Part-7: Communicating Value

Lesson-7(Discussion Questions):

The opening vignette of Chapter 17 is about Dove's advertising campaign featuring "normal” women.  Go to the Web site: www.campaignforrealbeauty.com and read Randall Rothenberg, "Dove Effort Gives Packaged-Goods Marketers Lessons for the Future,” Advertising Age, March 5, 2007; Theresa Howard, "Ad Campaign Tells Women to Celebrate Who They Are,” USA Today, July 8, 2005; Jack Neff, "In Dove Ads, Normal is the New Beautiful,” Advertising Age, September 27, 2004.  After reading and visiting the site, share your impressions on the campaign's effectiveness with the target market. 

DQ No.1) Answer:

A company tries to sell its products and services towards a specific group of customers, called target market. A company first should identify its target customers by segmenting its whole market into a small segment and secondly it should be given the priority to fulfill their needs, wants and desires. As a marketing manager, we have to operate marketing mix-4Ps (product, Price, Place and promotion) effectively in order to gain a competitive edge in the market.

A significant shift in strategy occurred for Dove in 2003 with the lunch of the real beauty campaign that celebrates “real women” of all shapes, Sizes, ages, and colors. Furthermore, the campaign arose from research revealing that only 2% of women worldwide considered themselves beautiful. It featured candid and confident images of curvy, full bodied women-not traditional models. The ads promoted Dove skin products such as Intensive Firming Cream, lotion, and body wash. It seems that traditional TV and print ads were interlinked with all other forms of new media, for instance, real-time voting for models on cell phones and tabulated displays of results on giant billboards. Likewise, the dove evolution video showed a rapid-motion view of an ordinary looking woman transformed by makeup artists, hairdressers, lighting, and digital retouching to look like a model.  When it was uploaded to YouTube by Dove’s ad agency Ogilvy & Mather, it was an instant viral hit, drawing 2.5 million views. Dove products are recognized for their different functional features in every category in which they are shown. It is not only functional characteristics that differentiate Dove, but it also made a distinctive personality of the brand from its inception.

Dove’s advertisings and campaigns were stunning so that it created a huge impact on the customers. Also, it has integrated marketing communication in order to build the brand image of Dove in the mind of the customers. The evolution ads video showing an ordinary looking woman's face into that of supermodel; was just one kind of the creative marketing communications that sparked dove’s recent success in influencing its customers.

In summary, it is definitely true that Dove was successful in attempting to inform, persuade, and remind customers directly or indirectly about the product and the brand they sell. Marketing communication done by Dove also helped them to tell or show customers how and why the product is used, by what kind of person, and where and when. After reading and visiting its websites, it is known is that Dove's campaign was outstanding for delivering the promotional message that reached to its targeted audience, and it is understood by the audience properly, and message was quite good at stimulating the customers to buy repeated the same products.

References:

-   Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

- (n.d), Retrieved from http://www.dove.us/Social-Mission/campaign-for-real-beauty.aspx

2.    Read the following sources listed in the Marketing Insight: "Endorsements as a Strategy,” Irving Rein, Philip Kotler, and Martin Scoller, The Making and Marketing of Professionals into Celebrities (Chicago: NTC Business Books, 1997); Greg Johnson, "Woods Cautious Approach to the Green,” Los Angeles Times, July 26, 2000, p. A1; Bruce Horovitz, "Armstrong Rolls to Market Gold,” USA Today, May 4, 2000, p. 1B; Theresa Howard, "Pepsi Takes Some Fizz off Vanilla Rival,” USA Today, November 16, 2003; Keith Naughton, "The Soft Sell,” Newsweek, February 2, 2004, pp. 46-47; Betsy Cummings, "Star Power,” Sales & Marketing Management, (April 2001): pp. 52-59. After reading these articles, take a position: For or against using celebrities as endorsers. 

DQ No.2: Answer:

A celebrity endorsement refers to the advertising activity of the company by using celebrities to endorse brands. It is one of the most important marketing strategies for attracting new customers and retaining the existing ones. However, it is not easy task for marketers to select celebrities who represent the image and promise of the company’s brands. In this paper, I will discuss about advantages and disadvantages of doing a celebrity endorsement for a brand.

For celebrities as endorsers (pros of celebrity endorsements):

1.      Build brand equity: it can be very useful strategy for building brand equity of the company’s products and services. For instance, Nike, as one of leading company in the sports, wanted to expand into new markets by sponsoring tennis and track athletes.

2.      Help people remember Ads: it can improve ad recall, according to researchers Jagdish Agrawal and Wagner Kamakura. When people would see or hear Dennis Haysbert on the show “24”, they associate his voice with Allstate.

3.      Make people believe the product contributes to superstar status: Most of people always follow what their celebrities do in their lives so that people want to imitate their celebrities’ lifestyles to impress others. For example, if it is shown in the endorsement, a celebrity using a General motor’s car then others also would like to use the same car.

4.      Stand out: Research from Charles Atkin and Martin Block suggests that “celebrities may help advertising stand out from the surrounding clutter.”  It is true that celebrity endorsements enhance its image and brands in the minds of customers.

