Chapter-1 Marketing
Traditional concept:
According to this concept marketing is concern with buying and selling activities or exchange of goods and services. It is product oriented. It gives high priority for selling product. It does not considered consumer needs, wants and satisfaction.
According to the prof. Pyle, “Marketing comprises both buying and selling activities.”
Modern concept
According to Philip Kotler, "marketing is a social and managerial process by which individual and group obtain what they want through creating, offering, and exchanging product and value with other."
According to W.J Stanton, "Marketing is a total system of business activities, design to plan prices, promoted and distributed wants satisfying product to target market to achieve organizational activities."
The new concept of market gives more emphasis to consumer satisfaction. Hence marketing is overall activities that are concern with the fulfillment of human needs and wants. It includes not only buying and selling activities but also consumers satisfaction, takes social responsibilities and provides after sales services.
Importance of marketing
Marketing is very important to consumer. The primary objective of marketing is to satisfy consumer. Marketing provides following services to the consumer:- Provides information Consumer wants to get maximum satisfaction from their limited resources. For this purpose information is essential to consumer obtain product information like product features, performance, price, use, availability, benefits, etc through advertisement such information help consumer to compare the product with other.
- Provides satisfaction Modern marketing is based on consumers satisfaction product are produces according to the needs, taste, and performance of the consumer. Marketing enable consumer to use their limited resources to maximize their satisfaction. It makes a product available at reasonable price in the market.
- Selection facility Today different producer produce similar nature of product. In order to satisfy their demand of different variety, design, colour, shape, sizes are produced. Consumers are free to select product according to their own interest by the help of marketing.
- Rise in living standard Marketing helps the consumer raise their living standard. Marketing present a product after market research it provides knowledge about different variety of product and services to the consumer by consumption of desire product standard of living increase.
- New product Creation, production and development of product are main activities of marketing. New products fulfill the consumer new want. So consumer cannot get new and latest product unless there is marketing. From marketing activities new and quality product are available to the consumer in market.
Importance to the business firm
The survival of the firm depends on their marketing activities. So the importance of marketing to the business firm can be explained as follows:- Information for planning and decision making Today's production planning is based on sale forecast rather than production capacity. Firms take decision to produce what they sell. Production planning is based on market information about consumer, taste preference and needs to take such decision marketing activities help to collect information and guide firm and producer.
- Develop exchange relationshipMarketing helps the firm to establish successful exchange relationship with the consumer. Firm must produces the right product at the right time at the reasonable price and distributed through the correct channel of distribution. It helps firm to establish successful relationship by obtain feedback from the buyer. Such feedback becomes the basis to meet the consumer taste and preference and need.
- Income generation:Marketing is an art which helps to generate the income through the selling of product and services at profitable price. The main objective of every business firm is to earn profit. It helps in increasing profit by reducing production and distribution cost on side increasing demand of product by means of advertisement and self promotion or the order side. Marketing helps in reducing the cost through increasing sales volume and earn higher profit.
- Link with society: Marketing helps the firm to establish link with society. It is important means of communication between firm and society. Today consumer taste, preference and needs are changing rapidly. Marketing provides information about these changes to the firm, from this business firm make plan and policy of creation, production distribution and it provide the product according to the need of society.
- Importance to the Nation / Society:Marketing services grows in social context. It is importance to the society and nation that can be explained in the following points:
- Employment generation:Marketing generates employment opportunities almost one-third of worlds. Labour force is engaged in marketing activities such as transportation agency, financial institution, wholesaling, retailing, communication, etc. People get employment opportunities on the basis of their education, skill and knowledge.
- Reduction in cost:Marketing activities provides direct benefits to the society by reducing cost of goods and services. An effective management use of modern technology, effective store and distribution system reduces the cost. It helps people to get goods and services at the reasonable price.
- Creation of utility:Marketing is economic activities. It creates place, time, and possession utilities. Transportation creates place utility by making product available at one convenience place to the consumer, storage creates time utility by making product available at the time when needed. Exchange creates possession utility by transferring ownership of product from point of origin to the point of consumption. These utilities help people to use the product at right place, at right time, at the right price.
- Development of economy:Marketing provides goods and services by utilizing economic resources and capacity to fulfill need, taste, and wants of people. Better utilization of natural resources, human resources and financial resources help of fulfill national requirement. All this activities help the economic development of the society as well as nation.
Development of Marketing Concept / Business concept:
Business concepts are the philosophies which organizations conduct their operation. The philosophy guides the marketing effort and activities any producer or organization. There are five business concepts under which organization conduct their marketing activities:
1) Production concept:
Production concept is the oldest or concept of marketing. This concept focuses on mass production and mass selling.
This concept holds that consumer will prefer those products that are widely available and at low cost. Hence, producer should concentrate on achieving high production efficiency and distribution coverage. This will lead to economies of skill and cost per unit will be reduced. This concept has following concept:
a) It is production oriented and focuses on selling what can be produced.
b) It focuses on high production efficiency to reduce cost.
c) It focuses on wide distribution to make product easily available.
d) It attracts consumer through low pricing.
This concept is useful to expand the market share, but it leads to the poor quality services. Customer needs are disregarded.
2) Product concept:
This concept focuses on the quality performance and features of goods and services. This concept believes that producer and organization should develop their efforts towards making continuous quality improvement of product, this concept implies that;
a) Producer concentrates on quality improvement of the product.
b) Consumer prefer high quality product at a reasonable price.
c) It does not care consumers’ needs, taste, and preference.
d) Effective and efficient management is needed to improve the quality of product.
In product concept producer focuses only on improvement of quality but not in consumers’ preferences, needs, and taste so the change.
3) Selling concept:
Selling concept mainly focuses on selling expect by the use of excessive selling and promotion effort. It tries to persuade customer to buy.
This concept implies that:
a) This concept is selling orientation and tries to fulfill sellers’ needs.
b) Aggressive selling and promotion are conducted to attracted customer product or push in the market.
c) Customer needs, satisfaction is not concerned.
d) Profit is made through high sales volume.
e) Consumers are persuaded by the uses of selling technique.
