Marketing Philosophy

 Marketing management is the conscious effort to achieve desired exchange outcomes with target market. But what philosophy should guide a company’s marketing efforts ? What relative weights should be given to the interests of the organization, the customers and society ? So, marketing activities should be carried out under a well thought philosophy of efficiency, low cost and mass distribution. There are five competing concepts under which organizations conduct marketing activities. These are discussed below.    

1.  Production concept :

            The production concept is one of the oldest concept in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This concept hugely used in the developing countries. It is also used when a company wants to expand the market.  

2.  Product concept :

            The product concept holds that consumers will favour those products that offer the most quality, preference or innovative features. In this concept price of the product is not an important factor. Managers in these organization focus on making superior products and improving them over time. They assume that buyers admire well made products and can appraise quality and preference. Company first try to produce a better quality product with the help of their engineers but they do not consider the needs and wants of the consumer. Here company think that if they are able to product a better quality product then they can sell it easily in the market.    

3.  Selling concept :

            The selling concept holds that normally consumers are not interest to buy enough of the company’s product, until they are forced. The company must therefore, undertake an aggressive selling and promotional effort. This concept assume that typically consumers are not buy much more and must be stimulated to buy more. It is also assume that company has an efficient and effective selling and promotional tools to stimulate more buying.

             The selling concept is practiced most aggressively with unsought goods, that buyers normally do not think to buy it. Such as insurance, encyclopedias. These industries have preferred various sales techniques to locate prospects and disclose the product benefits to the prospects. The selling concept is also practiced in the non - profit organizations to collect funds and political parties. Most firm practice the selling concept when they have over capacity. Their aim is to sell what they make rather than what market wants.       

4.  Marketing concept or consumer oriented concept :

            The marketing concept or consumer oriented concept holds that the key to achieving its organizational goals consist of the company being more effective than competitors in creating, delivering and communicating customer value to its chosen target market. Marketing concept rests on four pillars. These are discussed below.

            (a) Target market : First company segmented total market according to some effective basis. Then they choose a target market, which market is more profitable and at the same time it is easy to serve. Company do best when they choose their target market carefully and prepare effective marketing programs. 

            (b) Customer needs : A company can define its target market but fall to correctly understand the customers needs. Understanding customer needs and wants is not always simple. Some customers have needs which they are not fully conscious, or they can not articulate these needs, or they use some words that requires some interpretations. So, it is essential to find out the actual needs and wants of the customers.

            (c) Integrated marketing : When all the company’s departments works together to serve the customer’s interest, the result is integrated marketing. Integrated marketing takes place on two levels. First, the various marketing functions - sales force, advertising, customer service, product management, marketing research - must together. Second, marketing must be embraced by the other departments, they must also have to think about customer.    

            (d) Profitability : The ultimate purpose of the marketing concept is to help organizations to achieve their objectives. In the case of private firms, the major objective is to earn profit. In the case of non - profit or public organizations, it is surviving and attracting enough funds to perform useful work.

 5.  Societal marketing concept :

            The societal marketing concept holds that the organization’s task is to determine the needs, wants and interests of the target markets and deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. Here company must try to make a balance among company profit, customer want satisfaction and public interest. At the same time company try to build up a health and wealth society so that company can able to survive in long run.      

Difference between selling concept and marketing concept

Starting point	Focus	Means		Ends
Factory	Products	Selling and promoting		Profit through sales volume
Selling concept
Target market	Customer needs	Integrated marketing		Profit through customer satisfaction
Marketing concept

Types of Markets

  A market is a set of all present and potential buyers. We can classify the market according to the nature, objectives, behaviour of the market, which are discussed below.

1.  Consumer markets :

            This market is constitute by the consumer who buys goods and services for their ultimate consumption. They do not process it to produce another goods and services or resell it to another customer. Their buying behaviour is mostly emotional and they are not well informed about goods and services. Producer or marketer requires to getting a clear sense about their target customers. Most of the product’s strength depends on developing a superior product and packaging and backing it with continuous advertising and reliable service. Consumer marketers decide on the features, quality level, distribution coverage and promotional activities that will help their product or service to achieve the best position in the market.  