5.      Brand Credibility and worldwide reputations: Celebrity Endorsements could be believable and credible than other advertising campaigns because many people believe in what their celebrities do while choosing and buying the particular products and services.

Against celebrities as endorsers (Cons of celebrity endorsement):

Although a celebrity is a good fit for the brand, using one for endorsements has its own sets of possible risks.

1.      Images change: Celebrities may make mistakes and when they do, they affect the entire company’s brands they endorse.

2.      Celebrities become overexposed: when a celebrity is successful and he/she tries to endorse more and more companies at once, the celebrity’s credibility may suffer. People may feel that the celebrity will endorse anything to earn money.

3.      Celebrities can overshadow brands: Consumers may focus on the celebrity, not the product. This kind of danger may happen when one celebrity endorses multiple products at a time. For example, when, an Indian cricketer, David Beckham endorses a number of companies at once, his image as the focal point of advertising devalues many products.

Hence, having aforementioned all, I would prefer to have a celebrity endorsement because its pros far outweigh its cons. Yet it has some pitfalls that companies should consider before selecting a celebrity, and developing endorsement programs. It can reap huge rewards for a brand in long term though some possible risks are there. As a marketing manager, we must be able to determine which option is better by calculating its risks and rewards.

References:

-          (n.d). Retrieved fromhttp://frog-dog.com/the-advantages-and-disadvantages-of-celebrity-endorsements/

-          Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

3.    It has been suggested that over 70 percent of all buying decisions are made in the store and as a result, point-of-purchase advertising has grown in its appeal. Give three examples of point-of-purchase advertising that you have recently come across (ads in-store, personal selling by a cosmetic counter salesperson, etc.) and comment on the effectiveness to them of this type of advertising. Did you buy the product? Did the advertising annoy you? Moreover, in the role of a marketing executive, would you recommend spending part of your advertising budget on this form of media? 

DQ No.3) Answer:

Point-of-purchase (POP) or point-of-sale refers to an area surrounding counter where the sales are made order to increase the profit margins. These kinds of advertising play a pivotal role for influencing customers to buy repeatedly and make strong loyal customers. Some examples of point-of-purchase are merchandise display, use of signature, receipts and suggesting selling by the retailer either in Mall or market or city.

For example, some of the point of purchase advertising, I have had are as follows:

·         When I went to the mobile shop to buy a mobile, there were lots of mobile companies there to provide their services. Firstly I thought to buy a Nokia mobile but I saw a nice ads picture of Samsung that had dragged my attention to buy that mobile. I saw a lot of good features on the Samsung Mobile that I suddenly change my decision to buy it.

·          I recently visited to the shopping mall for purchasing a wallet. I purchased wallet when I was paying the money I saw advertisement/pictures of the wallet in side of the counter. I asked to the sales person to show these wallets. Among them one of wallets is attractive. I asked its cost and she said high price $ 50 and I bought that wallet at $ 50.

·         I went to Dell laptop show-room to buy a laptop; suddenly I saw posters of Watch just attached shop with that Dell laptop shop. Actually I was planning to buy watch too so I went to the watch shop and bought a watch, Rolex from that shop.

Moreover, as a marketing executive, I would recommend spending part of one's advertising budget on this form of media. It is very important therefore to ensure that point of purchase units are displayed in the most attention grabbing, eye drawing position in the store to help direct the customer as needed. Customers like to be informed and will appreciate clearly displayed information that attempts to help them make the most suitable purchasing choice. These advertisements are really eye-catchy and interesting as they are creative to attract the customers and at times they are successful at doing so. And I don't think that these kinds of advertisement annoy me, rather they give us more information regarding its products’ features and qualities.

References:

-          Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-          (n.d). Retrieved from http://www.investopedia.com/terms/p/pointofpurchase1.asp

4.    Dell(r) Computers has begun setting up kiosks demonstrating their products in regional malls across the country. They are also selling their computers in Wal-Mart stores, Best Buy, and other U.S. retailers. Dell will soon be selling through retailers in China.  Consumers are no longer directed to their web site to place an order.  Obviously, Dell has had to change its "contact” with consumers. What effect do you believe this type of change in their direct marketing mantra is having on Dell's business? Must other direct marketers make the change?

DQ No.4) Answer:                            

Dell is one of the largest computers supplier company in the world, established in 1984. Dell has continued for shaping the industry by breaking new ground and pioneering critical developments in home, small business and enterprise computing. It has been delivering computer systems, computer peripherals, computer software, IT consulting and IT services since its inception in US.

According to Wikipedia-“A retail kiosk (also referred to as mall kiosk or Retail Merchandising Unit) is a store operated out of a merchant-supplied kiosk of varying size and shape, which is typically enclosed with the operator located in the center and customers approaching the vendor across a counter.”

The place or distribution channel is one of important factors of marketing mix. Initially, Dell uses a direct channel model where it sells its products directly to the customer without need for a distributor or a middle man through Internet. However, selling and distributing the products and services through internet is not sufficient in the modern marketing. For this, in 2002, Dell opened kiosk locations in shopping malls, including Wal-Mart, across the United States to provide personal service to customers who preferred this method of shopping to Internet or telephone orders. Kiosks are located in shopping malls, airports, sporting events, or larger stores etc. to make customer more ease for communicating and delivering the products and services.

