• MARKETING MANAGEMENT

Marketing = ?

Marketing management is the art

and science of choosing target
markets and getting, keeping, and
growing customers through
creating, delivering, and
communicating superior customer
value.
 The components of marketing concept are
as under
• a. Satisfaction of Customers: In the modern era, the
customer is the focus of the organization. The
organization should aim at producing those goods
and services, which will lead to satisfaction of
customers.
• b. Integrated marketing: The functions of production,
finance and marketing should be integrated to satisfy
the needs and expectations of customers.
• c. Profitable sales volume: Marketing is successful
only when it is capable of maximizing profitable sales
and achieves long-run customer satisfaction
 Simple Marketing System
Communication

Goods/services
Industry Market
(a collection (a collection
of sellers) of Buyers)
Money

Information
6
 AIM OF MARKETING
• The ultimate aim of marketing is
exchange of goods and services from
producers to consumers in a way that
maximizes the satisfaction of
customer’s needs. Marketing functions
start from identifying the consumer
needs and end with satisfying the
consumer needs.
 Functions of marketing
For goods to move from manufacturing to
consumer ,marketing managers should see
that certain marketing functions . The
universal functions of marketing
 Selling
 Buying
 Transportation
 Storage
 Risk bearing
 Standardization & Grading
 Financing
 Market information
• Selling - producers function within a free market to sell
products to consumers.
• Buying - people have the opportunity to buy products that
they want.
• Transportation -products must be physically relocated to
the locations where consumers can buy them. This is a very
important function. Transportation includes rail road, ship,
airplane, truck, and telecommunications for non-tangible
products such as market information.
• Storage - products must be stored and protected until they
are needed. This function is especially important for
perishable products such as fruits and vegetables.
• Risk bearing - insurance companies provide coverage to
protect producers and marketers from loss due to fire,
theft, or natural disasters.
• Grading and Standardizing - Many products are
graded in order to conform to previously
determined standards of quality. For example,
when you purchase US No. 1 Potatoes, you know
you are buying the best potatoes on the market.
• Financing - banks and other financial institutions
provide money for the production and marketing of
products.
• Market Information - information from around the
world about market conditions, weather, price
movements, and political changes, can affect the
marketing process. Market information is provided
by all forms of telecommunication, such as
television, the internet, and phone.
Modern Marketing has some other
functions
 Modern Marketing Functions
• Market Information
• Market Planning
• Exchange Functions
• Product Designing and development
• Physical Distribution
• Standardization and Grading
• Financing
• Risk Taking
• Packaging, labeling and branding
• Customer Support
• Market Information : To identify the needs,
wants and demands of the consumers and
then analyzing the identified information to
arrive at various decisions for the successful
marketing of a firm’s products and services is
one of the most important functions of
marketing. The analysis involves judging the
internal weaknesses and strengths of the
organization as well politico-legal, social and
demographic data of the target market. This
information is further used in market
segmentations.
• Market Planning : Market-planning aims
at achieving a firm’s marketing
objectives. These objectives may involve
increasing market presence, dominate
the market or increase market share. The
market planning function covers aspects
of production levels, promotions and
other action programmes.
• Exchange Functions : The buying and
selling are the exchange functions of
marketing. They ensure that a firm’s
offerings are available in sufficient
quantities to meet customer demands.
The exchange functions are supported by
advertising, personal selling and sales
promotions.
• Product Designing and development :
The product design helps in making the
product attractive to the target market.
In today’s competitive market
environment, not only cost matters but
also the product design, suitability,
shape, style etc. matter a lot in taking
production decisions
• Physical Distribution :The physical
distribution functions of marketing
involve transporting and storing. The
transporting function involve moving
products from their points of
production to locations convenient for
purchasers and storing function
involve the warehousing products
until needed for sale.
• Standardization and Grading : Standardization
involves producing goods at predetermined
specifications. Standardization ensures that
product offerings meet established quality and
quantity. It helps in achieving uniformity and
consistency in the output product. Grading is
classification of goods in various groups based
upon certain predetermined characteristics. It
involves the control standards of size, weight etc.
Grading helps in pricing decisions also. The higher
quality goods and services attract higher prices.
• Financing: The financing functions of
marketing involve providing credit for
channel members or consumers.
• Risk Taking :Risk taking is one of the
important marketing functions. Risk
taking in marketing refers to uncertainty
about consumer purchases resulting
from creation and marketing of goods
and services that consumers may
purchase in future.
• Packaging, labeling and branding :Packaging
involves designing package for the products,
labeling means putting information required /
specified on a product’s covering. Packaging
and labeling serve as promotional tools now a
days, Branding distinguishes the generic
commodity name to a brand name. For
example, Wheat Flour is a generic name of a
commodity while “Ashirvad Aata” is a brand
name. In service industry, also branding
matters a lot.
• Customer Support : Customer support is a very
important function of marketing. It involves pre
sales counseling, after sales service, handling
the customer complaints and adjustments,
credit services, maintenance services, technical
services and consumer information. For
example, water purifier comes with an onsite
service warranty of 7 years helps in marketing
and is an important marketing function as well.
 Marketing Selling
 Focuses on Customer’s needs. Focuses on seller’s needs.
Customer enjoys supreme  Product enjoys supreme
importance. importance.
 Converting customer’s needs into Converting product into cash.
product.
 Profits through customer Profits through sales volume.
satisfaction.
Emphasis is given on product Emphasis is placed on sale of
planning and development to match
products with the market. products already produced.
Integrated approach to marketing is Fragmented approach to selling is
practiced.
practiced.
The principle of caveat emptor (let
The principle of caveat vendor (let
the buyer beware) is followed.
the seller beware) is followed.
 Marketing
 Marketing is the sum of all activities that take
you to a sales outlet. After that sales takes over.
 Marketing is all about creating a pull, sales is all
about push.
 Marketing is all about managing the four P’s –
product
price
place
promotion
 The 4 Ps & 4Cs