Under this concept managers focuses on increasing sales volume through promotional tool. This concept is dominates in Nepalese organization.
4) Marketing concept:
Marketing concept is a new concept that identified customers’ needs. It holds that the key to achieve organizational objective is to satisfy needs of customer through the integration of marketing activities.
This concept implies that:
a) The starting point to target market, marketing programme is design according to the needs of customer.
b) Customer needs is focus on the philosophy “we make what we want” is followed.
c) Customer oriented product is to be designed. Customer value is to be created.
d) There is integration of all activities through coordinated marketing effort.
e) Profit is made through customer needs, satisfaction.
5) Societal Marketing concept:
It is the latest business concern. It focuses on the responsibility towards the society. In the name of satisfaction customer needs different bad practices came into existence. It resulted into inflation, environmental change, increasing pollution etc to eradicate such threats this concept is introduce after 1970’s.
This concept is an emerging concept. It focuses on protecting interest of consumers and safe guarding the well being of society. Marketing must be socially responsible.
This concept implies that:
a. This concept gives priority to the social responsibility and accountability.]
b. It focuses on fulfillment of consumers need, want and interest by providing social friendly competitive product.
c. Integrated marketing approach is used to coordinate all the activities of organization.
d. It concentrates earning profit by satisfying consumer and welfare of society. It is for long term existence of the firm.
Four pillars/Marketing concept/Fundamental of marketing concept:
The development of this concept after 1950’s is based on four fundamental principles which are also known as four pillars of marketing.
a) Target market focus:
By the help of market segmentation need desire and interest of the customer should be identified. According to the findings marketing programmes should be developed to satisfy specified customer with the product or services.
b) Customer orientation:
After defining and choosing target market the firm should considered different need of customer and developed product to meet the needs. This is popularly known as customized marketing which helps to built long term relationship in between buyer and seller.
c) Integrated marketing:
The concepts of integrated marketing implies that all the companies department such as research and development engineering, purchasing, manufacturing selling, etc should work together to achieve companies overall objective.
d) Profit through customer satisfaction:
The primary objectives of the business firm to satisfy customer. Profit is the secondary objective of the firm. Firm creates superior customer value and target at long term profit through creating and retaining satisfied customers.
Differentiate between selling concept and marketing concept:
| selling concept | marketing concept |
Marketing mix:
Marketing mix is the overall activities of marketing from marketing research to consume satisfaction. In other word marketing mix can be understand as a set of product, price, place, and promotion which are used to achieve from marketing objective in the target market. Marketing mix concerns about which product to produce, how to produce, where to sell, how to deliver and motive to the target consumer.
In 1960AD prof. Mecarthy popularized the concept of 4ps as a marketing mix. They are product, price, place, and promotion which are explained as follows:
1. Product mix
Product is anything that can satisfy customers' needs. It may be physical or non physical like services, ideas, etc. Producers or distributors develop the product to satisfy the customers’ needs. For this they are concerned about quality, range, durability, branding, packaging, etc product mix includes the following elements.
i. Product planning and development
Through research and feedback from the customers producers should find out the interest fashion, want and demand of customer. Product planning and development includes the replacement of old goods change in colour brand packaging and reformation in the product.
ii. Standardization and Grading:
If the product is divided according to the physical shape then such division is known as standardization of the product. For example: different size of same brand shoes if the product is divided according to the quality of the product such division is known as Grading. For example: cheap, and expensive types of shoes hence standardization indicates physical measurement or quantity and Grading indicates quality of product.
iii. Branding and packaging
Branding means giving identification to the product it is necessary to differentiate the product from others, names word sign design and symbol helps to identify the seller and differentiate from the competitors. Brand should be short, attractive and memorable. Packaging is equally important as branding. Good packaging must be done according to nature of the product promote and attracts the customers.
2. Place mix:
All the activities that take place while transferring ownership of product from the point of origin to the point of consumption is known as place mix. It is also called distribution mix. Place mix includes the following elements:
i. Selection of channel of distribution:
The different factors such as cost, nature of product competitors are to be considered while selecting the channel of distribution. The right decision for the channel of distribution to deliver the right goods to the right customer at the right place and at the right time can result to success.
ii. Physical distribution:
Physical distribution concerns with delivering the goods from the producers to the customers. Physical distribution has to supply in right quantity to the right place, at the right time. These functions play determining role for all marketing activities so, it is also known as second half marketing. It includes transportation, ware housing, inventory control, and material.
3. Promotion mix:
Informing and persuading the customer regarding the organization and each product is called promotion. It is necessary tool to achieve success in this competitive world. The main elements of promotion mix are as follows:
i. Personal selling:
It is the face to face communication in between producer and customer. It is costly and time consuming process. But it is very effective for selling high priced product and new product.
ii. Advertising:
It is a paid form of promotion in which mass media are used to communication about the product. Newspaper, radio, television, poster, etc are used to create demand of the product. This form of promotion is effective if producers or distributers want to send information widely.
iii. Sales Promotion:
It is the technique used to sale more goods at the short span of time display and decoration of product, trade fair; exhibition, free sample, discount gift etc are the promotional activities to attract the customer and increase volume of sales.
iv. Publicity:
It is the non paid form of promotion, news release, press conference, publication are the example of publicity. It does not remain under controll of organization.
Difference between sales promotion and advertising:
4. Price mix:
Price plays an important role for the exchange process. Price stands for the amount of money that customer have to pay to obtain the product. It also determines the result of investment to the producer. Cost, competitors, rules and regulation expenses, etc are to be analyzed while fixing the price. The important elements regarding price mix are as follows:
i. Selling price:
Price decision and policy has direct impact on the sales volume and profit of the organization hence while determining the price, notional profit, customer interest, cost factor competitors situation etc are to be analyzed. Reasonable selling price keeps the faith of the customer and helps to increase the sales volume.
ii. Discount and commission
Discount is the reduction in price. It is of two types i.e. trade discount and consumers’ discount.