Despite the added expense, due to these changes in direct marketing will deliver a superior customer value through a new way various services such as prices at the kiosks match or beat prices available through other retail channels, high visibility of these units, which are most often located in the common areas of malls, these businesses can often gain a relatively trackable monthly sales figure after a three or four-month trial. Many other benefits exist, such as the low overhead, small inventories, and low or non-existent CAM, tax, utility, and marketing fees, as compared to their in-line storefront counterparts, which can often have fees equal to or in excess of the rents themselves. Having said these, however, direct marketing must be changed to attract more customers in the way the customers want.

Hence, it would be wise decision to use Kiosks for the customers who want to have a unique style to do fun while visiting and purchasing the goods and service. Furthermore, it should be changed as the customer needs and preferences so that more and more customers will not switch into other competitors.

References:

-          Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-          (n.d).Retrieved from http://en.wikipedia.org/wiki/Mall_kiosk

Part-6: Delivering Value

Lesson-6: Discussion Questions (Based on chapter 15 & 16):

1. Progressive companies have begun developing a value network system to get products in the hands of consumers. A value network includes a firm’s suppliers, its suppliers’ suppliers, its immediate customers, and their end customers. Identify a company that has successfully set up a value network, then compare and contrast the components of the value system to a competitor that does not have one.

DQ No.1) Answer:

A value network system refers to the process of building strong relationship among the company, its suppliers and immediate customers. It is one of the most important value creating processes by developing partnership relationship with close associates of the company. In other words, it is a value creating process through an interdependent relationship among suppliers, the company and its valuable customers. Producing a product and making it available to ultimate customers is not an easy task for any company. It is considered as the series of different departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's product or services. As Value network system focuses on building a strong relationship among suppliers, distributors, and customers that links raw materials, components and manufactured goods and how to move ahead towards the final consumers.

Here is an example of how McDonald's value network system is working effectively to deliver superior customer value than other competitors. As you know, McDonald is one of fastest growing restaurant companies in the world. Just think a little bit about how it is maintaining its value network system all over the world. For this, McDonald needs to look beyond its own value chain and into the value chains of its suppliers, distributors, and, ultimately, its customers. McDonald has approximately 30,000 restaurants in more than 100 countries serving more than 52 million customers daily. Consumers are more likely to prefer the McDonald's system, not just to its food product, rather than that, it is successfully in making partners with its franchisees, suppliers, and others  in order to deliver exceptionally high customer value.

Here is an example that compares and contrasts the components between McDonald and KFC fast Food companies. McDonald, as told above, has good value network which is far better than KFC Company because McDonald has more partners with its franchisees, suppliers and customers than KFC. KFC focuses on only limited items than McDonald does.  However, both companies are good at delivering their values to their respective customers. So, both of them are able to create more potential customers and running at a profit due to good network value system.

References:

-   Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

- (n.d.). Retrieved from http://en.wikipedia.org/wiki/Value_network_analysis

2. Describe the hybrid channel of distribution. Do you think Internet sales will grow in the future or will customers demand hybrid distribution choices like free shipment to store sites (Wal-Mart) or a pick-up store (IKEA)?

DQ No.2) Answer:

Hybrid channel of distribution refers to an activity of using two or more than two channels by a company for managing its distribution channels effectively and efficiently. Today’s marketing organizations are using more than one channel to get a competitive advantage by providing superior customer value. It is very useful these days because a company cannot achieve its efficiency by using just single channel so that it needs to use different marketing channels to approach different target consumers. Multi-marketing channels help to reduce costs, expand its market coverage, and convert potential customers into profitable customers.

In addition, customers like to have more options in the future while buying a particular product or service. This is only possible when a company uses hybrid distribution channel for providing customer superior value than competitors do. It is understood that many customers are likely to spend more time with the companies who use two or more than two channels to satisfy customers’ needs and demands. However, to make it more effective, it is necessary to understand the customers’ needs and wants before deciding whether to use hybrid or single distribution channel.

The trend of internet sales is increasing day by day. Many people don’t have much time to buy the products by visiting real stores or outlets. The internet is providing an ease platform for busy and working people. It seems that our lives will be busier and even less time will be left for purchasing. I think, most of customers in developed countries like USA, UK are already started using internet sales, and this trend will keep growing due to increase number of smart-phones and information technology. On the other hand, it is also true that customers are demanding hybrid distribution channels or pick up store as they want more for less. For example, Wal-Mart and IKEA are also getting more success than ever before. Nowadays, many companies have started to provide goods and services through multiple channels, and it is quite preferable than just using a single channel. However, in my opinion, the use of internet sales will grow faster than the use of multiple channels in the future because many companies have started to sell the products or services through internet selling, and also, customers started to buy through it as a fun and convenient.