2.  Business markets :

            This market is constitute by the business men or professionals who buys goods and services to produce another goods and services or resell it to another customer. They are well - trained and well - informed professional buyers who have the skill to evaluate the competitive offerings. Business buyer purchase products to make profit. Their buying behaviour is purely rational. Business marketers must demonstrate how their products will help business customer to achieve their profit goals. In this market advertise has very small role, but stronger role is played by sales force, price and company’s reputation for reliability and quality.     

3.  Global markets :

            Companies selling their goods and services in the global market place and face additional decision and challenges. Marketer must be decide which countries to enters, how to enter each country, how to adapt their product and service features to each countries, how to price their product in different countries. In the global market, marketer must have to take other decisions, such as how to adapt their communication to fit the cultural practices of each country. These decisions must be made on different legal system, different styles of negotiation, different type of requirements for buying, owning and disposing of property and so on.    

4.  Non - profit and governmental markets :

            Companies selling their goods to non - profit organizations such as churches, Universities, Education boards, charitable organizations or government agencies. In this market, company must be careful to set price for their goods, because these organizations have limited purchasing power. Lower prices can be affect the features and quality of the goods. In this market, different type of formalities are needed to make sales.    

Core Marketing Concepts

   Marketing have different type of core concepts, which are helpful to understood marketing as a modern social science. These core concepts are discussed below.

1.  Target markets and segmentation :

            A marketer can not satisfy all type of customers in a market at a time. Not everyone likes same soft drink, same dress, restaurant, automobile, movie etc. Customer likeness or dislikes of goods and services are depends upon the age, sex, income, culture, education, status and so on. Therefore, marketer segmented total market according to age, income, culture, education, status of the customers. Then firm decides which segment is more profitable and which segment   is easy to serve or to satisfy.   

2.  Marketers and prospects :

A marketer is someone who seeking a response ( attention, a purchase, a vote, a donation ) from another party. Where another party is called the prospects. If two parties are seeking to sell something to each other, then we called them both marketers.

3.  Needs , wants and demands :

            The marketer must try to understand the needs, wants and demand of the target market. Needs describe the basic human requirements. People need food, air, water, clothing and shelter to survive. People also have some strong needs for recreation, education, health care, justices and entertainment. A marketer can not create needs for his market.

            These needs become wants when they are directed to specific objects that might satisfy the need. A persons needs can be food but his wants can be rice, brad or fruits.

            Demands are wants for specific products backed by ability to pay. Three factors are important to create demand for a product. First, desire to buy a specific product, second, ability to buy ( purchasing power ) and third, willingness to pay. Demand can be created by the marketers.  

4.  Product or offering :

            People satisfy their needs and wants through products. A product is any offering that can satisfy a need or want of the customers. Product is the most important factor in marketing for any type of manufacturing and business organizations. Marketers chose their marketing policies and strategies on the basis of the product nature, position and stage of product life cycle. Major types of basic offerings of business or social organizations are goods, services, experiences, events, persons, places, properties, organizations, information and ideas.

5.  Value and satisfaction :

            The product or offering will be successful if it is able to delivers value and satisfaction to the target buyer. The value is a ratio between what the customer gets ( benefits ) and what they gives ( cost ). The buyer chooses different offerings on the basis of which is perceived to deliver the most value. The benefits include functional benefits and emotional benefits. The costs include monetary cost, time cost, energy cost and psychic costs. The marketer can increase the value of the customer offering in several ways. Raise benefits, reduce costs, raise benefits and reduce costs, raise benefits by more than the raise in costs, Lower benefits by less than the reduction in costs.      

6.  Exchange and transactions :

            Exchange is the core concept of marketing, involves obtaining a desired product from someone by offering something in return. Exchange is only one of four ways in which a person can obtain a product. The person can self - produce the product and service, as when a person hunts, fishes, produce cloths or gathers fruits. The person can use force to get a product, as in a holdup or burglary. The person can beg, as happens when a homeless person asks for foods. Five conditions are more essential to create exchange. these are.

            (a) There is at least two parties.

            (b) Each party has something that may be valuable to the other party.

            (c) Each party is capable to communicate and delivery.

            (d) Each party is free to accept it or reject the exchange offer.

            (e) Each party believes that it is appropriate or desirable to deal with the other party.