Trade discount is concern with providing discount to the middleman such as agent, wholesaler and retailer. It is useful for push strategy.
Consumers’ discount is concerned with providing discount to the ultimate consumer. It is useful for adopting pull strategy.
Commission is the extra amount given for the specific performance carried out by the middlemen. It is determined according to the sales volume.
Approaches to the study of marketing:
Marketing can be understood through event approach. The most common approaches marketing are:
1) Commodity approach:
This approach focuses on the study of different types of product. It concentrates on product to determine about its production and distribution through different channel of distribution. The commodities are classified as:
a) Consumer product
The product which are sold to ultimate consumer for final consumption are known as consumer product it is of four types i.e. convenience goods, shopping goods, specialty goods and unsought goods.
b) Industrial product:
The products which are sold for further production or processing are known as industrial product. It is of five types i.e. raw material, lubricating material and parts, installation, accessories equipment and operating supplies.
c) Agricultural product:
The products which are the result of cultivation, dairy farming, and poultry farming are known as agricultural product. There are two types, i.e. industrial consumer product and consumer agriculture product.
Advantages:
a) This approach is concern with flow of specific commodity from supplier to the consumer.
b) This approach covers the institution involve in the flow of commodity.
Disadvantages:
a) This approach results in duplication of marketing efforts.
b) It is time consuming and costly process.
2) Functional approach:
Functional approach is concerned with the various marketing function. It views marketing on “what marketing does” rather than “what marketing is.” Some of the major function includes:
a) Exchange function:
Exchange with concern with buying and selling activities it involves:
i. Buying function:
Buying function is receiving ownership of production by paying certain amount of money. It involves demand forecast, identification of supply services purchase of goods, etc.
ii. Selling function:
Selling is transferring the ownership of product by receiving certain amount of money. It includes product planning and development, contact, demand creation, negotiation and contractual function.
b) Distribution function:
Distribution function is concerned with transferring goods from point of origin to the point of consumption. It includes:
i. Transportation:
Transportation is important means to transfer goods and services from production point to consumption point. Transportation creates place utility. There are different modes of transportation such as railway, roadway, airway, etc.
ii. Storage:
Storage is the method of preserving the product so we can consume them at the time of necessity. Hence it created time utility. It helps to preserve the quality and insure continuous supply of the product.
c) Facilitating function:
This function is also known as auxiliary function of marketing. It involves:
i. Financing:
Finance is concern with the collection and allocation of financial resources. Different financial institutions provide funds to the business.
ii. Risk bearing:
Marketing involves different risk such as danger of loss, fashion out, physical damage, etc. Some of the risk can be transferred to the insurance company.
iii. Market information:
Information is a most important factor that leads towards the success of the organization. Information flow is carried out for research buying, selling and distribution activities.
Advantages:
a) This approach is concern with floe of goods as well as institution involved in the movement of goods.
b) This approach emphasizes the function which marketing must perform.
Disadvantages:
a) This approach puts too much attention on marketing function.
b) It ignores consumers’ needs.
3) Institutional approach:
This approach is concern with various institutions involved in marketing activities. Such activities may be related with product, price, place and promotion. It is useful in explaining the roles and significance of the institution. It includes:
a) Producer/Manufacturer:
Producers or manufacturers are the source of marketing activities. Producers produce raw material whereas Manufacturer converts raw material into finished product.
b) Middlemen/Intermediaries:
Intermediaries are those who act as a link in between producer and consumer. They can be agent, wholesaler, retailer, etc. Agents perform their activities on the basis of commission received, wholesalers are those who deal with large quantity of goods and act as a link between producer and retailer. Retailers are those who act as a last middleman and sell the product to the ultimate consumer.
c) Facilitating institutions:
All those supporting agencies in marketing activities are financial institution. It includes:
· Transportation agencies
· Public warehouse
· Advertising agencies
· Financial institutions
· Research and consultancy firms
Advantages:
a) Marketing activities are not possible in the absence of institution.
b) Marketing costs can be reduced through proper selection of institution.
Disadvantages:
a) This approach does not provide total view of marketing.
b) This approach does not address consumers’ needs.
4) System approach:
Under the system approach, marketing is viewed as an organized and integrated effort to secure customer satisfaction and profit. A marketing system is unified whole composed of interrelated and interacting parts to achieve objective. It includes:
A. Input:
Input includes all those resources that are needed to conduct marketing activities. It consists of marketing mix elements i.e. product, price, place and promotion.
B. Processing:
Inputs are processes so as to derive outputs. It consists of environmental influences and buyer decision for purchase.
C. Outputs:
Outputs are the main point of marketing activities. It consists of profit, service, growth, survival, leadership, etc.
D. Feedback:
Feedback is a mechanism to provide information. It helps to re-design input and processing activities.
E. Environment:
Environment influences overall marketing activities; marketing operates in a dynamic environment.
Advantages:
a) It is an integrative view of marketing activities, synergy is achieved.
b) Marketing resources are effectively utilized and achieved objective.
Disadvantages:
a) It is difficult to implement.
b) It ignores customers’ need.
5) Environmental approach:
Marketing activities do not operate in vacuum. The environmental factors affect marketing programme. Hence markets must anticipate (forecast) and predict the dynamic forces in the environment. It can be classified into following:
a) Internal environment:
All the forces and conditions which are under the control of organizational are known as internal environment. It consists of:
i. Organizational structure
ii. Organizational resources
iii. Organizational culture
iv. Employees
b) External environment:
All the forces and conditions are outside the control of organization is known as external environment. It is located outside the organization. It consists of:
i. Political and legal forces
ii. Economical forces
iii. Socio-cultural forces
iv. Technological forces
Advantages:
i. It helps to conduct “SWOT” analysis according to which marketing strategy is design.
ii. Marketers developed the marketing mix programme so as to adopt environment forces.
Disadvantages:
i. It is costly together information regarding marketing environment.
ii. It is not objective oriented.
