Rajagopal. Marketing Dynamics: Theory and Practice
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Marketing Dynamics: Theory and Practice
Step 7: Do periodical evaluation of price strategy, renew consumer’s accreditation for new
products ,continue cycle of such pricing mechanism in the market.
Organisation Building
There are some important steps to be considered for building up a sales organisation within the
limits of working capital.
Activity Scheduling
Step 1: Set-up directive levels, line of function and answerable levels, decide the structure of
organisation-vertical or horizontal.
Step 2: Allocate tasks, define functional lines, keep informality in business dealings, earmark
competent authority for specific tasks and delegate powers.
Step 3: Develop market information system - manual or computerized, streamline policy directives
and actions.
Step 4: Keep minimum hierarchical tiers in decision making, conduct self-appraisal tests for
individual monitoring, avoid personal conflicts in business, draw consensus in problem solving.
Step 5: Develop local expertise, provide service opportunities for local people to induct loyalty in
the organisation, restrict budget on personnel expenditure at the embryonic stage of the business
firm.
Step 6: Identify new resources for business expansion, prepare action plans, monitor the progress
periodically.
Step 7: Workout the efficiency of leasing out some of the supporting activities viz. security,
maintenance of outlets, packaging, delivery system etc.
Step 8: If it is a co-operative set-up involve members in manage decisions, policy issues and
monitoring activities. The member’s control in management is essential.
Sales Management
It is technique to improve the positions of sales realisation and acquire efficiency in the business by
minimising the risk and maximising the profit. The steps to be followed in the function are as under:
Activity Scheduling
Step 1: Identify the sale points, position the products, provide wide local publicity, offer inaugural
subsidy in price. Relatively high investment in advetising and publicity is essential in the early stages
of market capturing.
Step 2: Workout the sales cost, manpower-sales ratio, managerial costs and recurring costs.
Step 3: Draw line of effective communication, distribute visuals to dealers and outlet managers,
devise and use triangulates and hangers for advertisements. Aggressive communication strategy to
be worked out for the first phase of business performance.
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Step 4: Gear up product sales , re-launch the products if necessary, take consumer opinion,
consider qualitative aspects for product improvement. Advertise through the flanker communication
approach.
Step 5: Identify bulk markets, establish co-ordination with the government departments, public
sector undertakings etc, do good liaison ,schedule consignment deliveries and keep direct links.
Step 6:
Identify seasons for marketing, provide festive offers to the consumers, show demonstrations on
product manufacturing, if feasible.
Step 7: Visualize the scope of future product market, plan to enhance the business activities, look
for the scope of diversifying the activities in related fields.
Step 8: Workout marketing budgeting, anlayse price spread, review profit and chalkout plans for
prolific reinvestment in diversified field of business.
Advertising Management
The activity of sales promotion largely depends on the advertising techniques that are followed in the
product marketing. There are some fundamental steps for the media planning. However, it is to
remember that each media has its own positive and negative dimensions.
Activity Scheduling
Step 1: Define target audience, product type, the spatial and temporal aspects of demand for the
product(s).
Step 2: Select the most appropriate type of media, inter and intra-cost structure and range of
exposure.
Step 3: Workout a balance between appreciation and frequency of media advertisement,
popularise good phrases in association to the product dominant in the market. Have memorable
punch line for the product, do also authentic comparison to convince customers, use celebrities and
popular anchors.
Step 4: Select the popular approach of communication, draw positive- negative ways to finger
attention on the concept of product through the selected media, draw final stress on the merits of the
products.
Step 5: Use folk culture methods to popularise the product in urban and rural markets, organize
free show on specific occasions.
Step 6: Decide for continuous advertising or ‘bursts’, adopt the pattern of Drive, Cue and Flanker
at subsequent states of the product promotion. Achieve state of art in product advertising.
Step 7: Design short visual advertisements (approximately 10-15 seconds) and insert at high
frequency for a limited period, increase the intervals of insertion, keep in mind the consumers’ attention,
interest desire and action towards the product.
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Packaging and Branding
In the contemporary era the packaging and branding device plays an important role in mobilizing
the products in the potential markets and help in acquiring the consumer recognition. In this aspect a
synchronized efforts needs to be made to use the packaging and branding parameters effectively.
Activity Scheduling
Step 1: Use the less expensive but hygienic material for packaging, provide attractive designs,
look for uniqueness.
Step 2: Introduce periodic changes in the packaging pattern, popularize aesthetic touch in the
packing, introduce at different levels.
Step 3: Use memorable symbols for branding, develop popular brand, in case of dynamic product
hire brands of good companies, make long-run brand switch for operation.