Marketing Convenience
Mix

Place
Product

Customer
Solution Price Promotion

Customer Communication
Cost

24
• Market research is the process of assessing
the viability of a new good or service through
research conducted directly with the
consumer which allows a company to discover
the target market and record opinions and
other input from consumers regarding interest
in the product.
 LEGO

it is well known that Lego has been a toy geared towards boys for many
years. In a study done by the company, it was reported that only 9% of the
primary users of the toy were female. Upon seeing this, the company
decided to come out with a new product to entice more girls to play with
Legos.
Lego sent out researchers to do a four year study involving 3,500 girls and
their mothers. This market research included studying the girls’ playing
habits and extensive questioning regarding what would make Legos more
interesting for girls.
• At the conclusion of the market research, Lego
came out with a new line of toys on January 1st,
2012. This line was called “Friends”. The brick
colors for this line were changed to more vibrant
colors. The packaging also changed, along with the
figurines included in the set. Figurines were made
to be slightly bigger to accommodate accessories
such as hairbrushes and purses in their grips. All of
these changes were in line with what the market
research data found to be more appealing.6
 McDonald’s

McDonald’s is one of the largest fast food chains in the

world. In order to continue this trend, McDonald’s
uses ongoing market research.
In their market research, they have narrowed their focus
onto four different questions:
• Which products are well received?
• What prices are consumers willing to pay?
• What TV programs, newspapers and advertising
consumers read and view?
• Which restaurants are most visited?
• By answering these questions, McDonald’s is
able to determine whether the pool of their
target customers is growing or not.
• One of the problems addressed by this research
was if McDonald’s was serving healthy or organic
food. As a result, the company has launched a
campaign to prove that their meat is real. They
also have changed part of their menu to include
healthier alternatives, such as apple slices.
• TNS India Private Limited
• Market Xcel Data Matrix Private Limited
• The Nielsen
• Millward Brown
 Marketing research
 Marketing research is the means by
which the information necessary to
run a business is obtained.
 It helps an entrepreneur to take
decisions concerning the type of
product, the price policy, the
channel of distribution, and sales
promotion can be made rightly with
the help of marketing information at
the right time.
• It is the gathering, recording, and analysis
of all facts about problems relating to the
transfer and sale of goods and services
from producer to consumer. For example,
a hotel should find out what all services
are needed to satisfy its customers and
the soft toy manufacturer making teddy
bears needs to find out if children really
want purple teddy bears and so on
 Every company, irrespective of size, must
research its market, customers and
competition; initially to set it on the right
course and then continually to monitor
its performance.
 Small-scale firms are often unable to
afford continuous marketing research.
However, they can use personal contacts
and other informal methods for
collecting required information about
markets.
 The Market Research Process
• The market research process is a systematic methodology
for informing business decisions. It consists of six steps:
• Step 1. Define the Objective & Your “Problem
• Step 2. Determine Your “Research Design”
• Step 3. Design & Prepare Your “Research
Instrument”
• Step 4. Collect Your Data
• Step 5. Analyze Your Data
• Step 6. Visualize Your Data and Communicate
Results