Exchange is a process rather than an event. Two parties are engaged in exchange if they are negotiating, trying to arrive at mutually agreeable terms.

A transaction is a trade of values between two or more parties. A transaction involves several dimensions, at least two things of value, conditions of agreement, a time of agreement, and a place of agreement.         

7.  Relationship and networks :

            Relationship marketing has the aim of building long term mutually satisfying relations with key parties – customers, suppliers, distributors – in order to earn and retain their long term performance and business. Marketers accomplish this by promising and delivering high quality products and services at fair price to the other parties over time. Relationship marketing builds strong economic, technical and social ties among the parties. It helps to cut down transaction costs and time.

The ultimate outcome of relationship marketing is the building of a unique company asset called marketing network. A marketing network consists of the company and its supporting stakeholders, such as customers, employees, suppliers, distributors, retailers, adverting agencies, university scientists and others with whom it has built mutually profitable business relationships.  

8.  Marketing channels :

            To reach a target market, the marketer uses three kinds of marketing channels. The marketer uses communication channel to deliver and receive message from target buyers. This includes newspapers, magazines, radio, television, mail, telephone, billboards, posters, CDs, audiotapes and internet.

            The marketer uses distribution channels to display or deliver the physical product or services to the buyer or user. This includes warehouse, transportation vehicles, distributors, wholesalers and retailers.

            The marketer also uses selling channels to effect transactions with potential buyers. Selling channels include not only the distributors and retailers but also the banks and insurance companies that facilitate transactions.     

 

9.  Supply chain :

            Marketing channels connect the marketer to the target buyers, the supply chain describe a longer channel stretching from raw materials to components to final products that are carried to final buyers. The supply chain represents a value delivery system. Each company captures only a certain percentage of the total value generated by the supply chain.    

10. Competition :

            Competition includes all actual and potential rival offerings and substitutes that a buyer might consider. Competition can be classify into four categories.

            (a) Brand competition : A company sees its competitors as other companies offering a similar product and services to the same customers at similar price.

            (b) Industry competition : A company sees its competitors as all companies making the same product or class of products.

            (c) From competition : A company sees its competitors as all companies manufacturing products that supply the same service.

            (d) Generic competition : A company sees its competitors as all companies that compete for the same customers.    

11. Marketing environment :

            The marketing environment consists of task environment and broad environment. The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers, agents, brokers, manufacturer representatives, marketing research agencies, advertising agencies, banks, insurance companies, transportation and telecommunication companies and the target consumers.

            The broad environment consists of demographic environment, economic environment, natural environment, technological environment, political environment, legal environment, social environment and cultural environment. These environments contain forces that can have a major impact on the actors in the task environment.     

Demand States and Marketing Tasks

 Different type of demand are exist in the market for different type of products and services, which are discuss below. Marketer observed the demand in the market and take necessary action to change the nature of demand or adjust it with the help of different type of marketing tools and techniques. 

 1.  Negative demand :

            A market is in state of negative demand if a major part of the market (customer) dislikes the product and may even may pay a price to avoid it. Such as vaccination, dental work, air travel etc.

            The marketing task is to analyze why the market dislikes the product and whether a marketing program consisting of product redesign, lower prices and more positive promotion can change beliefs and attitudes.   

2.  No demand :

            Target customers may be unaware of or not interested in the product. College students may not be interested in foreign language course. A new service holder may not be interest to take a life insurance policy.

            The marketing task is to find ways to connect the benefits of the product with the person’s natural needs and interests.

3.  Latent demand :

            Many customers may have a strong need that cannot be satisfied by any existing product. There is a strong latent demand for harmless cigarettes and more fuel efficient cars.

            The marketing task is to measure the size of the potential market and take necessary research program and develop products and services to satisfy the demand if that are profitable. 

4.  Declining demand :

            Every organization, sooner or later face declining demand for one or more of its products. Such demand for gramophone, radio, black and white television etc.

            The marketer must analyze the cause of the decline and determine whether demand can be restimulated by new target markets, by changing product features, by price reduction or by more efficient and effective communication.   

5.  Irregular demand :

            Many organizations face demand that varies on a seasonal, daily, or even hourly basis, causing problems of idle or overworked capacity. Such as road transport city buses are idle during off - peak hours and insufficient during peak hours.