Step 4: Do not change the brand or logo frequently, do consider a brand representing emotional
importance to customer, get copyright.
It is essential for any firm entering into a competitive market environment to assess the strength,
weakness, opportunity and threat at every stage of business planning. Such exercise would help in
reforming the policies for the subsequent stages. The activities discussed above form the core issues
for effective business planning in an effective manner.
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Armstrong Scott J. (1988), Review on Alfie Kohn’s Book, Journal of Marketing, 52, October, 131-
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Keller, L. Kevin: Strategic Brand Management – Building, Measuring and Managing Brand
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Business School Press, Boston, 2001, 6-9
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Sharp B. (1995), Brand Equity and Market Based Assets of Professional Service Firms, Journal of
Professional Services Marketing, 13 (1), 3-13
Tauber, Edward M.: Brand Leverage: Strategy for Growth in a Cost-control World, Journal of
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Equity Scale, Journal of Business Research, 52, 1-14
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Case 9.1
TROPICANA FRUIT BEVERAGE IN INDIA
Focus of the strategic marketing may be well explained in the case of Tropicana Beverages
Company, a unit of Pepsi, when it planned to enter the Indian market. Broadly the focus of the
strategy of the company delineated on the market place where to compete. The strategy further
focused as how to compete and when to compete determining the strategy of means and time of
business strategy. Tropicana Beverages Company (TBC), a global Pepsi Co unit that entered
India in 1998, wants to shift the market towards packaged fruit juices. Its brand, Tropicana, is a
brand of pure fruit juices. Fruit-based drinks are different. Any beverage containing a fruit content
of less than 20 percent is a ‘fruit drink’ (Frooti, Slice). More than 20 but less than 85 percent fruit
content could be termed a ‘nectar’ (Dabur Real). More than 85-percent fruit content qualifies a
drink to be a ‘pure fruit juice’. Tropicana began its foray by test launching a juices brand called
Dole in Bangalore. The attempt was to understand the Indian consumer. The feedback was
encouraging. Not only did customers have the ability to pay, but there was also a clear need for a
good-quality product in the category. The main brand, Tropicana, was launched in June 1999, in
Delhi. By September, it moved to Bangalore. The second phase of expansion saw the brand hit
Mumbai and Pune.
Tropicana now sells in 18 cities, though only at select retail outlets. In a tropical country, the way
fruit juice is transported and stored is of paramount importance. Exposure to sunlight and heat bears
the risk of ruining the product. Tropicana, being a 100-percent natural product without any additives
and preservatives, strategy of distribution is largely controlled. Expand to the necessary limit, so that
it is readily accessible, and then entice these consumers to drink more.” This insures its promise of
quality, which is what will place the brand securely in consumer mind space as a trusted symbol. It’s
not an easy game. Enkay’s Onjus, an overnight success that expanded rapidly, has dropped out of the
business. “The category itself defines the strategy,” says the country Director, “and so, by choice,
we are available at just 20,000 retail stores.”
Core strategy of the brand is to first raise off-take in the specific areas by ensuring frequent
distribution service, and then expand the overall market by simultaneously playing up the health
benefits and overcoming people’s resistance to packaged juices. The Indian consumer, having
been cheated on quality for years, sees health value only in freshly squeezed juices (done before
her eyes). This is a misperception, says Tropicana, and it hopes to counter it by emphasizing
product quality. According to TBC, if the juice’s quality can be trusted, modern packaging adds
value. It allows the consistent delivery of the world’s most nutritious and tasty fruits, in a
contamination-resistant form that is both light and convenient. To reduce ‘thermal shock’, Tropicana
comes in Tetrapaks, made of a six-layer material that insulates the liquid from heat. The threat of
exposure rules out PET and glass bottles, despite the visual appeal of transparency.
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In Tetrapaks, though, the domination of Frooti, Parle Agro’s mango-based drink, is near total in
India. This dissuaded TBC from launching a mango flavoured variant. But would there be any
demand for any other flavour? After all, Parle Agro and Godrej Jumpin’ found that mango was the
only viable fruit flavour in India. “Mango has become a preferred choice because it is the only
choice,” explains Manglik, adding that mangoes are easy to procure and process. But differentiation
was needed to make the brand stand out. Ignoring conventional wisdom, TBC decided to offer a new
set of flavours namely spate orange (pure orange), sweet orange (a blend of orange and white
grape), pineapple, apple and red grape.
Sweet orange is specially blended to satisfy the Indian sweet tooth. TBC is even toying with the
idea of tomato and mixed fruit juices. Tropicana has been a success, with a claimed 35-percent share
of the branded-fruit-juice market, placed at Rs 100 crore in 2000-01. The other major player is Dabur
Real, which has an equivalent share. In volume terms, Tropicana has logged sales of 500,000 cases
(12 litres each) for the year, a figure it wants to double in 2001-02 (and every year thereafter).