 Step 1. Define the Objective & Your
“Problem
• Perhaps the most important step in the market research
process is defining the goals of the project. There is
typically a key business problem (or opportunity) that
needs to be acted upon, but there is a lack of information
to make that decision comfortably; the job of a market
researcher is to inform that decision with solid data.
Examples of “business problems” might be “How should
we price this new widget?” or “Which features should we
prioritize?”
• By understanding the business problem clearly, you’ll be
able to keep your research focused and effective
 Step 2. Determine Your “Research Design”

• Now that you know your research objective, it is time

to plan out the type of research that will best obtain
the necessary data. In this step you will first determine
your market research method (will it be a survey, focus
group, etc.?). You will also think through specifics
about how you will identify and choose your sample
(who are we going after? where will we find them?
how will we incentivize them?, etc.). This is also the
time to plan how you will conduct your research
(telephone, in-person, mail, internet, etc.
 Step 3. Design & Prepare Your “Research Instrument”

• In this step of the market research process, it’s

time to design your research tool. If a survey is
the most appropriate tool (as determined in step
2), you’ll begin by writing your questions and
designing your questionnaire. If a focus group is
your instrument of choice, you’ll start preparing
questions and materials for the moderator. You
get the idea. This is the part of the process
where you start executing your plan.
 Step 4. Collect Your Data

The time when you are administering your

survey, running your focus groups, conducting
your interviews, implementing your field test,
etc. The answers, choices, and observations are
all being collected and recorded, usually in
spreadsheet form. Each nugget of information is
precious and will be part of the masterful
conclusions you will soon draw.
 Step 5. Analyze Your Data
• Step 4 (data collection) has drawn to a close
and you have heaps of raw data. If it’s on
scraps of paper, you’ll probably need to get it
in spreadsheet form for further analysis. If it’s
already in spreadsheet form, it’s time to make
sure you’ve got it structured properly. package
typically Excel, SPSS, Minitab, etc.), build
tables and graphs, segment your results by
groups that make sense (i.e. age, gender, etc.),
and look for the major trends in your data.
 Step 6. Visualize Your Data and Communicate Results

• After spending hours through raw data, build useful

summary tables, charts and graphs. Now is the time
to compile the most meaningful take-aways into a
digestible report or presentation. A great way to
present the data is to start with the research
objectives and business problem that were identified
in step 1. Restate those business questions, and then
present your recommendations based on the data, to
address those issues.
• When it comes time to presenting results, remember
to present insights, answers and recommendations,
not just charts and tables
Market research process
Marketing information can be collected from
the following sources
Primary Sources

1. Customers: Consumers being the final users of products or services

can be an invaluable source of primary data. A representative sample
of consumers may be selected and information obtained from them
regarding the quality, design, package, price, etc. of the firm’s
products.
2. Dealers: The dealers can provide information about the marketing
policies of the competitors.
3. Salesman: Salesmen remain in personal contact with the customers.
They can, therefore, supply data to the marketing
manager relating to the buying habits and preferences of customers.
Online surveys, phone
 Secondary Sources