6) Managerial approach:
This approach is management oriented and focuses on managerial decision to the marketing activities. Goals are achieved by using managerial tools, they are:
a) Marketing planning:
Planning is the primary function of marketing management. It is an intellectual process which is concerned with deciding in advance what, when, why, how, and who shall do the marketing activities. Generally, marketing manager defines goal and take necessary steps to achieve goal in different efficient manner.
b) Marketing implementation:
Implementation means the producers that convert plans into action. Marketing management must coordinate different department for effective marketing implementation. It requires regular instructions, guidance, supervision and control over subordinates. Leadership skill is required for effective implementation of marketing plans and programme.
c) Marketing control:
Marketing control is the measurement and correction of marketing performance to achieve planned goal. Planning and control are closely related. It includes:
i. Establishing standard
ii. Measuring actual performance
iii. Finding deviations
iv. Using corrective action
Advantages:
a) This approach uses both qualitative and quantitative techniques for marketing decisions.
b) It helps to develop timely decision to achieve objective.
Disadvantages:
a) This approach ignores customers’ needs
b) Changing environmental forces are ignored.
7) Economic approach:
Economic approach is concerned with the allocation of resources. It is concerned with maximizing profit with the least cost. Cost and profit analysis is required for the optimum utilization of resources and achieve marketing goal. This approach studies about:
a) What to produce and in what amount.
b) What resources are to be used in production and distribution process
c) How to manage demand and supply
d) Who gets the resulting output and in what amount
Hence this approach focuses on efficient used or allocation of resources in order to satisfy consumers’ need and achieve organizational goal.
Advantages:
a) This is well developed approach and popular among economist.
b) This approach ensures optimum utilization of resources.
Disadvantages:
a) This approach is based on various assumptions.
b) It has no relevance in the world of marketing.
8) Legal approach:
This approach is concerned with statuary and common law the effect of marketing environment. This approach focuses on the laws, rules and regulation which directly and indirectly affect the marketing activities. The main subject matter of this approaches are:
a) Marketing is regulated by law.
b) Such law may be local, national, international
c) Law prohibits or permits certain actions of marketing. Hence, it has positive and negative impact on marketing.
d) Law can prescribe certain act which is man for marketing.
e) Law provides opportunities and threats for marketing.
Advantages:
a) This approach ensures legal compliance of marketing activities.
b) This approach is concerned with consumer welfare and social responsibility to the stakeholder.
Disadvantages:
a) This approach has a narrow focus.
b) It is not pro-active according to the changing environmental forces.
Chapter: 2 MARKETING ENVIRONMENT
All the forces surrounding that influence marketing activities are known as marketing environment.
They affect the performance and outcome of marketing. Surrounding or forces change overtime and thus marketers should analyzed environmental factors i.e. SWOT analysis and develop strategy to achieve objective.
Scope of marketing environment:
It includes all these forces that influence marketing environment. It consists:
1. Organization:
All kinds of organization which conduct marketing activities are the scope of marketing environment. Organization may be profit oriented or service provider. All they need marketing.
2. Business activities:
All the activities that are needed are a scope of marketing environment. Research and development, production, finance, human resource management etc are the scope of marketing environment.
3. Forces:
There are mainly internal and external forces that affect marketing environment. Good policies, structure resources are internal forces whereas PEST i.e. political and legal, economical, socio-cultural, and technological forces are external forces.
4. Marketing mix:
Marketing mix includes all the activities and programmes from understanding customers’ needs to satisfy them. They are product, price, place and promotion. These elements are to be adopted and manage according to the changing environment.
5. Stake holders:
Stake holders are those who have stake in the performance of marketing. They are inside and outside the organization that effect activities of marketing, Stake holders includes:
i. Customers
ii. Competitors
iii. Labour unions
iv. Suppliers
v. Market intermediaries
vi. Government
vii. Pressure groups and media
Marketing environment:
A.Internal environment:This environment refers all the surrounding condition and influences that are located inside the organization. It includes following elements:
- Objective of firm (profit oriented/service oriented):
Objectives are the desire outcome which is design by the marketing firm. It may be profit oriented or service oriented. Such objectives guide overall marketing operation.
- Policies of firm: Marketing firms develop policies to attain objective, policy change according to the dynamic nature of environment. Policies are the guideline for decision marketing and future courses of action. According to the policies, marketing programmes are to be designed.
This environment refers all the surrounding condition and influences that are located outside the organization. It cannot be controlled by the organization opportunities and threats are outcome. They are:
a.Micro environment:
The forces which are close to the firm are called micro environment. These forces affect its ability to serve the customers. It includes:
- Suppliers:Suppliers are those individuals or organizations who produce input like raw materials and components to the firm. Suppliers’ ability to provide continuous supply of quality product insures success to the business firm. It is deal to depend more than single suppliers to insure regular supply of product.
- Marketing intermediaries: All those parties who act as a middleman in between producer and consumer are marketing intermediaries. They includes marketing middleman such as wholesaler, retailer. Similarly, it includes Transportation Company, warehousing company, bank, financial institution and other.
- Customers: All those parties who receive the ownership of product by certain amount of money are customers. Customers are of different types. According to their characteristics customers are business firm, reseller, government and international agency.
- Competitors: Competitors are those who try to grab the market. Hence, business firm should develop strategy according to the nature of competitors. There may be different types of competitors.
- Public: A public is any group that has an actual or potentials or impact on the organizations’ ability to achieve its’ objectives. There may be different types of public such as financial Public, general Public, media Public, internal Public, etc.
The larger societal forces that affect both the consumer and firm are called macro environment. Such forces are located outside of firm. It includes:
- Demographic environment:
Demography is the study of human population in terms of size, density i.e. location, gender, occupation and other statistic. Demography offers consumer profile which is essential for market segmentation and determination of target market. Demographic analysis includes:
· Changes in population
· Age mix
· Urbanization
· Migration
· Income distribution
II. Political and legal environment:
Political environment is concerned with political factors such as political system, political institution, political philosophy, etc. these factors directly influence marketing activities.