TBC’s three-tier distribution structure is made up of 15-16 C&F (carrying & forwarding) agents, 150
distributors and 20,000 retailers. TBC transports its juices in refrigerated vehicles from the factory to
distributors.
Price-wise, Tropicana is about 85 percent more expensive than fizzy drinks. Till 1998, importing
fruit concentrate was not even permitted by India. Since then, things seem to be moving in the right
direction. The 2001-02 Union Budget has reduced excise duty by 16 percent. Customs duty has also
been scaled down, from 38.5 to 35 percent. The Frooti drinker will have to be given a reason to spend
extra money. Dabur Real, though, has similar prices, along with the advantage of Dabur’s widespread
distribution network (it sells in 55 towns). Dabur has been around longer, in India, and is higher up the
learning curve on consumer insights and demand patterns. The only problem, according to an ex-
Dabur executive, is that Dabur is used to operating in monopoly markets, and may not be able to
handle MNC competition. At posh outlets in the metros, Tropicana claims to outsell Real by a good
margin. And those are outlets that also tend to stock imported juices from Australia and West Asia.
Berri’s, for example, is a juices brand that is selling in India at fairly competitive prices. Coca-Cola’s
Minute Maid is also expected to enter the Indian market.
Advertising is low-key. The brand’s tagline, devised by FCB Ulka: ‘The taste of good health’. As
things stand, Tropicana has taken on the onus of market expansion. A recent attitude study shows
that as people get older, they look for value additions, moving to more nutritious drinks. Also, parents
are keen that their children drink liquids that are healthful, instead of all those fizzies. Tropicana
offers convenience, standardized quality and perennial availability, compared to squeezed-at-home
juice, and hygiene for the fruit-juice-stall customer. But the shift to packaged fruit juices still remains
a leap of faith for the Indian consumer. What the market needs is the sort of attention that cola-style
brand warfare attracts.
Strategic plan is defined as the managerial process of developing and maintaining a strategic fit
between the organizations and changing market opportunities. It relies on developing (1) a strategic
direction or mission statement (2) objectives and goals (3) a growth strategy and, (4) business portfolio
plans.
G
rowing internationalization of business induces changes in the positioning of competitors and
appropriate competitive strategies. As the companies attain gradual success in geographically
expanding their business and effectively performing international operations, they reach at critical
point and would be able to synchronize the proximity to the overseas markets and customer needs.
The global companies at this point blue print their successful business systems in the emerging
markets by creating relatively decentralized operations in production, marketing and sales. Business-
to-business marketing refers to the marketing of products and services to organizations rather than to
households or ultimate consumers. The implied alternative is consumer marketing, although the
distinction between the two areas is not entirely clear-cut. Business-to-business marketing has also
been termed as industrial marketing, commercial marketing, and institutional marketing. Although
many of the same products will be bought by both business and consumers, it is possible to identify a
number of ways in which the emphasis of business-to-business marketing differs from that of consumer
marketing. These differences are seen to have considerable implications for the manner in which
business-to-business marketing is undertaken.
Market structure is the first of these, with business markets tending to have a greater concentration
of both buyers and sellers in comparison to consumer markets. Derived demand is another feature, with
the demand for business products and services said to be dependent to an extent on the level of activity
the buying organization generates in its own markets, although this will clearly not always be the case.
The scale of business purchases is often seen as greater than that for consumers and products are
Chapter
INNOVATIVE MARKETING STRATEGIES
10
CHAPTER FOCUS
• To understand the contemporary marketing strategies developed by
global companies and applied in varied marketing environments,
• To develop creative thinking and strategy building skills on market
entry, profit impact on marketing and business negotiations, and
• To gain knowledge on social marketing concepts, its applications and
corporate strategies.
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generally held to be more technologically complex although both of these factors are relative and
something of broad generalizations
1
(Chrisnall, 1989).The manner in which purchase decisions are
made is another area in which businesses are said to differ from consumers. Many organizations
employ professional purchasers, or have a purchasing department, although it has been noted that the
purchasing department is often not the most powerful influence on supplier choice. Purchases are
generally made not for self gratification but to achieve organizational objectives and are therefore
often held to be based more on “rational,” “economic” or “task “ considerations such as price, quality,
and delivery criteria, than the purchases of consumers. However, it is widely recognized that business
buying is more likely than consumer buying to be guided, at least, by formalized rules, evaluation
criteria, or procedures.