References:

-          Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-          Local Mentor- Subash Chandra Baral

3. Chapter 16 identifies four levels of service in retailing—self-service, self-selection, limited service, and full-service. Visit at least one of each type of the described retailers and are to comment vis-à-vis the retailer-positioning map (Figure 16.1). Answer the following relative to your shopping trip: Did you experience a dissonance between the service you received and their initial characterization of the store? In other words, did you receive “better” service than you initially expected to receive from a self or limited service retailer? Did you experience a “lack” of service from the store you perceived as “full service”? If either of these conditions occurred, postulate a causal relationship for the occurrence.

DQ No.3) Answer:

Retailing is a process of selling activities by a retailer in which goods and services are directly sold to its end consumers for personal or non-business use. It is a part of an integrated supply chain process where a retailer buys goods and services in large volume form wholesaler or producer in order to sell them in smaller quantities to its ultimate customers by taking a certain profit margin. It can be done either locating its place in fixed area like retail stores or markets, or door-to-door selling. Today’s marketing world, there are lots of stores that are offering goods and services by differentiating its quality, prices, convenient locality, and  after-sale-service etc. some of the examples are retail stores, department stores, supermarket stores, and drugs store etc. Consumers’ preferences are affected by several service levels that are discussed in the following paragraphs.

1.      Self-service: Self service refers to the practice of serving ourselves by purchasing needed goods and services.  This allows enough freedom to its customers for choosing whatever they want to buy from the retailing stores.

For example, recently I visited to Bhatbhateni Supermarket for shopping a winter jacket where a lot of retailing stores were there. The most interesting thing was that I was given enough freedom to select the jacket that I really wanted to buy. There were good staffs staying everywhere to assist me if required. But it was quite fun for me to choose from a variety of jackets. Thus, I felt no dissonance in this supermarket because I got the services that were characterized by its popularity in Nepal.

2.      Self-selection: Self-selection refers to the practice of choosing goods from the retailing for our own purposes. It provides more options to select our needed goods and services.

As I said above, In Bhatbhateni, I chose a specific retailing store for buying my own jacket. I was feeling quite free to move on any product or department. First of all, I was confused to select which retail stores were better but I asked one staff for finding a better store for a jacket.  In this case, I also got what I was expecting to get so that I felt better experience here too.

3.      Limited service: These retailers carry more shopping goods, and customers need more information and assistance during the purchasing of goods and services. These retailers provide us very limited services like no credit allowed but may have freedom to choose the goods and services.

For instance, last Friday I visited to Civil Mall for buying a LCD TV, one of the supermarkets, I found many shopping verities with different ownership. However, I did get the service that I was thinking to get from this supermarket like credit service so that it disappointed me instantly.

4.      Full service: In these retail stores, salespeople are assisted from the first phase of purchasing to the last phase of buying goods and services. Some retailers, who think that providing full service is an added value to its customers, are likely to use full-service, and in return, they charge high prices for the services they provided.

Like I said above, I was thinking to get a home delivery service for LCD TV, but I did not get as I expected to get as a part of full services from this supermarket store. In this case, I felt lack of services which need to be offered to potential customers like me.

Hence, having discussed all the above, there are basically four levels of services that are available in the retail stores. It is interesting that customers’ preferences are affected by those four services while purchasing the particular products or services like I felt between Bhatbhateni supermarket and Civil Mall. So, it seems that if customers are happy with the store then they are likely to be a potential customer and think positively towards it and vice-versa.

References:

-   Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

- Local Mentor: Subash C. Baral

4. Atmospherics is an important component of store attractiveness. Every store has its own unique look, feel, and smell. Yet each consumer may react differently to each of these elements. Visit three retailers of your own choosing and comment on how the store atmospherics affected you personally. Have a friend of the opposite sex visit the same retailers. roup the findings by sex. Why are there such differences? What can a store do to appeal to both sexes?

DQ No.4) Answer:

Atmospherics refers to the surroundings that are likely to attract or repel customer for purchasing decisions. Atmospherics includes the store layout, noises, temperature, lighting and decorations etc. it is necessary to design them effectively in order to attract more customers for long-lasting effect. It needs to be set up as the preferences of customers so that they frequently visit to buy the goods and services. For making a positive impact, every store has to design the atmospherics in such a way that is quite better than other competitors. However, it is not guarantee that if it is designed properly then they visit repeatedly because each and every customer may feel it very differently. The common belief is that if it is managed properly then more customers are likely to visit in the future.

Here I will share my own experience regarding three retailers’ atmospherics which affected me personally. They are described as follows:

1.      Civil Mall: Civil mall has strived to lure more customers through different and unique features like QFX Cinemas, well architecture, games station, and verities of shopping retailers. It is quite fascinating and attractive in comparisons to other malls of Kathmandu.

2.      The Kathmandu Mall: Though Kathmandu Mall is located at the heart of Kathmandu, Nepal, the architecture, interior and exterior designs are not good as much as it should be to attract new customers. However, it is true that I found a variety of products and services for clothing and cosmetic items.

3.      Bhatbhateni Supermarket: The architecture, exterior and interior designs of the whole building and blocks are attractive. All products are placed systematically to attract more customers. It is offering a variety of product and services such as kitchen items, groceries, clothing items, cosmetics and others which attracted me to enter there.