Legal forces include rules of conduct enforced by state. Legal environment includes act, rules, regulation, and precedent. It defines what marketers can perform and cannot perform. Marketing must ensure that their activities confirm to law of land.
III. Economic environment:
Economic environment is concern with economic surrounding that affects operation of marketing activities. Similarly, interest rate money supply, price level, consumer credit also influence economic environment. The economic environment includes:
i. Economic condition
ii. Economic policy
iii. Economic system
iv. Globalization
IV. Socio-cultural environment:
Socio-cultural environment includes social forces and cultural forces. Social forces are those surrounding related to human relationship. The society where people grow up, share their beliefs, values and attitude. Social forces are influence by following factors:
i. Demography
ii. Lifestyle
iii. Social Institution
Cultural forces are guiding factor that influence the choice of people like food, clothing, housing, etc. culture is created by society and handed down from generation to generation. Culture is learned behaviour. The components of culture are norms, values and belief, language and religion, etc.
V. Technological environment:
Technology is concerned with application of scientific or other organizational knowledge to the practical task. Technology is the method of converting resources into product. Mechanization, automation, computerization, robotics, information technology, etc have influenced marketing activities. Technological environment consists of:
i. Level of technology used
ii. Phase of technological change
iii. Research and development budget
VI. Natural environment:
Natural environment consist of those forces which is concern with geography, natural resources and all other forces. Natural environment provides threats and opportunities. People are conscious about preservation of the nature, so that marketers should design product with the consideration of natural aspects. Some of the reasons for its attention are as follows:
i. Shortage of raw materials
ii. Increased pollution level
iii. Increased cost of energy
iv. Changing role of government
Marketing environment in Nepal:
Nepal is landlocked county is of total area 147181 sq. km. Nepal is divided into 5 regions, 14 zones, and 75 districts. Nepal is the member of SAARC, WTO, and other organization.Marketing environment in Nepal can be studied in following ways:
- Political and legal environment:The influence of political and legal environment on Nepalese marketing is more. Such forces determine the nature of marketing activities of the country. Some forces of political and legal environment can be explained as follows: i.Political system:Nepal is republic based on multiparty democratic system.
ii.Political institution:
It consists of Legislature executive and Judiciary. Legislature (parliament) enacts law that guide marketing activities. The executive government implements law by preparing rules and regulation. The Judiciary interpret the law all these aspect affect Nepalese marketing activities.
iii. Pressure group:
It consists of those groups which give pressure and government to protect their special interest. Such pressure groups are human right organization, consumers association, women’s’ organization, FNCCI, trade unions, etc.
iv. Law:
Law is the guiding and controlling factors of all marketing activities in Nepal. It may promote or restrain marketing activities. Some of the important laws regarding marketing activities are:
Company Act 2063 B.S
Contract Act 2058 B.S
Labour Act 2048 B.S
Consumer Act 1962 B.S
Food Act 1966 B.S and other.
i.Income distribution:
Nepal Per Capita Income is below US. $500 nearly half of population is still below the poverty line. All these effect on purchasing power of potential customer.
ii.Structure of economy:
Nepal has mixed economic system in which both public and private sector have their existence in Nepal. Some of the basic and important industries are owned managed and controlled by the government.
iii.Foreign trade:
The biggest trade partner of Nepal is India. Most of the goods are imported through India. Nepal has established foreign trade relation more than with sixty countries. Nepal has adopted liberalized economy. Hence, there is trade diversification.
iv.Regional group:
Regional groups generate marketing opportunities to the member countries. Nepal is one of the members of SAARC and of WTO.
i.Social class:
In the context of Nepal, there are three class structures in which individuals are classified i.e. high class, middle class, and lower class. According to this basis, demand of product differs.
ii.Demography:
Demography force includes sizes of population, age, etc. According to the 2011 census, Nepal has 26494904 population made of male and female nearly both are 50/50. The growth rate of population is 1.35% out of 55% is below 25 years age. Urbanization in Nepal is increasing about 14.2% in 2001 to 17.7% in 2011. Most of the people are migrating toward Terai from Mountain and Hilly regions.
iii.Cultural forces:
Cultural forces include religion, language, attitude, values, and belief. The main religions are Hindu, Buddhism, Islam, Christianity, etc. More than 80% Nepalese people follow Hindu religion. People speak different languages but Nepali is an official language. Nepalese society is mixed of different cultural group. Hence, there are differences in the way of dressing, fooding, housing, habits, etc. all these take account in the design of marketing activities.
i.Level of technology:
There are labour based and capital based technology. Technology is used according to the nature of environment and requirement level of technology influence the processing and output of marketing activities in Nepal.
ii.Pace of technology change:
In Nepal people are adopting new technologies to increase their efficiency. The skills and human resources to handle technologies are being upgraded.
iii.Research and development budget:
Most of the companies are not aware on research activities. Nowadays big house like Chaudhary, Hulas Jyoti are giving attention. So they are preparing budget for the same purpose.
iv.Technology transfer:
In Nepal technology transfer is increasing and the sources are global company, technical assistance, project and trade. According to the contract, companies are transferring technologies, similarly donors are supporting for the developing project to transfer new technology. There is import of technology in Nepal.
Impact of environment on Nepalese Marketing:
Environmental factors are the determinants for the success or failure of business. Environmental factors may provide opportunity, threat to marketing. In this regard Nepalese marketing has both positive and negative impact.A. Positive impact: The positive impact created by Nepalese marketing can be explained as follows:
- Opportunities: Changes in environmental factors may provide opportunities to Nepalese marketing. Each change should be monitored to future opportunities. That leads to the expansion and growth of business firm.
- Adaptation:Marketers have to analyze changing scenario of the environment. Marketing adaptation is possible through the dictation of changing trend and new wants of customer.
- Global achievement:Marketers must have to analyze environmental factors to achieve goals effectively competitive forces can be easily managed by proper analysis of environmental factors.
- Stability:Environment analysis helps to forecast the positive and negative impact of environmental changes. They can developed action plan such helps to maintain stability of business firm. It is also helpful in reducing uncertainty.