            The marketing task is to find ways to alter the pattern of demand through flexible pricing, promotion and other incentives. 

6.  Full demand :

            Organizations often face full demand when they are pleased with their volume of business.

Such as mobile phone companies faces full demand situation in Bangladesh.

            The marketing task is to maintain the current level of demand, so that they can face the changing customer preferences and increasing competition. The organization must maintain or improve its quality and continually measure customer satisfaction.

7.  Overfull demand :

            Some organization face a full demand level that is higher then they can expect or capable or want to handle. At present in Bangladesh L .P. gas companies enjoying overfull demand.

            The marketing task is to finding ways to reduce demand temporarily or permanently. In this situation marketers generally take the steps to raising price and reduce promotional activities and services.   

8.  Unwholesome demand :

            Unwholesome demand is the demand of that products and services which are harmful to the society. Organizations give their time, money, resource, effort and energy to discourage the consumption of these type of products and services. Such as unselling campaigns have been conducted against cigarettes, alcohol, hard drugs, X - rated movies, large families etc.

            The marketing task is to use negative messages and information ( harmful sides of the products and services ) in promotional activities, increase the price and reduce the availability of that products and services.     

The Scope of Marketing

 The Scope of Marketing

            In twenty first century marketing is not related with the production and distribution of goods and services. The scope of marketing is so much expanded that it has play vital role to improve our standard of life and at the same time help to create health and wealth society. Following areas or items where marketing principles, policies and strategies are applied and on the other hand these are widely used in marketing activities.

1. Goods :

            Physical goods constitute the bulk of most country’s production and marketing effort.

Physical goods can be food, car, television, clothing, housing and so on. Most of the marketing activities are closely related with goods. Without goods transportation, warehousing, grading and standardization activities can not be performed.

2. Services :

            Services play a vital role in the modern economy. As economies advance, developed nations are give more emphasis on production of services. Services include the work of airlines, hotels, care rental firms, barbers and beauticians, maintenance and repair people and service of accountants, lawyers, engineers, doctors, software programmers and management consultants. Many market offering are consist of a mix of goods and services. Such as fast food restaurant, where the customers are consume both good and service at a time. Pure service would be a psychiatrist listening to a patient or legal advice of lawyer.   

3. Experiences :

            Marketers can create, stage and marketed experience. As for example, Walt Disney World’s Magic Kingdom, where he create a visiting fairy kingdom, stages pirate ship, or haunted house and marketed different experiences for the customers. Another example, customers can gather experience by spending one week at a baseball camp playing with some retired baseball great players.

4. Events :

            Marketers can marketed events as goods and services. Marketers promote time - base events, such as the Olympics, company anniversaries, major trade shows, sports events. There is a whole profession of meetings planners who will work out the details of an event and stages it to come off perfectly.      

5. Persons :

            Celebrity marketing  has become a major business. A politician can marketed himself through campaigning political mandate, personal image or success. Today every major film star has an agent, a personal manager and ties to a public relations agency. Artists, musicians, doctors, high level lawyer and other professionals are drawing help from celebrity marketers. 

6. Places :

            Place marketing can be expressed in two different ways, one is places are used or play a vital role in marketing activities. Such as historical cities, regions or sea beach or natural beautiful areas to attract tourists. Other is places are used like as goods. Such as real estate or apartment marketing.

7. Properties :

            Properties are intangible rights of ownership of either real property or financial property. Such as real estate, apartment and stocks, bonds etc. Properties are bought and sold, so it requires marketing effort. Real estate agents work for property or apartment owners or seekers to sell or buy residential or commercial real estate or apartment. Investment companies and banks or their agents are involved in marketing of securities to both institutional and individual investors.   

8. Organizations :

            Organizations are actively works to build a strong, favorable image in the mind of their public or customers. Universities, colleges, museums, NGOs ( non government organization ) and clubs all lay plans to boost their public image to compete more successfully for audiences and funds.  

9. Information :

            Information can be produced and marketed as a product. Universities, colleges, schools and research organizations are collect data and facts and develop or produce information and thereafter distributed to parents, students, manufacturing organization and communities at a price. We buy CDs and visit the internet for information. At present in the knowledge society production, packaging and distribution of information is one of the major industries.    

