MB03 – 02 : MARKETING MANAGEMENT

1. Explain the socio-economic factors affecting the marketing environment

Ans:

The first macro environmental force that marketers monitor is population because people make up markets. Marketers are keenly interested in the size and growth rate of the population in different cities, regions, and nations; age distribution and ethnic mix; educational levels; household patterns; and regional characteristics and

Movements.

P Worldwide population growth.

The world population is showing “explosive” growth. It totaled 5.4 billion in 1991 and is growing at 1.7% per year. At this rate, the world’s population will reach 6.2 billion by the year 2000.6.

The world population explosion has been a source of major concern, for two life (fuel, foods, and so forth) are limited and are likely to run out at some point. First published in 1972, The Limits to Growth presented an impressive array of evidence that unccheck3ed population growth and consumption would eventually resulting insufficiently food supply, depletion of key minerals, overcrowding, pollution, and overall deterioration in the quality of life.7 One of the study’s strong recommendations is the worldwide social ,marketing of gamily planning.8

The second cause for concern is that population growth is highest in countries and communities that can least afford it. The less developed regions of the world currently account for 76% of the world population and are growing at 2% per year, while the population in the more developed countries is growing at only 0.6%per year. In the developing countries, the death rate has been falling as a result of modern medicine, but the birth rate has remained fairly stable. Feeding, clothing, and educating their children while also providing a rising standard of living is out of the question in these countries.

P Population age mix.

National populations vary in their age mix. At one extreme is Mexico, a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Products

High importance in Mexico would be milk, diapers school supplies, and toys. Japan’s population will consume many more adult products.

P Ethnic markets.

Countries vary in their ethnic and racial makeup. A at one extreme is Japan, where almost everyone is Japanese; at the other extreme is the United States; with people from virtually all nations. The United States was or9iginally called a “melting pot” but there are increasing signs that the melting didn’t occur. Now people call the United states a “salad bowl” society with ethnic groups maintaining their ethnic differences, neighborhoods, and cultures. The U.S.population (261 million in 1994)is 76%white, African-Americans constitute another 12% and Latinos another 9 percent. The Latino population has been growing fast, with the largest subgroups of Mexican (5.4%), Puerto Rican (1.1%) and Cuban Chinese constituting the largest group, followed by the Filipinos, Japanese, Asian Indians, and Koreans, in that order. Latino and Asian American consumers are concentrated in the far western and southern parts of the country, although some dispersal is taking place. Finally, there are 5 million practicing Muslims in the United States.

Each population group has certain specific wants and buying habits. Several food, clothing, and furniture companies have directed their products and promotions to one or more of these groups, For instance, Sears is taking note of the preferences of different ethnic groups;

P Educational groups.

The population in any society falls into five educational groups: illiterates, high school dropouts, high school degrees, college degrees, and professional degrees. In Japan, 99% of the population is literate, while in the United States 10% to 15% of the population may be functionally illiterate. However, the United States has one of the world’s highest percentages of college-educated citizenry, around 36 percent. The high number of educated people in the United States spells a high demand for quality books, magazines, and travel.

P Household patterns.

The “traditional household” consists of a husband, wife and children (and sometimes grandparents). In the United States today, the traditional household is no longer the dominant household pattern. Marketers must increasingly consider the special needs of no traditional households, since they are now growing more rapidly than traditional households.

P Geographical shifts in population.

The 1990s is a period of great migratory movements between countries and within countries. As a result of the collapse of Soviet Eastern Europe, nationalities are reasserting themselves and forming independent countries. The new countries are making certain ethnic groups unwelcome ( such as Russians in Latvia, or Muslims in Serbia), and many of these groups are migrating to safer areas. As foreign groups enter other countries for political sanctuary, some local groups start protesting . In the United States, there has been opposition to the influx of immigrants from Mexico, the Caribbean, and certain Asian nations.

P Economic environment

Markets require purchasing power as well as people. The available purchasing power in an economy depends on current income, prices, savings, dept, and credit availability. Marketers must pay close attention to major trends in income and consumer spending patterns.

P Income distribution.

Income distribution is related to a country’s industrial structure but is also affected by the political system. Marketers often distinguish countries with five different income-distribution patterns: (1) very low incomes, 92) mostly low incomes,(3) very low very high incomes,(4) low, medium, high incomes, and (5)mostly medium incomes. Consider the market for Lamborghini, an automobile costing more than $100,000. The market would be very small in countries with type 1 or 2 income patterns. One of the largest single markets for Lamborghini’s turns out to be Portugal (income pattern3)_ one of the poorest countries in Western Europe, but one with enough wealthy families to afford expensive cars.

In the United States, there is some evidence that the rich have grown richer, the middle class has shrunk, and the poor have remained poor. This is leading to a two-tier U.S. market with affluent people buying expensive goods and working class people spending more carefully, shopping at discount stores and factory outlet malls, and selecting; less expensive store brands. Conventional retailers who offer medium-price goods are the most vulnerable to these changes.

P Savings, debt and credit availability.

Consumer savings, debt, and credit availability affect consumer expenditures. The Japanese, for example, save about 18% of their income, while U.S. consumers save about 6 percent. The result is that Japanese banks have been able to loan out money to Japanese companies at a much lower interest rate than U.S.banks could offer to U.S. companies. Access to lower interest rates has helped Japanese companies expand faster. U.S. consumers also have a high debt-to-income ratio, which retards further expenditures on housing and large-ticket items. Credit is very available in the United States but at fairly high interest rates, especially to lower-income borrowers. Marketers must pay careful attention to any major changes incomes, cost of living, interest rates, savings, and borrowing patterns because they can have a high impact on business, especially in companies whose products have high income and price sensitivity.