- Political and legal forces:In Nepal political uncertainty is the major factor having adverse impact on marketing. Similarly, lots of changes in legal frame work are creating adverse impact on marketing.
- Economic forces:There are economic problem in the context that economic policies keep on changing. Inflation has increased cost of marketing. Globalization has added challenges to the marketing.
- Socio-cultural forces:Mass migration from hill to Terai region and other countries cultural forces are changing life style of Nepalese people, consumer are visiting fast food in urban areas.
- Technological forces:Many industries are running poor because of inability to adopt the changes in technology. Marketers are very slow in adopting information, communication, and technology.
Chapter: 3 MARKET SEGMENTATION
Meaning of market:
The term ‘market’ was derived from Latin word ‘marcutus’ which means a place where buying and selling takes place this defines market in narrow sense. In sense of economics, market refers to a commodity or commodities, and buyers and sellers who are in direct competition with one another. But in broader sense, a market denotes not only a place, but also an area or demand. A market is a grouping of customers which consists all existing and potential customers.A market can be defined as, “people or businesses or organizations with potential interest, purchasing power, and willingness to spend money to buy goods and services to satisfy a need.”
Basic concepts
1. The Place Concept:Place concept is also called narrow and traditional concept. In this concept, the market is defined as a convenient place where buyers and sellers come together for buying and selling purpose. The convenient place may be a wholesaler’s store or retailer’s store or a supermarket.
Here, buyers and sellers directly meet each other and communicate directly to the customers about the product and the home delivery service of goods may not be necessary. Market may be defined as a place where buyers and sellers meet, goods and services are offered for sale, and transfer and ownership occurs.
2. Commodity Concept:
According to commodity concept, the activity of selling and buying of goods and services is called market.
It refers not only to the place but also to a commodity and buyers and sellers.
They should be indirect competition with one another.
It focuses or emphasizes on goods and services rather than place.
3. An Area or Region Concept:
In this concept, a market may be defined as an area or region consisting of many places, where prices of the products are fixed or determined by free play of demand and supply. In these areas or regions, exchange process can takes place continuously directly or indirectly between buyers and sellers.
They may use several means of communication like telephone, letters, television, newspapers, etc. Such a market may include a local market.
Area concept is macro concept whereas place concept is micro concept.
It considers whole area where sellers and buyers make exchange directly or indirectly in the free and open manner.
4. Demand Concept:
The demand concept of market means, “People with needs to satisfy the money to spend that money to satisfy their needs and wants.”
In this regard, Stanton defines “market” as “an aggregate demand by potential buyers of a product or service.” Similarly, Philip Kotler defines “market” as “the set of all actual and potential buyers of a product.” In marketing, demand concept has closer relation.
Market is the aggregate demand of the potential buyers for a product or services.
5. Exchange Concept:
According to exchange concept, the process of selling and buying of goods and services in free manner between sellers and buyers is called market. The exchange between goods and services of sellers and money or credit instrument of buyers is done. Such market should be conducted freely and independently and competitive price should be fixed.
6. Space Concept:
Space concept is the new concept which is based on internet. Producers or sellers put variable information about their goods and services on internet and buyer get the product from internet search. Buyers and sellers need not be together. It is also called marketing through internet.
Characteristics of a Market:
1. Customers:A market is made up of group of customers. If there are no customers, there can be no market.
2. Needs and wants:
The customers should have unsatisfied needs and wants. If all needs and wants of customers are satisfied, there is no need for market.
3. Purchasing power:
The customers should have ability to spend, and have purchasing power in terms of money.
4. Willingness to spend:
The customers should have willingness to spend money to satisfy their needs and wants. If there is no willingness to spend, there can be no market, demand makes market.
5. Exchange relationships:
The customers as buyer should enter into exchange with sellers. Both buyer and seller should be able to communicate with each other freely. If there is no exchange, there is no market.
6. Products:
The seller offers product. The buyer obtains product for money. The product can be goods, services, ideas, information, experience, event, place, person and organization. If there is no product there is no market.
In marketing, a market may consist of the following
characteristics:
A market is a convenient meeting place for exchange purpose.
Buyers and sellers are the two sides or parties of the market.
There may be both direct as well as indirect contacts between the buyers and sellers.
Product is an object of a market if there is no product selling and buying activities cannot be performed.
Money acts as medium of exchange and the price for any product is determined by mutual understanding between sellers and buyers, or by free play of demand and supply.
There should be free competition without which need fulfillment affected.
Transfer of ownership should take place after the exchange of goods and services.
Types of market:
1. On the basis of geographical area:a. Local market:
The market which covers local area only is called local market.
b. Regional market:
The market which covers regional area is called regional market.
c. National market:
The market which is covers national territory only is called national market.
d. Global /International market:
The market which covers more than one country is called global or international market.
2. On the basis of competition:
a. Monopoly market: Single seller
There must be only one seller and many buyers.
Does not exist any substitute products in the market and competitor.
There exists a very high entry barrier whether economic or political in nature.
The amount of product differentiation varies greatly depending upon the general factors which influence product differentiates and the degree to which the monopolistic make advantage of them.
b. Perfect competition market: Large numbers of sellers
There must be a large numbers of sellers/firms and buyers.
There must be a standardized (homogeneous) product.
There must be free entry and exit of firms.
All buyers should know about the competing brands i.e. they have perfect knowledge about competing brands and products.
Buyers should be free to select any product.
c. Oligopoly market:Few numbers of sellers
3. On the basis of volume of business:
a. Wholesale market:
Large amounts of goods but less number of transactions Sells for resell or reuse purpose only
b. Retail market:
Few amounts of goods but large number of transactions Sells for private use
4. On the basis of control:
a. Controlled market:
Market controlled by government or other interest groups or pressure
group
b. Uncontrolled market:
Market not controlled by government or other interest groups or pressure group
5. On the basis of nature of product:
a. Commodity market:
In this market, physical goods are sold which are tangible in nature.
b. Service market:
In this market, intangible types of services are sold like ideas, knowledge, etc.
c. Money market:
In this market, monetary transaction / financial transactions are done like bank.
d. Foreign exchange market:
In this market foreign currency is exchanged this exchanging right is only with Nepal Rastra Bank but nowadays other financial institutions can also exchange foreign currency by taking permission from Nepal Rastra Bank.
e. Stock / Security market:
Nowadays, this market is popular where only exchange of stock is done.
f. Labour market:
This is a new concept, where only employees’ transactions are done. Supplying of employees is done.