• 1. Press: Newspapers like the Economic Times and

Magazines like Business Today and trade directories
regularly publish data about various industries.
• 2. Government Publications: Bulletins, periodicals,
journals and magazines of different ministries and
departments of the Central and State Government.
• 3. Publications of financial institutions: Publications
of Reserve Bank of India, public financial institutions
and commercial banks.
• 4. Foreign governments and international agencies:
Publications of agencies like the United Nations, the
World Bank, the ILO
• 5. Publications of trade associations: Trade
associations and Chambers of Commerce collect and
publish useful data for the benefit of their members.
• 6. Private concerns and research institutions:
Business data published by research institutes like
National Council of Applied Economic Research,
Indian Institute of Foreign Trade, etc.
 ADVERTISING
• Advertising is any paidform of non personal
presentation and promotion of ideas, goods, or
services by an identified sponsor.
• Advertising is generally regard as a form of
communication for the purpose of which is to convey
concepts about company goods and services by
means of words, pictures ,diagrams, sounds, music,
color, symbols and shapes.
• Advertising message can be conveyed by many
methods .
• A firm can deliver its message through an advertising
media, a single service or media more than one
service.
• Advertising is any communication, usually
paid-for, specifically intended to inform and/or
influence one or more people.
• A simpler (and modern) definition of
advertising can be – A paid communication
message intended to inform people about
something or to influence them to buy or try
something.
 Characteristics of Advertising

• Paid Form: Advertising requires the advertiser (also called

sponsor) to pay to create an advertising message, to buy
advertising media slot, and to monitor advertising efforts.
• Tool for Promotion: Advertising is an element of the
promotion mix of an organization.
One Way Communication: Advertising is a one-way
communication where brands communicate to the customers
through different mediums.
• Personal Or Non-Personal: Advertising can be non-personal
as in the case of TV, radio, or newspaper advertisements, or
highly personal as in the case of social media and other
cookie-based advertisements.
 The Five Ms of Advertising
Message
Money Message generation
Factors to Message evaluation
consider: and selection
Mission Message execution Measure-
Stage in PLC
ment
Sales Social-responsibility
goals Market share review Communi-
and con- cation
sumer base impact
Adver- Media
tising Competition
objectivesves and clutter Reach, frequency, Sales
impact impact
Advertising Major media types
frequency Specific media
vehicles
Media timing
Geographical
media allocation
 Advertising media
Newspapers
• Advantages: Flexibility, timeliness; good local market
coverage; broad acceptance, high believability
• Limitations: Short life; poor reproduction quality;
small pass-along audience.

Television
• Advantages: Combines sight, sound, motion; high
attention; high reach; appealing to senses
Limitations: High absolute costs; high clutter; fleeting
exposure; less audience selectivity
• Direct Mail
• Advantages: Audience selectivity; flexibility, no ad
competition within same medium; allows
personalization
• Limitations: “junk mail” image
• Radio
• Advantages: Mass use; high geographic and
demographic selectivity; low cost
• Limitations:Audio only; fleeting exposure; lower
attention; non standardized rates; fragmented
audiences
• Magazines
• Advantages: High geographic and demographic
selectivity; credibility and prestige; high-quality
reproduction;long life; good pass-along readership
• Limitations: Long ad purchase lead time; waste
circulation; no guarantee of position
• Outdoor
• Advantages: Flexibility; high repeat exposure; low
cost; low message competition
• Limitations: Little audience selectivity; creative
limitations
 Sales promotion
• Sales promotion is a part of the promotional mix where the
business uses many short-term customer-oriented strategies
to stimulate the demand for its product by making it look
more attractive and/or worthy.
• Sales promotion is a marketing strategy where the product is
promoted using short-term attractive initiatives to stimulate
its demand and increase its sales.
• This strategy is usually brought to use in the following cases
• to introduce new products,
• sell out existing inventories,
• attract more customers, and
• to lift sales temporarily.
 Sales promotion
o Sales production technique includes short
term incentives like discounts, free gifts and
contents to stimulate sales of the product.

o These incentives are entirely useful when a

new product is being launched.