As one of my friends, she also visited with me but our likings and disliking towards respective stores are quite similar but not totally the same. It is surprisingly true that male and female have some differences in looking the same malls. It is due to sex factor because males are not like the same as females for various things.  As we know, people are more likely to be attracted on those things which they usually prefer to have. Also, they are different in nature and basically females want to buy more cosmetic items than men do. The color most females preferred is pink whereas Males’ preferences are not the same as women do. It can be noticed that some differences are there between male and female due to cultural differences, Psychological differences, and behavioral differences and so forth.

However, a store can appeal both sexes by doing following activities:

1.      Providing a variety of products or services for both sexes: If a store has only products related to males, then males are less likely to visit a store. Thus, a store has to offer an array of products that match both sexes.

2.      Giving attractive discounts/bonuses for both sexes: A store has to lure the both sexes by offering discounts or bonuses. For instance, Buy one and get one free.

3.      Designing atmospherics as good as possible: A store can appeal both sexes by designing and architecting its surroundings as beautiful as possible.

Hence, having said all the above, it is understood that atmospherics is one of the important marketing tools to attract more customers so that it should be managed properly and effectively. We as a marketing future manager needs to think all these factors including atmospherics which have a great impact for appealing both sexes to buy the products or services.

References:             

-          Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-           (n.d.).Retrieved from ntt://en.wikipedia.org/wiki/Atmospherics/

Part-5: Creating Value

Lesson-5: Discussion Questions (Based on chapter 12 and chapter 14):

1.      Studying how consumers shop, how they use a particular product or service, and how they dispose of the product when consumed is important for marketers. This information forms the basis of product strategy. Define the consumption system and identify the two upcoming product strategies that are affected by this knowledge.

DQ No.1) Answer:

The product consumption style has been considered as one of the important factors that provide a clue for marketers to design the product strategies.  Studying how consumers use the product will definitely help to form the basis of strategy. Most of successful marketers are always looking into the market in order to get some useful insights regarding changing consumers’ preferences and habits.

Consumption System refers to the pattern or manner about how consumers consume the products or services. It includes the combination of product consumption, the frequency of their consumption and the quantities consumed. For instance, Milk may be taken as directly or in tea and either cold or warm. It is important to understand the consumers’ consumption system while offering the goods and services to its end users. It needs to be understood by all marketers so that they can identify the appropriate product strategies for attracting its new customers and retaining the existing customers. The two upcoming product strategies that are affected by this knowledge are the product augmentation strategy and product potential strategy. They are briefly described as follows:

1.      Product Augmentation strategy: In this strategy, marketers prepare the augmented products that can exceed the customers’ expectations. In the developed countries like US, UK, Brand positioning and competitions are commonly prevailing. However, in developing countries like India, Brazil, it takes place at expected product level.

2.      Product potential strategy: in this strategy, potential products encompass all the possible augmentations and transformations the product or offering might undergo in the future.

In short, product consumption system differs in different places of the world because different people have different styles and cultures to do the same things in different ways. Likewise, consumption systems are measured differently in different areas so that two upcoming product strategies that are affected by this knowledge are augmentation and potential strategies.

References:

- Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

- (n.d.) Retrieved from http://www.fao.org/wairdocs/ilri/x5466e/x5466e03.htm

2. Explain the concept of line stretching and the three uses for it.

DQ No.2) Answer:

All companies have a certain part of the total possible product range within product lines. Line stretching refers to the extension of the product range in order to strengthen its product line. In other words, an increase in the number of current product range within the same product line is called line stretching. For example, Toyota company had no product range at first but now it has been offering low product range to high product range; cars. Literally, there are three ways in which it can be done, and they are as follows:

1.      Down-Market stretch: Some companies produce low-priced goods for increasing its products in the markets. The condition when a company starts to produce goods in the lower priced range is called down market stretch. The company may notice strong growth opportunities as mass retailers such as Wal-Mart, Best Buy and others to attract a growing number on shoppers who prefer to buy low-priced goods. The company may wish to tie up lower end competitors who strive to move up market. If the company has been attacked by low end competitors, it usually decides to counter attract by entering the low end of the market.

2.      Up-Market Stretch: The condition when a company wishes to enter high end markets, or reach for higher range than their current line is called up market stretch. It can be done in the same line.

3.      Two-Way Stretch: The companies which are currently serving middle class, decide to stretch both down and up ways is called two way stretch. It can be very useful approach while entering into the competitive markets. Texas Instruments (TI) introduced its first calculators in the medium-price-medium-quality end of the market. Continuously, it added calculators at the lower end taking the share from Bowmar, and at the higher end to compete with Hewlett-Packard. This two-way stretch won Texas Instruments (TI) an early market leadership in the hand-calculator market. Examples are Zen LXI, and Zen VXI etc.

Three uses of it are as follows:

1.      Expansion on the product range: Line stretching is very important approach that helps to expand its product lines.

2.      Wide coverage of market and customers: It can be good way to cover wide market and customer’s coverage. It can be used to produce goods and services for covering wide area.

3.      Competitive advantage: It can be used to achieve a competitive advantage through using appropriate line stretching ways. It helps to accomplish the predetermined goals by serving all types of customers.