6. On the basis of delivery of goods:
a. Spot market: At spot delivery of goods
b. Future market:
Buying contract is done in present and goods are taken in the future. Where contract is done in written form, modes of transportation, payment are considered. Like bills payable receivable
7. On the basis of sellers’ position:
a. Primary market:
b. Secondary market:
c. Terminal market:
8. On the basis of equilibrium of demand and supply:
a. Fair market:
b. Black market:
9. On the basis of consumption:
a. Consumer market:
b. Industrial market:
Market segmentation:
Segmentation is dividing something into small part. Dividing the total market into small parts or segments is called market segmentation. In other words, marketing segmentation is the process of dividing the total heterogeneous market into different homogeneous market which consist similar needs and characteristics. It is customer oriented concept this makes easy to identify target market and make marketing plans and programs. Market segmentation plays an important role in identifying market opportunities, effectively using market resources, evaluating competitors, making strategic plans, specializing market, making effective marketing mix and making business organizations adoptable to the environment.According to prof. Philip Kotler, “Market segmentation is the act of identifying and profiling distinct group of buyers who might require separate product and/or marketing mixes.”
In conclusion the process of dividing large heterogeneous markets into several small segments on the basis of customers’ needs; wants; buying purpose, buying habit, age, education, gender, religion, income, etc. is called market segmentation. Market segmentation is customer oriented mission, in which total market is divided into several parts of same characteristics by identifying customers’ needs or wants to supply them with their demands.
Segmentation implies:
a. Division of total market into groups.
b. Group should be large enough for marketing purposes.
c. Group should be homogeneous in preferences.
d. Customers in a group should have similar needs and characteristics.
Requirement for effective market segmentation:
a) Measurable:Customers’ income, age, gender, etc. can be easily obtained and measurable but beliefs, perception and attitude cannot be measured, market segmentation should be made on the basis of the components that are measurable.
The needs, size, purchasing power and characteristics of the customers in the segment should be measurable.
b) Divisible:
There must be clear-cut basis for dividing customers into homogeneous groups but should be distinct with other segments. This means the segmentation will be effective if each segment can be easily
differentiate. Basis for dividing market may be Geographical, Economical, Buying behaviour, characteristics of customer. If we are selling necessary goods geographical market
segmentation can be done, if we are selling luxurious goods economical market segmentation can be done, etc.
c) Accessibility:
We should perform market segmentation in that way, the goods must be easily available in the place where the real customer is. Market segmentation should be made in a way that marketing activities such as distribution, advertisement media, selling efforts etc can easily reach there. The main priority must be given to the volume of population. There should be middlemen to distribute the products which should be reachable and serviceable. The segment should be accessible through market institutions such as distribution channels, advertising media and sales force.
d) Substantial:
We must divide market in that way which helps in achieving organizational goal. Segmentation should be enough to run the business smoothly and it can earn profit. The main purpose of market
segmentation by identifying target market is to earn profit, so market segmentation should be sufficient and satisfactory. If market segmentation is small, it becomes difficult to earn profit. It should be large enough in terms of customers and profit
potential.
e) Actionable:
Segmentation should be actionable. Organization should be able to formulate and implement the different marketing mixes.
Benefits of market segmentation:
1. Identification of market opportunities:Segmentation helps to find out needs of market, size of business, growth rate, opportunities, threats, etc to select the best market segment. We should analyze that which market is suitable in the particular place and their profit margin. By market segmentation we came to know about the quality, demand, profit, generally, there is high profit in luxuries goods.
2. Effective use of marketing resources: (Marketing mix 4Ps)
3. Competitive response:
Organizations face fewer competitors in segments. They can watch and analyze the marketing strategies of the competitors.
Analysis of competitors
Find out the strength and weakness of competitors
Grab opportunities from the weakness of competitors
We must try to make our strength points greater than competitors if it is not possible we should analysis the weakness point of competitors to get opportunity.
4. Market specialization:
Segmentation leads to development of micro markets. Organizations can develop market specialization by serving many needs of one segment. They can fine-tune their marketing mix.
5. Environmental adaptation:
Organizations can effectively monitor environmental changes in segments to identify the trends. They can also anticipate and predict changes in segment. This helps them to adapt their marketing mixes to
environmental changes.
6. Costumers’ satisfaction:
Limitation of market segmentation:
i. Over expenses:While selling goods by market segmentation it will increase the cost of the organization. Market segmentation is costly process it consumes lots of money of the organization in unproductive sector.
ii. Limited market coverage:
While selling goods by market segmentation it will increase the cost of the organization as well as limited place to sell goods and services so it covers limit place only.
Among the above mentioned points there are following limitations:
iii. Time consuming process
iv. Need of skill technician
v. Availability of data
Process of market segmentation:
i. Identify market segmentation: Study of market
Identification of consumers’ taste and preferences, gender, group.
Customer size, product, nature
Data collection
ii. Develop profiles of each segment:
In this process the variables for segmentation are identified. They can be geographic, demographic, psycho graphic and behavioral, According to the types of market. Each segment is profiled in terms of similarities in demand and characteristics of customer groups. The process ultimately helps in the selection process.
Analysis of each segment to determine their similarities and dissimilarities.
iii. Evaluation of market segmentation:
Size of business
Profit level
Competition level
Seasonal / off seasonal
Future of business or continuity of business
iv. Select the target market:
v. Develop a positioning strategy:
vi. Establish a marketing plan:
Segmentation variables/bases for consumer market:
Segmentation variables are characteristics of consumers used for dividing a total market into segments. Selecting appropriate variable is an important decision for market segmentation.Consumer markets consist of ultimate consumers. They buy products for personal or household use.