Business purchase decisions are also typically seen as a more complex process than those of
consumers, involving several people, frequently from different departments. Various different
organizational purchasing roles include “users” of the product or service in question; “gatekeepers,”
who control information to be received by other members of the buying centre; “deciders,” who
actually make the purchase decision, whether or not they have the formal authority to do so; and
“buyers,” those who do have formal authority for supplier selection, but whose influence is often
usurped by more powerful members of the buying centre.
Importance of long-term, relatively stable relationships between buyers and sellers has been
emphasized, which has led to the development of the interaction and network approaches to business-
to-business marketing, where the role of marketing management is seen in terms of the management
of a range of individual buyer-seller relationships in the context of a broader network of interconnected
supplier, buyer, and competitor organizations. The various differences in emphasis between business-
to-business marketing and consumer marketing have led to attempts to develop the scope of the
marketing concept and to reappraise such marketing tools as the marketing mix, which is seen as
inappropriate in its traditional form.
ECONOMIC VALUE-ADDED (EVA) CONCEPT
Economic value-added (EVA) is the after-tax cash flow generated by a business minus the cost of
the capital it has deployed to generate that cash flow. Representing real profit versus paper profit,
EVA underlies shareholder value, increasingly the main target of leading companies’ strategies.
Shareholders are the players who provide the firm with its capital; they invest to gain a return on that
capital. The concept of EVA is well established in financial theory, but only recently has the term
moved into the mainstream of corporate finance, as more and more firms adopt it as the base for
business planning and performance monitoring. There is growing evidence that EVA, not earnings,
determines the value of a firm. The chairman of AT&T stated that the firm had found an almost
perfect correlation over the past five years between its market value and EVA. Effective use of
capital is the key to value; that message applies to business processes, too.
1 Chrisnall, P.M. (1989), Strategic Industrial Marketing, 2nd ed., Prentice-Hall
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Main differences between EVA, earnings per share, return on assets, and discounted cash
flow, the most common calculations, as a measure of performance are as follows: Earnings per
share tells nothing about the cost of generating those profits. If the cost of capital (loans, bonds,
equity) is, say, 15 percent, then a 14 percent earning is actually a reduction, not a gain, in
economic value. Profits also increase taxes, thereby reducing cash flow, so that engineering
profits through accounting tricks can drain economic value. As Bennett Stewart, the leading
authority on EVA, comments, the real earnings are the equivalent of the money that owners of
a well-run mom-and-pop business stash away in the cigar box. Renowned investor Warren
Buffet calls these “owner’s earnings”: real cash flow after all taxes, interest, and other obligations
have been paid.
Return on assets is a more realistic measure of economic performance, but it ignores the cost
of capital. In its most profitable year, for instance, IBM’s return on assets was over 11
percent, but its cost of capital was almost 13 percent. Leading firms can obtain capital at low
costs, via favourable interest rates and high stock prices, which they can then invest in their
operations at decent rates of return on assets. That tempts them to expand without paying
attention to the real return, economic value-added. Discounted cash flow is very close to
economic value-added, with the discount rate being the cost of capital. Determining a firm’s
cost of capital requires making two calculations, one simple and one complex. The simple one
figures the cost of debt, which is the after-tax interest rate on loans and bonds. The more
complex one estimates the cost of equity and involves analysing shareholders’ expected
return implicit in the price they have paid to buy or hold their shares. Investors have the
choice of buying risk-free Treasury bonds or investing in other, riskier securities. They
obviously expect a higher return for higher risk. To attract investors, weak firms must offer a
premium in the form of a lower stock price than stronger firms can command. This lower price
amounts to the equivalent of a higher interest rate on loans and bonds; the investor’s
premium increases the firm’s cost of capital.
Cash flow and the cost of capital employed to generate that flow have become the key
determinants of business performance, with earnings per share increasingly a misleading or even
damaging target for strategy and investment. When a firm switches from FIFO (first in, first out)
to LIFO (last in, first out), its cost of goods assumes the price of the most recent purchases of
materials in inventory. This typically reduces its profits because the older purchases cost less than
the more recent ones. Yet the firm’s stock price will rise, even though its reported profits drop,
because it pays less in taxes, thus increasing its after-tax cash flow. The money spent to acquire
the goods in inventory is exactly the same regardless of which method is used, but LIFO increases
economic value-added.
How do you measure the capital invested in assets in place? Many firms use the book value
of capital invested as their measure of capital invested. To the degree that book value reflects
accounting choices made over time, this may not be true. In cases where firms alter their
capital invested through their operating decisions (for example, by using operating leases),
the capital and the after-tax operating income have to be adjusted to reflect true capital
invested. How do you measure return on capital? Again, the accounting definition of return