References:

-          Kotler, P., & Keller, K. L. (2005). Marketing Management. New Delhi: Prentice Hall of India.

-          www.citeman.com. (n.d.). Retrieved 11 28, 2014, from http://www.citeman.com/1290-line-stretching-in-marketing.html

Part-4: Building Strong Brands

1. Consumer perceptions of prices are also affected by alternative pricing strategies. Marriott Hotels, for example, has different brands for differing price points. Building upon the Marriott example, you are to scan the environment to find examples of a company whose pricing strategy is closely tied to its branding strategy. Caution: do not just list just the different price points in the same company such as Ford automobiles.

DQ No.1) Answer:

Consumer perceptions refer to the psychological state of consumers towards the products or services.  Consumer perceptions are affected by several factors such as products pricing strategies, qualities and branding and so forth. Good marketers always try to attract new customers and retain the existing customers for operating the organizations at a profit so that they can apply the following pricing strategies to survive and compete with their close competitors.

1.      Premium pricing: Premium pricing strategy refers to the fixation of price in such a way that companies range the price of the product higher than the competitors. It is applicable when product is new and includes more product qualities and features in the products than competitors.

2.      Penetration pricing: It is the pricing strategy in which companies enter into the market with low pricing than the competitors. And it uses the public awareness strategy to attract the customers.

3.      Economy pricing: It refers to the strategy of ranging affordable price from low to high in which marketers try to attract the customers who have low income levels.

4.      Price skimming: It is the strategy where marketers set the higher price at first and after that slowly decreases after it gains the maximum revenue.

5.      Psychological pricing: It is the strategy used by the marketers by considering the customer psychology. For example: keeping price of a product is $99, instead of keeping $100.

In addition, by applying these pricing strategies in the companies like Marriott Group, which has provided a wide range of hotels for charging different prices to different product brands. The transportation company in Nepal, “Metro Deluxe” also has been offering its different services or prices in order to facilitate different passengers. It has been offering three different brands with different pricing strategies to attract all customers. One of them is that Normal Metro Deluxe, it is offering its services with low income passengers. Second of them is that Metro Deluxe, it is providing its transportation service with medium rage cost, and third of them is, AC Metro deluxe, it is charging very high prices by offering its customers more facilities than others.

In a nutshell, consumer perceptions of prices are not affected by various pricing strategies which most of marketers use to set up while determining pricing of different products and services. Thus, it is very important for marketers to know about pricing strategies to attract new customers and retain the existing ones.

References:

-           Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2012). A south Asian Perspective Marketing Management. New Delhi: Pearson Prentice Hall.

-           Local mentor: Subash Chandra Baral

2.  Choose a service good, such as education, legal advice, tax advice, or other such services, and map out your perception of prices and what you consider to be the current actual price. Compare and contrast their perceptions with the stated or published prices for these services. You should explain the differences between perception and stated prices in terms of consumer buying behavior models from Chapter 6 of this text.

DQ No.2) Answer:

Perception can be defined as a process of selecting, organizing and interpreting information inputs to produce meaningful picture of something or someone. On the other hand, Consumer buying behavior models refer to buying behavior of end consumers about what to buy, when to buy, where to buy and with whom to buy and so forth. These models help in understanding and analyzing the psychological aspect of the individuals for buying any product or service. Most of the consumers these days are more aware and conscious about products or services than ever before.

Any consumers have to pass through the following consumer buying stages before buying any products or services. They are as follows:

1.           Need/problem Recognition

2.            Information search

3.            Evaluation & selection of alternatives

4.            Purchase decision

5.            Post-Purchase behavior

Price perception refers to individuals’ judgments or perceptions towards particular products’ prices that could be high or low, and differ in persons to persons. Stated price, on the other hand, refers to the price that is stated for the goods or services to be sold, and it is fixed and determined before offering goods or services to its ultimate users.

In addition to above, we can make it more clearly by providing a real example. In the context of our country, Nepal, there are a lot of public and private colleges for providing an excellent education. However, people have different perceptions regarding its quality, prices, and facilities and so on. Generally people want to go the private colleges because their perceptions towards private colleges are positive and they think it is better way to learn than doing the same thing in public colleges. The Stated Price of the public colleges is really low but the actual price people have to pay is high due to not having the services as expected. Likewise, in the private colleges, the cost is already high and people do not stop going there to get admitted because people perceive more values in these colleges than in public colleges.  In the consumer buying behavior process, these factors also equally play a pivotal role in determining what services or product to buy or consume.  People tend to go the colleges in which their perceptions are met by products or services’ stated prices.

In summary, Consumer buying behavior is affected by a lot of factors such as perceptions of the price they pay for the products or services, and the services they actually expect to get from.

References:

-          Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2012). A south Asian Perspective Marketing Management. New Delhi: Pearson Prentice Hall.

-          Local mentor: Subash Chandra Baral 

Part-3: Connecting with Customers

Discussion Questions:

1.      People can emerge with different perceptions of the same object because of three perceptual processes. List and briefly characterize these processes.