1. Geographical variables:
Region
Zone
District
City
Village
2. Demographical variables:
Demography is concerned with human population and its distribution. Demographic variables are very popular for market segmentation which is easy to measure.
i. Gender wise:
Market segmentation can be done by gender of customer i.e. male and female. Market demand and buying behaviour differ according to gender. Traditionally, markets for clothes, cosmetics, magazines and shoes have been segmented on the basis of gender.
ii. Age group:
Product needs differ according to age group. The market is segmented into teenage, old age, child.
iii. Occupation: agriculture/ teacher/worker, pilot, businessman Buying patterns differ with occupation. The income of people may be same but their spending patterns vary with their occupations.
iv. Religion and culture:
Religion affects product usage. Major religions such as Hindu, Muslim, Buddhist, Christian, etc can be used for market segmentation.
v. Ethnicity:
Caste, race and ethnic groups can be used for market segmentation which affects product usage. Nepal has about 60 ethnic groups along with Brahman, kshetri, etc.
vi. Nationality
vii. Education:
Education can be used for segmentation. Education levels for segmentation. Books and magazines are segmented on this basis.
viii. Income:
Income provides purchasing power and determines the level of spending. Working wives add to family income levels.
ix. Family life cycle:
Family life cycle affects spending patterns.
x. Employment
3. Psychological variable:
Psychological variables describe consumers in terms of psychological
and behavioural dimensions. They are buying motives, lifestyle and
personality.
i. Social class: lower, middle, and upper class
ii. Life style: drunkard, smoker, fashionable, modern, classical Life style is a person’s pattern of living. It is reflected in his activities, interest, and opinions. It affects product needs and choices. Life style groups can be segmented according to how they spend their time, what are their interests and what are their opinions about themselves and broad issues.
iii. Personality: conservative, money mined, extroverted, introverted, social, aggressive. Personality is the sum total of ways in which an individual reacts and interact with others. It is an individual’s pattern of traits which it influences behavioural responses.
4. Behavioural variables:
Behavioural variables refer consumer response to the product.
a) Occasions: Occasions affect purchase, need and usage rate.
Regular, occasional
b) Benefits:
Consumers seek benefits from products. Benefits describe consumer feelings of satisfaction and outcomes of buying products. They can be quality, service, economy, and speed. Benefits segmentation is getting popular and important.
c) User status:
User status reflects frequency of product purchase.
Regular user
First user
Second user
Potential user
Non-user
d) Usage rate:
It is the rate at which consumers use or consume products.
Heavy user
Medium user
Light user
e) Loyalty user:
Consumer loyalty to brand can be used for market segmentation.
Hard core
Shifting
Switcher
Segmentation variables/bases for industrial market:
Industrial market is that type of market where the goods and services are sold for re-use or re-sale purpose for profit-motive. In other words, industrial markets buy products for business use, resell, or to make other products. Industrial buyers are usually well-informed, customersare few but orders are of big size.
A. Geographical variable:
a) Location: It is geographic location to be served, it can be
i. Local
ii. Region
iii. National
iv. International
It sets the boundary.
b) Topography:
Climate (Terai, hill, mountain)
B. Demographic:
a) Types of industry: Industrial markets consist of a range of industries.
i. Agriculture
ii. Service
iii. Manufacturing
iv. Tourism
b) Size of customer: Every industry contains various sizes of customers in terms of orders.
i. Small size of business
ii. Medium size of business
iii. Large size of business
C. Operating variable:
a) Technology:
Technology determines the product requirements of buyers
i. Manual technology:
ii. Mechanized technology:
iii. Automated technology:
iv. Computerized technology:
v. Robotics technology:
b) Usage rate:
Usage rate affects the frequency and quantity of product use.
i. Heavy user:
ii. Medium user:
iii. Light user:
iv. Non user:
c) Service need: Customers may require various types of services.
i. Before sales service:
ii. After sales service:
iii. Warrantee or guarantee
iv. Installation and repairs
Selection of market segment:
Organization should be careful while selecting the segments to be served. The selection strategy can be:a) Single segment coverage:
An organization can select one segment and offers one marketing mix. The organization gains reputation through specialization in the market. It can match marketing mix to customer needs with limited resources.
b) Multi- segment coverage:
An organization can select two or more market segments and offers separate marketing mixes for each segment. This strategy diversifies the risk. It results in greater sales volume.
c) Product specialization:
An organization concentrates on making a single product which is sold to multiple segments. This strategy builds product reputation and diversifies risk.
d) Market specialization:
An organization concentrates on one segment but serves many products to that segment. This strategy helps organizations to build reputation but they remain over-dependent on one segment.
e) Full market coverage:
An organization serves all market segments with all the products they need. Various product items in one product line are offered.
Market segmentation practice in Nepal:
The socio-economic changes and developments in transport and communication system have made Nepalese marketers conscious of market segmentation.Features:
1. Non-systematic:
Segmentation is generally done in traditional way on past experience, rumor, competitors’ strategy. No any systematic study for segmentation.
2. Segmentation variables:
The variables mostly used for consumer market segmentation are:
a. Geographically:
Nepalese organizations are generally segmented on the basis of geographical it is the most popular variables for market segmentation. It can be done on the basis of place or area like District, Zone,
Development region, National and International.
b. Density: Urban, village
c. Demographic:
Gender, Age, Religion, lifestyle are widely used as variables for segmentation. The demographic variable for market segmentation is increasing concept in Nepal.
d. Behavioural:
Benefit, loyalty, and Usage rate
3. Lack of information:
Nepalese marketers do not have comprehensive information about consumer characteristics. They regard marketing research as “wasteful cost”. This has constrained the effective evaluation of market segments in terms of their attractiveness and appropriateness.
4. Government policy:
Government policies in Nepal are not supportive of marketing. They do not regard businessmen as partner for development. Different restrictions of movement of goods and controls have discouraged market segmentation.
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