  10. Ideas :

            Every market offering includes a basic idea at its core. The buyer of a television set is really buy recreation and prestige. Products and services are the platforms for delivering some ideas or benefits. Marketers search hard for core need of their customers and they are trying to satisfying them. Many organization promote ideas to create better environment in the society. As for example, slogan of “ planted trees and save the environment ”.     

Describe the different types of Market Segmentation

  Geographic Segmentation

This is perhaps the most common form of market segmentation, wherein companies segment the market by attacking a restricted geographic area. For example, corporations may choose to market their brands in certain countries, but not in others. A brand could be sold only in one market, one state, or one region of the United States. Many restaurant chains focus on a limited geographic area to achieve concentration of force. Regional differences in consumer preferences exist, and this often provides a basis for geographic specialization. For example, a company might choose to market its redeye gravy only in the southeastern U.S. Likewise, a picante sauce might concentrate its distribution and advertising in the southwest. A chainsaw company might only market its products in areas with forests. Geographic segmentation can take many forms (urban versus rural, north versus south, seacoasts versus interior, warm areas versus cold, high-humidity areas versus dry areas, high-elevation versus low-elevation areas, and so on). These examples also reveal that geographic segmentation is sometimes a surrogate for (or a means to) other types of segmentation.

Distribution Segmentation

Different markets can be reached through different channels of distribution. For example, a company might segment the “tick and flea collar” market by selling the product to supermarkets under one brand name, to mass merchandisers under another brand, to pet stores under another brand name, and to veterinarians under yet another brand name. This type of distributional segmentation is common, especially among small companies that grant each channel a unique brand to gain distribution within that channel. Other examples of distributional segmentation would be an upscale line of clothing sold only in expensive department stores, or a hair shampoo sold only through upscale beauty salons.

Media Segmentation

While not common, media segmentation is sometimes a possibility. It is based on the fact that different media tend to reach different audiences. If a brand pours all of its budget into one media, it can possibly dominate the segment of the market that listens to that radio station or reads that magazine. Media segmentation is most often practiced by companies that have some control over the media and can somehow discourage competitors from using that media.

Price Segmentation

Price segmentation is common and widely practiced. Variation in household incomes creates an opportunity for segmenting some markets along a price dimension. If personal incomes range from low to high, the reasoning goes, then a company should offer some cheap products, some medium-priced ones, and some expensive ones. This type of price segmentation is well illustrated by the range of automotive brands marketed by General Motors historically. Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac varied in price (and status) along a clearly defined spectrum to appeal to successively higher income groups.

Demographic Segmentation

Gender, age, income, housing type, and education level are common demographic variables. Some brands are targeted only to women, others only to men. Music downloads tend to be targeted to the young, while hearing aids are targeted to the elderly. Education levels often define market segments. For instance, private elementary schools might define their target market as highly educated households containing women of childbearing age. Demographic segmentation almost always plays some role in a segmentation strategy.

Time Segmentation

Time segmentation is less common but can be highly effective. Some stores stay open later than others, or stay open on weekends. Some products are sold only at certain times of the year (e.g., Christmas cards, turkeys, fireworks, cranberry sauce). Chili is marketed more aggressively in the fall, with the onset of cooler weather. Football is played in the fall, basketball in the winter and spring, and baseball in the spring and summer (or at least this used to be the pattern). The Olympics come along every two years. Department stores sometimes schedule midnight promotional events. The time dimension can be an interesting basis for segmentation. In addition to the foregoing, markets can be segmented by hobbies, by political affiliation, by religion, by special interest groups, by sports team loyalties, by universities attended, and hundreds of other variables. You are only limited by your marketing imagination.