DQ No.1) Answer:

Nowadays it is supposed that all consumers are rational, and they go different stages for buying any products. Perception is a process of selecting, analyzing, organizing and interpreting information input to create a meaningful picture of the world.  Perception may not be the same for all people; it depends on individuals’ past experiences, psychological conditions, financial status etc. However, the perception may change and normally go through three different processes. People can emerge with different perception of the same object because of the following three perceptual processes:

1.      Selective attention: Although there are lots of products that are available in the markets, products that remain in the consumer’s head are relatively selective. However, there are some factors that grab attention of the buyer such as:

a)      People are more likely to notice stimuli that relate to a current need. For instance, a person is motivated to buy a car will notice car ads; he or she will be less likely to notice Movie ads.

b)      People are more likely to notice stimuli that they anticipate. For example, a person who is more likely to notice cars than bicycle in a market because he/she doesn’t expect the market to carry bicycles.

c)      People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli. For example, a person is more likely to notice an ad offering $1500 off the price of a car and one offering $ 50 off.

2.      Selective distortion: consumers give focus on the product they are aware of. It is refers to a tendency to interpret information in such a way that will fit our preconceptions. Generally it occurs with brand aware people as they trust in the brand quality. For instance, suppose a person who is more aware about laptop brands such as Hp, Dell, Acer, and Apple but his/her brother has Apple laptop then he/she is generally aware of Apple brand so that he/she give first priority on the Apple Brand.

3.      Selective retention: most of consumers normally forget much information about products which are not needed at the moment. People generally remember those products that they believe on and do not remember for those products which are not use at the same time. For example, an MBA student who is pursuing specialized subject as marketing would retain marketing information in the mind rather than financial information.

In conclusion, perceptions are more important than the reality as it as perceptions that will affect consumers actual behavior. Thus, people can come up with different perceptions of the same objects because of the above mentioned three processes.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d), Retrieved November 18, 2014 from http://www.citeman.com/696-selective-attention-distortion-and-retention.html

2.      What are the five stages of the consumer buying process? Through market research a consumer gathers information about the competing brands of a product and their features. The consumer then advances through four sets with respect to brands before a decision is reached. What are those four sets?

DQ No-2: Answer:

A consumer buying process refers to the buying behavior of customers. All consumers may have to pass through these stages in buying a product. However, it is not necessary that all consumers must pass through all five stages because if you are already familiar with the product then you can buy the products by skipping some stages but if you are going to buy totally new products you must follow all these stages step by step.

1.      Problem Recognition/Identification: The first stage of consumer buying process is to recognize our needs and demands. It means that we have to understand what problems we have at hand and what are we going to solve them. For example, I need a laptop for my study.

2.      Information Search: After recognizing product needs, we have to look for information regarding products’ features and characteristics. It can be done by various ways such as research, surveys and online search on the internet. For example, I need a laptop so I gather various information regarding laptops such as Brands (Dell, HP, Acer, Apple etc) and their features to resolve my educational issues.

3.      Evaluation and selection of alternatives: It is third stage of consumer buying process in which consumers evaluate the various information regarding products’ attributes, its benefits and need fulfillment etc. after analyzing theses information, the best alternative can be made for purchasing decision. For example, I evaluate these features and brands and select (HP) one of the best alternatives which may be reasonable and can solve my problem.

4.      Purchase Decision: To purchase a product, it should be fixed that which brand is to buy? Where it is feasible to buy and when it should be bought. It final decision to buy the products which may or may not satisfy the consumer satisfaction. For satisfying needs, for instance, I buy a HP laptop based on its attributes and value creation to me.

5.      Post-purchase Behavior: After purchasing the product, the customer may or may not be satisfied. Satisfied customers continue to purchase and develop brand loyalty and brand equity. On the other hand, unsatisfied customers stop buying the product and they also dissuade others from buying it. In this case, when performance exceeds the expectations then the customers are delighted. After purchasing a HP laptop, it is the time to determine whether it satisfied me or not. For example, it satisfied me and thus I became a loyal towards HP.

Four sets involved in customer buying decisions:

1.      Total Set: Total set refers to a set of brands available in the market. All buyers may not be familiar with all brands so that buyers have no all information regarding sellers’ brands.

2.      Awareness Set: Awareness set means those familiar brands which the consumer is aware of total set, and knowledge about. Awareness may not be the same for all brands and products.

3.       Consideration Set: It refers to a set of brands that consumers are considering to buy them. These brands have a positive impact on the mind of consumers because they have established trust already for them.

4.      Choice Set: It is a set of final choices that are actually available for buyers to purchase. A consumer has to choose from only two or three brands based on various factors which will enhance to buy the products. At this moment, a consumer is not confused whether to buy which products or not because he/she knows all about products and brands.

In short, Consumer buying process is all about buying activities of the consumers in which they follow 5 stages for new products and for existing products they may skip one or two stages. At the time of consumer buying decisions, basically four sets are involved to make a decision regarding customers’ brand choices. Therefore, all these have to take into account while buying products/services by rational consumers.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d.) Retrieved November 18,2014 from  http://theconsumerfactor.com/en/5-stages-consumer-buying-decision-process/

3.      What mental accounts do you have in your mind about purchasing products and services? Do you have any rules you employ in spending money? Are they different from what other people do? Do you follow Thaler’s four principles in reacting to gains and losses?