2. “Pavlov’s experiments on salivating the dogs have considerable relevance for a marketing man”. Do you agree? Discuss.

Ans:

The influence of social sciences on buyer behavior has promoted marketing experts to propound certain models for explaining buyer behavior. Broadly, they include the economic model, the learning model, the psychoanalytical model and the sociological model.

P The learning model:

According to the learning model, which takes its cue from the Pavlovian stimulus response theory, buyer behavior can be influenced by manipulating the drives, stimuli and responses of the buyer. The model rests on man’s ability at learning, forgetting and discriminating. The stimulus response learning theory states that there develops a bond between behavior producing stimulus and a behavior response (S>R Bond) on account of the conditioning of behavior and formation of habits. This theory may be traced to Pavlov and his experiments on salivating dogs. Pavlov’s experiments brought out associations by conditioning.

In his well-known research with dogs, a bell was rung every time food was served to a dog. Eventually, the dog started salivating each time upon hearing the bell though no food was served. The dogs behavior is conditioned; it is related to behavior-producing stimulus (bell ringing) and behavior learnt by the object _dog. In terms of consumer behavior, an advertisement would be a stimulus whereas purchase would be a response.

Learning Process: According to the stimulus-response and reinforcement.

3. As a consultant suggest a suitable market segmentation strategy for the manufactures of

a) Bicycles

b) Cosmetics

c) Wick –stoves

a ) Bicycles:

The modern marketing concept starts with the definition of target markets. The target marketing has its roots in the marketing age. Target marketing helps the marketer to correctly identify the markets – the group of customers for whom the product is designed. Here two alternative different needs: One, to treat the target market as a single unit – one aggregate market and draft one marketing-mix for them. This approach is known as the ‘shotgun’ approach. Today, the shotgun approach works only if different products satisfying different needs, so far, are combined in one product. Two the total market is viewed as consisting of small segments and the consumer differences necessitate different marketing-mixes for each of them. Based on the capabilities of a company, the selection of the segments takes place. This is known as the ‘rifle’ approach – separate marketing programs with specific targets.

b) Cosmetics:

Once it is learnt that consumers would not accept standard products, the marketer might try to provide different sizes, colors, shapes, features and qualities to attract them. The product variety approach satisfies a customer more than standardized one model products. For example, when Maruti 800 was introduced into Indian roads, it was a variety product (variety compared to Premier Padmini) because it used two versions Standard and Deluxe with different colors. This type of philosophy might satisfy a customer for the moment, soon the customer discovers that the offered product does not fit into different needs, car for sports, family, commercial purposes long travel and hilly areas. The product-variety approach does not call for proper segmentation of the market. This is carried by the target marketing.

c) Wick stoves:

Before the onset of the marketing age, there was widespread adoption of mass marketing. mass production, distribution and promotion. That is, offering the same product and applying the same marketing-mix to all consumers assuming that there is no significant marketers felt that the consumer differences in education, income, offering them standardized product without suitable modifications. The Coca Cola company follows this approach. It designs its marketing program to appeal to all buyers. The Company feels that no segmentation is necessary. This is undifferentiated marketing strategy. But if a toothpaste of standard size is offered to a student (living in a hostel) a nuclear family (having three to-four persons) and a joint family (having more than 4 persons), the offered toothpaste might last many months for a student some months for a nuclear family, and last for about a month for a joint family. There seems a need to demulsify the marketing efforts. This type of marketing is well-suited for fruits, vegetables, Over- The-Counter (OTC) drugs, chocolates, bakery items, stationery items etc.

CASE STUDY

1. Did the wholesalers be regarded as a necessary nuisance ?

Ans:

The wholesalers can be regarded as a necessary nuisance without whom the distributors can not distribute more quantum of product for sales. In stead of having more number of retailers and sell the product, it is always better to have few number of whole sellers and sell the product. The main reason is that, we can control over the price of our product. We can be sure of market trend and act accordingly.

But at the same time, wholesalers should not given too much of privilege on the price of the product. They should be given a cut off maximum rate at which he can sell the product to the retailers.

2. Should the number of wholesalers be increased, maintained or reduced or eliminated ?

Ans:

The wholesalers should never be reduced. Once the number of wholesalers reduced , then it will be difficult task for the management to sell the product through retailers.

The number of wholesalers need not be maintained at the same level. If an organization would like to increase its sales more and more then, it is not advisable to maintain the same number of wholesalers over the period.

Therefore, the number of wholesalers should be increased, in order to sell more quantum of products over the years. If an Organization is willing to increase its sales , then obviously it has to increase the number of wholesalers year by year. But at the same time, it should try to keep the number of wholesalers with in certain boundaries. If the demand is less from the public and the number of wholesalers are more, then it will create an adverse effect . Therefore, it is always better to have required number of wholesalers according the need and trend of the market.

3. How could the distribution be strengthened?

Ans:

The distribution can be strengthened in the following ways :

· There should be proper supply of product to the distributors to keep them always available for meeting out the orders from wholesalers and retailers.

· There should be proper system of analyzing the demand in the market and accordingly products can be provided to the distributors in order to avoid over stocking in the hands of wholesalers.

· The distributors should be made aware of the company’s policy in respect of pricing of the product.

· The Management should be very careful while selecting or appointing distributors for their product. It has to be more selective in appointing capable and effective distributors.

· There should be regular order taking from the distributor and good communication, smooth correspondence between the distributor and the management.