Psychographic or Lifestyle Segmentation

Lastly, we come to psychographic (or lifestyle) segmentation, based upon multivariate analyses of consumer attitudes, values, behaviors, emotions, perceptions, beliefs, and interests. Psychographic segmentation is a legitimate way to segment a market, if we can identify the proper segmentation variables (or lifestyle statements, words, pictures, etc.). Qualitative research techniques (focus groups, depth interviews, ethnography) become invaluable at this stage. Qualitative research provides the insight, the conceptual knowledge, and the consumer’s exact language necessary to design the segmentation questionnaire. Typically, verbatim comments from consumers are used to build batteries of psychographic or lifestyle statements (these two terms are used interchangeably). A large representative sample of consumers (generally, 1,000 or more) are then asked about the degree to which they agree or disagree with each statement. For example, if you were designing a market segmentation questionnaire for an airline, you might conduct a series of depth interviews to help design the questionnaire. You probably would include a behavioral section (frequency of flying, how purchased tickets, who traveled with, cities flown to, where sat, airlines flown, money spent on airline tickets, etc.). You would include a major section on attitudes toward air travel (motivations for air travel, fears related to air travel, positive emotions of flying, attitudes about airline employees, checking luggage, buying tickets, and so forth). You would also want to include a section on perceptions of the different airlines; that is, their “brand images.” You could go further and add a section on media consumption, or personal values, as well. It is at this point that you realize the questionnaire is too long, and you have to make some hard decisions about what questions or statements to include.

PRICING APPROACHES

 Here are some demand-oriented approaches to pricing:

 Skimming pricing. When you are offering a new or innovative product you can initially charge a high price, since the "early adopters" aren't very price sensitive. Then you lower prices to "skim" off the next layer of buyers, etc. Eventually, the price will drop as the product matures and competitors offer lower prices.

 Penetration pricing. You set a low initial price in order to penetrate quickly into the mass market. A low initial price discourages competitors from entering the market, and is the best approach when many segments of the market are price sensitive. Amazon.com, for example, offers a discount price and may lose money on the first sale, but this way they gain more customers who will purchase products later at a lower marketing cost (since it costs much less to attract them back for the second or third sale if they are happy with their first purchase experience).

 Prestige pricing. Cheap products are not taken seriously by some buyers unless they are priced at a particular level. For example, you can sometimes find clothing of the same quality brand at Nordstrom as you do at the Men's Warehouse. But because it is priced higher, Nordstrom's clientele believes it to be of higher quality.

 Odd-even pricing takes advantage of human psychology that feels like $499.95 is less than $500. Studies of price points by direct marketers have found that products sell best at certain price points, such as $197, $297, $397, compared to other prices slightly higher or lower. Strange, we humans!

 Demand-backward pricing is sometimes used by manufacturers. First, they determine the price consumers are willing to pay for a product using an approach such as Make Your Price Sell! (http://sales.sitesell.com/myps ) automates. Then they work backward through the standard markups taken by retailers and wholesalers to come up with the price they can charge wholesalers for the product.

 Bundle pricing is offering two or more products together in a single package price. This can offer savings to both the buyer and to the seller, who saves the cost of marketing both products separately. And the customer is willing to pay more because he perceives that he is getting a lot more, even though the cost to the seller may not really be that much more.

 Here are some cost-oriented approaches to pricing that I'm sure you are familiar with:

 Standard mark-up pricing. Typically a manufacturer marks his price up 15% over his costs, a wholesaler 20% over his costs, and a retailer 40% over his costs. The retailer gets a larger markup based on the idea that, since he is closest to the end user, he is required to spend more services and individual attention meeting the buyer's needs.

 Cost-plus pricing adds a small percentage to the retailer's costs -- and "cost plus 5%" sounds so modest in ads for new cars! Ah! If only it were that simple. :-)

 Experience curve pricing assumes that it costs a company less to produce a product or provide a service over time, since learning will make them more efficient.

Then there are competition-oriented approaches to pricing that you'll recognize:

 Customary pricing is where the product "traditionally" sells for a certain price. Candy bars of a certain weight all cost a predictable amount -- unless you purchase them in an airport shop.

 Above-, at-, or below-market pricing. Certain stores advertise "low cost" or "discount" pricing. Others price at the market, while others deliberately price above-the-market at premium prices to attract prestige buyers.

 Loss-leader pricing works on the basis of losing money on certain very low priced advertised products to get customers in the door who will buy other products at the same time.

 Flexible-price policies offer the same product to customers at different negotiated prices. Cars, for example, are typically sold at negotiated prices. Many B2B sales depend on negotiated contracts.

 Once you have determined the list or quoted price you can make some special adjustments still.