DQ No.3) Answer:

Mental accounting refers to a tendency of customers to categorize money or values for their own choices. They use it while handling money for segregating their savings to meet different goals even though there is no mandatory to use these funds to any of the goals.

According to Philip Kotler-“Mental accounting refers to the way consumers code, categorize, and evaluate financial outcomes of choices.”

Literally, most of rational consumers go through the mental accounting processes while purchasing any products or services. I think that I usually use to have mental accounts while spending money. For instance, I separate $3 before going to movie theatre to watch a movie. If I lost that $3 in the way, it doesn’t matter for me because I have already set up spending $3 money in the mind so it is called mental accounts. On the other side, incidentally I have to spend another $3 for watching the movie but in this case I haven’t expected this money so that it doesn’t belong to any mental accounting.

As a rational consumer, I do not use any rules but only use my habit for purchasing routine products such as low priced products( a cup of tea, for example). On the other hand, I use to have some rules regarding spending money for high priced products such as car, computer and house. For example, I usually spend my money when there are more values from the products or services than other products. This means that I make a list of preferences regarding product choices by analyzing product features such as Price, quality, service, warranty, and brand choices etc. yes, it could be different than what other people do because all consumers may not be rational in the countries like Nepal where country is in developing phase and people in this country also have irrational consumers.  Thus, rational consumers’ purchasing habits might be different than irrational consumers because they have no same levels of knowledge; ideas, experiences, and product awareness etc. while spending money for goods and services.

According to Chicago’s Richard Thaler, mental accounting is based on a set of four key principles which I also pursue in reaching to gains and losses. They are as follows:

1.      Segregate Gains: Usually consumers tend to segregate different gains of using product/services separately so that sum of whole benefits is greater than the individual benefits.

2.      Integrate Losses: Consumers tend to integrate small cost of one product with large cost of another product.

3.      Integrate smaller losses with larger gains: Conscious consumers tend to integrate smaller losses with larger gains.

4.      Segregate smaller gains from larger losses: Consumers tend to segregate smaller gains from larger losses in order to identify the smaller gains and larger losses.

Hence, having discussed all these, it is inevitably true that a rational consumer makes a purchase decision in terms of gains and losses according to a value function. Thus, consumers use mental accounting based on Chicago’s Richard thaler’s four key principles.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       http://www.investopedia.com/university/behavioral_finance/behavioral5.asp

DQ No.4) Identify the four market segment groups based on brand loyalty status and list what a company can learn from analyzing the degrees of brand loyalty.

DQ No.4) Answer:

Market segment is a small part of whole market based on demographic structures and psychological conditions. Brand loyalty refers to a deeply held commitment of a consumer towards particular products or brands. Brand loyalty enforces the customers to repurchase the products again and again, and it also positively promotes its products through a word of mouth.

Marketers have identified four market segment groups based on brand loyalty status. They are as follows:

1.      Hard-core Loyals: Those customers, who always buy the same branded products, refer to hard-core loyals. They always believe in one brand regardless of other brands available in the markets. They are very important for any companies because they are highly feel comfortable and sense of pride by using that kind of brands. A customer, for example, who always buys Apple’s products only and no other brands at all because he/she is loyal to Apple company.

2.      Split Loyals: Those customers, who like to buy among two or three brands, refer to split loyals. Although there are several brands available in the markets, Split loyals are inclined to compare their benefits and risks, and buy within these two or three brands. For example, a customer who would like to use smart mobile phones either it could be from Apple’s brand, or Samsung’s brand or Nokia’s brand.

3.      Shifting Loyals: Those customers, who move from one brand product to another, refer to shifting loyals. They do not buy specific brands all the time because they believe in demands, consumer preferences, a word of mouth and so forth. A customer, for instance, was loyal to Samsung’s Galaxy S5 but now he/she is shifting his/her brand towards Apple’s I6 mobile.

4.      Switchers: Those customers who have no brand loyalty at all refer to switchers. They like to use those products which are affordable and easily available in the markets. They do not care about brand and they buy whatever they like to use for their own convenience. Customers, for example, who are ready to buy any mobile phones regardless of brand choices, fall in this category.

By analyzing the degree of brand loyalty, a company will be able to do the following things:

Ø  To prioritize their customers according to brand loyalty.

Ø  To segment the markets by analyzing the target markets.

Ø  To understand the changing trend of customers’ needs wants and preferences.

Ø  To improve the brand loyalty by eliminating products defects and customers’ complaints.

Ø  To anticipate the customers’ preferences in the future and prepare accordingly.

It is now concluded that it is essential task for any company to identify the market segment groups based on customer loyalty status because of above mentioned reasons. Also, it will enable a company to analyze the trend and changing nature of customers so that right products can be delivered to the right customers at the right time based on their brands preferences.

References:

-       Kotler, Philip & Keller, Kavin. (2012). Marketing Management. Addison-wesley: Prentice Hall.

-       (n.d), retrieved November 18, 2014 from http://1praja1.blogspot.com/2013/06/brand-loyalty.html