeavors done via a far-reaching network to which target customers are ever-connected via their mobile devices.

 

 

Importance of Mobile Marketing

 

·         Users spend 89% of their time on mobile apps, making mobile devices dominate communication.

·         The overall view and amount of content on mobile devices are simplified due to their smaller size. As mobile devices are smaller and lighter than computers, users can easily carry them everywhere and make purchases at any time they want.

·         Mobile hastens the time to purchase by 20 percent.

·         Compared to a year ago, 50 percent of smartphone users expect to buy something immediately while using their devices.

·         Ninety-one percent of smartphone users plan purchases or buy individual items after seeing relevant ads.

·         2/3 of customers who use smartphones are likely to purchase from businesses that have apps or mobile websites with content customized to their location.

·         Forty percent of online transactions occur on mobile devices.

 

Benefits of Mobile Marketing

 

Compared to other forms of marketing, mobile marketing has several significant benefits.

 

·         Text messaging is easy and comparatively cheap. If we take traditional advertising methods such as TV ads or printing ads into account, SMS is obviously cheaper. Like ad formats such as PPC or email marketing campaigns, text messages are pretty easy to send and they require no technical skills.

·         SMS has a high CTR. Since people consider communicating via their mobile devices more private than emailing for example, they check their phones more often and never ignore messages. Users only share their phone number with their favorite companies, so they are already waiting for your promotions.

·         Especially useful for local businesses. Local companies can easily tell their loyal customers about hot deals, the latest arrivals, and special offers via SMS. Clients won’t miss this chance to drop in to check out your offers.

 

Types of Mobile Marketing

 

·         Mobile app marketing. Mobile apps allow businesses to include ads in specific mobile application designs. Facebook is an excellent example of ads in an app.

·         In-game advertisements. This approach refers to all advertisements on mobile devices that pop up when certain games are opened or in progress. These ads can appear as full-image ads, banner pop-ups, or video ads that show up during loading screens.

·         Quick-response barcode (QR codes). These barcodes are scanned using the camera of a phone, and then the customers are redirected to the linked site from where they can see more information regarding a particular brand.

·         Mobile banner ads. These banners are pretty much the same as the ones on the desktop, only that they are adequately smaller to fit on the screens of mobile devices.

·         Proximity or Bluetooth marketing. With this approach, consumers get location-specific ads enabled from the Bluetooth on their devices.

·         Voice marketing. This is when businesses use computer produced and automated calls to promote their goods or services. It is up to the customer to decide whether to hang up or listen to the phone call.

·         SMS marketing. This method of mobile marketing is, by far, the most common. Marketers use this medium to reach out to customers with offers and other relevant information via their mobile gadgets.

Business to Business (B2B)

 

“Business to Business Marketing” ?

Let us first understand the meaning of Business.

 

Any organization or firm actively involved in the transaction of goods and services to the consumers/end users is known as business.

 

As the name suggests “Business to Business Marketing” (B2B Marketing) refers to the exchange of either goods or services or both between two businesses (organization/firm). “Business to business marketing” also known as industrial marketing involves the sale of goods and services by one organization to the other which in turn either further sells them to the consumers or use them to support their own system.

 

·         In layman’s language business to business marketing is nothing but the transaction of goods and services between businesses/organizations/firms.

 

·         Transaction between a manufacturer and a wholesaler often comes under Business to Business Marketing.

 

 

Business to Customer (B2C)

Business to customer marketing, commonly known as B2C marketing, is a set of strategies, practices, and tactics that a company uses to push its products or services to customers. B2C campaigns don’t just focus on the benefit or value that a product offers, but also on invoking an emotional response from the customer.

 

B2C marketing works on the basis that customers look for goods or services to meet an immediate need. Therefore, they tend to purchase without doing much research on the product or service. With B2C purchases, users typically complete their purchase within the first hours or days of becoming aware of a product or service. For a successful B2C campaign, a business owner should understand their customers’ buying habits, trends in the market, and what strategies the competitors use.

 

B2C promotions should be bright, easy for consumers to understand, and focused on solving the precise problem faced by their customers. With this information and the right tools, it is easy to create a campaign that triggers the right reactions from customers and as a result, drives sales.

 

B2C marketing is beneficial in the following ways, it:

 

·         Boosts website visits: B2C campaigns are created to woo prospective customers into visiting your brand’s website to earn more about your brand.

·         Helps brands grow their subscriber list: when the number of leads that visit a business’s website increases, the number of new subscribers also goes up.

·         Offers more refined interactions with customers: with knowledge about your target audience, B2C companies can send more specific messages at strategic times. Here segmentation proves to be useful.

·         Gives businesses better rankings on search engines: by using targeted keywords, a website can increase its position in search results. As a result, there are more chances for users to find YOUR company.

·         Increases conversion and brand awareness: B2C marketing strategies enable businesses to reach and connect with large audiences through bulk emailing, social media outreach, and other channels. As a result, a brand becomes popular, and conversion rates increase.

 

 

What is Mobile Social Media Marketing?

Mobile social media marketing is a technique of marketing via social media on mobile devices. It is researched that nearly 71% users access social media on mobile devices. Mobile devices are over taking desktops/laptops as they come handy to users; thus, making them a great channel for advertising and so are the social media get influenced by them. Advertisers find mobile devices more convincing ground than web and consider it as the perfect medium for marketing.

 

How does Mobile Social Media Marketing Work?

Create a great mobile social media policy by using the following points −

 

·         Amaze your customers with a catchy heading, image, or a punchline.

·         Share visual media like pictures and videos via social platforms.

·         Engage social media users through your mobile app.

 

 

 

Benefits of Mobile Social Media Marketing

1.      Social media is shining on every mobile device, regardless of their size and inherent technology. You can use the following aspects of social networking for reaching out to a larger customer base

 

2.      Convenience − People find mobile social networks handy over the desktops. It has now become a trend to tweet or update status via smartphones.

 

3.      Intimacy − It offers customers a feel of personal touch. People find smartphones as personal assets.

 

4.      Wider Reach − Presence of mobile devices are much wider and remote than any other device of similar kind. Thus, providing you higher extent of exposure.

 

5.      Quick Response − Customers’ response is much faster.

 

6.      Well defined Strategy − Mobile marketing can be very well strategies via social media and targeted customers can be reached through demographic data. This may give you an idea of audience behavior.

 

7.      Real-time Action − you get real-time actions. This gives you an opportunity to focus high on certain factors and improve other aspects.