 Quantity discounts encourage customers to buy larger quantities, and thus cut marketing costs.

 Seasonal discounts encourage buyers to stock inventory earlier than their normal demand would require. This enables the manufacturer to smooth out manufacturing peaks and troughs for more efficient production.

 Rebates, such as $40 off Microsoft FrontPage 2000, are usually offered by the manufacturer, but sometimes a retail store will offer its own rebate. Rebates make marketing sense, since they strongly motivate sales, but often less than 50% of the buyers will remember to collect the receipt, proof-of-purchase, and rebate form, fill it out, and mail it prior to the expiration date. And, of course, the rebate is often subtracted from the list price of the item, which still has considerable profit built in. Rebate marketing is less than half as expensive to the marketer as the price cut would seem to indicate.

 Trade discounts are offered by manufacturers to distributors or resellers in their distribution chain. For example, a manufacturer may quote list price of $1000 less 30/10/5, meaning 30% off the list price to the retailer, an additional 10% off the $1000 to the wholesaler, and an additional 5% off the $1000 to the jobber. This pricing will be expected if you have an online B2B store.

 Cash discounts are sometimes offered for the costs saved from not having to extend credit and bill the buyer on an open account. This mainly affects B2B sales rather than retail.

Allowances may be permitted for trade-ins (not too many trade-in cars shipped by modem though) or by a manufacturer for promotional advertising that a retailer undertakes.

Geographic adjustments involve FOB (freight on board) pricing at the point of shipping.

What is Pricing

 Pricing is the method a company uses to set the price its product. There are various factors that may come into play. The price of the same or similar product of your competition, the type of market you want to buy your product ( low income to high income), location of the market, seasonal adjustments and other outside factors can all affect price. Outside factors may include economic stability or instability, as we see in the economy today, weather related incidents, and even basic supply and demand. Usually, the idea is to set the price high enough to make a profit but low enough to attract consumer demand. However, some prices may be set artificially low to make the product a "loss leader" that helps get more people into a store.

There is a continuum that is used to develop a pricing strategy. On one end is your cost to develop the product and your profit targets (margins). Customer demand, competition, and other market forces define the other end of the continuum.

COST-PROFIT VARIABLES

Margin: A margin, the ratio of profit to revenue of a particular product, can be used to measure the financial success of a product. To calculate margin, take the profit associated with a product (sales price less total costs) and represent it as a percentage of the selling price (i.e., revenue).

Your product sells for $1,000.

Your total cost to produce that unit is $700.

Your margin is $300, or 30 percent.

In developing your pricing strategy, the target margin (usually set by your CFO, Marketing Director) serves as a floor for pricing the product. If, as a company, you must meet 30 percent margins on all products and it costs you $700 to produce a product, the lowest price you could offer would be $1,000.

Gross Margin: Quite a few companies determine their pricing strategies based on the "gross margin" of the product. A gross margin measures only the variable costs to produce the product.

The variable costs, also referred to as the costs of goods sold (COGS), include any cost directly associated with producing and selling one incremental product unit.

Typical variable costs include:

Ø  Technical cost to produce/acquire the unit sold

Ø  Sales commission on the sale

Ø  Marketing cost to acquire and retain the customer shared over the number of units purchased

Ø  Cost of professional services to service customer (e.g., salaries)

Your product sells for $1,000.

Your variable cost is $400.

Your gross margin is $600, or 60 percent.

Net Margin: Calculating the "net margin" for a product can be illuminating. The net margin includes the fixed and variable costs associated with producing a product and therefore is much lower than the gross margin.

 Typical fixed costs include:

Ø  Development labor and materials required to build the product

Ø  Human (e.g., product manager) and technical infrastructure (e.g., servers) required to build and maintain the product

Ø  Non-variable sales and marketing costs (e.g., print collateral)

Ø  Overhead from general and administrative

 To determine the net margin for a product, take the fixed costs, amortize them over the expected life of the product, then add the variable costs. For traditional companies, fixed costs are often spread over three years. For companies for which products are usually out of date shortly after their release, these costs should be amortized over 9-12 months.

 Your product sells for $1,000.

Your fixed cost is $500,000.

Amortize your fixed costs over 12 months.

Given that you expect 1,000 customers in those 12 months ($500 fixed cost per customer), your net cost is $900 ($500 fixed costs + $400 variable costs).

 Your net margin for your first year is $100, or 10 percent.

 Market Variables

 While margins are important in determining the floor in pricing a product or service, understanding market variables is critical to setting the ceiling, or likely price. These are key questions in crafting the overall strategy for setting your price:

Ø  What is the potential size of the product's market?

Ø  What are customer expectations for pricing?

Ø  What is the competition charging for similar services?

Ø  How do you want to position the company?

 Customer Demand

Revenue = Number of Customers x Product Price

 So the smaller the market for your product, the higher the price for the product will need to be to achieve your revenue goals.

 In reality, few companies put much effort into sizing the market for a product. "Build it, and they will come," product managers typically proclaim. Management regularly accepts this as a satisfactory answer, reasoning: “There will always be more potential customers than can possibly be acquired, so why bother accurately sizing the market?”, “We only need 1,000 customers to break even, and there must be at least that many potential customers out there.”, “We already have three customers who have asked for this product, therefore, there must be 300,000 more.”

 The bottom line is that it is a pain to properly size a market for a product. You need to be able to define who your target customer is and then do the necessary research to see how many people/companies out there fit this description. This can be expensive and time consuming.

 If you are 90 percent sure that the market is big enough to supply the revenue you need for a few years and you are in a crunch to introduce a product to market, it is probably safe to skip this exercise. However, you should still clearly define your target customer. You will need to know your customer to understand his or her expectations for pricing.

 Customer Expectations

Customers have expectations for pricing that they use when they make purchasing decisions. Understanding these expectations is key to setting a successful pricing strategy. Typically, customers associate a product type with a price range. For example, CDs cost from $10 to $20. It costs $7 to $10 to see a movie. Even if your product is first to market, you will likely find that the majority of potential customers have a sense of what it should cost based on what the product or service is replacing. For example, the price of Web-based training is associated with the price of classroom training. Defining this price range is particularly useful when you are looking for ways to price products for immediate sale. If customers expect a CD to cost $10 to $20, you know that at $9, you are likely to see a lot of transactions.

 Competitive Landscape

Competitors are typically the largest driver of customer pricing expectations. If customers are accustomed to seeing your competitors selling CDs for $10 to $20, they will expect you to offer your CDs in the same price range. Even if there are no other companies offering the exact product as you, clues for pricing can always be found by looking at other companies. No product is unique or without peers.

 Positioning

Positioning adds a little twist to the pricing game. Because customers have expectations about pricing, the price that you charge for a product affects a customer's impression of your company or the product line. Do you want to be known as a premium company or a "good value for the money" company? Both have advantages.

 Defining your positioning for pricing goes to the very core of your organization. Like margin goals, positioning goals need to be considered at a company level for they have a significant influence on the overall success of the company. In looking for the right positioning, seriously consider the strengths of your product and organization. If you can't provide a premium-quality product or service, don't try to price your products as premium, or your customers will have a negative experience. Likewise, don't waste resources building a premium product if you aren't planning to charge for the added value.

Challenges of bank marketing

 1) Technology: Marketing by private sector banks and foreign banks is more effective than public sector banks because these banks are IT oriented. Private sector banks and foreign banks are attracting more customers by providing e-services. Thus, technology has become a challenge before the public sector banks.

2) Untrained Staff: Often it happens that when a prospective customer approaches the branch, the employees seem to have very little knowledge about the scheme. This reflects an ugly picture of our bank’s image. Banks are not losing one prospective customer but 10 more customers who would be touch of this man. Attitude of the employees towards customers is also not very well. Thus, it is a need of time to reorient the staff.

3) Rural Marketing: This is a big challenge before the commercial banks to enhance rural marketing to increase their customers. Banks should open their branches not only in the urban and semi-urban areas but also in the rural areas.      

4) Trust of Customers: Marketing can be enhanced only by increasing the customers. Customers can be increased or attracted only by winning the trust of the customers.

5) Customer Awareness: Customer awareness is also a challenge before the banks. Bank can market their products and services by giving the proper knowledge about the product to customer or by awarding the customer about the products. Bank should literate the customers.