o Sales promotion techniques build the bridge

between the product and the consumer.
 Objectives of Sales Promotion:
• Sales promotion is a vital bridge or a connecting link between personal
selling and advertising.
• 1. To increase sales by publicity through the media which are
complementary to press and poster advertising.
• 2. To disseminate information through salesmen, dealers etc., so as to
ensure the product getting into satisfactory use by the ultimate
consumers.
• 3. To stimulate customers to make purchases at the point of purchase.
• 4. To prompt existing customers to buy more.
• 5. To introduce new products.
• 6. To attract new customers.
• 7. To meet competition from others effectively.
• 8. To check seasonal decline in the volume of sales.
 Sales promotion methods:
 Consumer promotion
 Trade promotion
 Sales force promotion
 Good public relations
 Display
 Product exhibition, demonstration &
conferences
 Product packaging
 Consumer
Consumer Promotion
Promotion

Consumer-Promotion Consumer-Promotion Tools

Objectives

Entice
EnticeConsumers
Consumersto to
Try a New Product Samples
Samples Advertising
Advertising
Try a New Product Specialties
Lure Specialties
LureCustomers
CustomersAwayAway Coupons
Coupons Patronage
From Patronage
FromCompetitors’
Competitors’Products
Products Patronage
Rewards
Get Rewards
Rewards
GetConsumers
Consumersto to“Load
“LoadUp’
Up’ Cash
CashRefunds
Refunds
on
onaaMature
MatureProduct
Product Contests
Contests
Hold
Hold&&Reward
Reward Loyal
Loyal Price
Customers PricePacks
Packs Sweepstakes
Customers Sweepstakes
Consumer
ConsumerRelationship
Relationship
Building Premiums
Premiums Games
Games
Building
Point-of-Purchase
Point-of-Purchase
Displays
Displays
1.Samples – Small quantity, sometimes free of cost
or sometimes at minimum price, sent door to door
personally or through mails or with other products
etc.
2. Coupons – A certificate that gives buyers a saving
when they purchase specified products.
3. Cash refund offers or rebates – Are like coupons
except that the price reduction occurs after the
purchase rather than at the retail outlet. Consumer
sends proof of purchase and manufacturer sends
the refund part of the purchase price to the
consumer.
4. Price packs (cents-off deals) – Offers consumers saving
off the regular price of the product, directly cuts price on
the label, or combination of two products (tooth paste
and tooth brush).
5. Premiums – Goods offered either free or at low cost as
an incentive to buy a product. Sometimes premium are
costlier than the product it is sold with, (brass tray free
with a product).
6. Advertising specialities – They are useful articles
imprinted with an advertisers name given as gifts to
consumers, e.g. pen, dairy, calendars, key etc.
7. Patronage reward – Cash or gift, for the regular use of a
particular product of the company like privilege card
membership given by the company to the regular user of
the products.
8. POP displays – (Point of purchase
promotion) Right display at right place
to attract consumers.
9. Contests, Sweepstakes, game –
(i) Contests- Submitting the entry
(ii) Sweepstakes – Calls for consumers
to submit their names for draws
(iii) Games – Daily games
 Trade Promotions

Trade-Promotion Tools
Trade-Promotion Objectives

Persuade
PersuadeRetailers
Retailersor
or Price-Offers
Price-Offers Premiums
Premiums
Wholesalers
Wholesalersto
toCarry
CarryaaBrand
Brand
Give Allowances
Allowances Patronage
Patronage
Displays
GiveaaBrand
BrandShelf
ShelfSpace
Space Rewards
Rewards
Promote
PromoteaaBrand
Brandin
in Buy-Back
Buy-Back
Advertising Guarantees Discounts
Discounts
Advertising Guarantees
Push Push
PushMoney
Money
PushaaBrand
Brandto
toConsumers
Consumers Free
FreeGoods
Goods
Specialty
Specialty
Advertising
Advertising
Contests
Contests Items
Items
1. Buying allowance
Buying allowance is granted to those dealers who
purchase in stipulated period of time. It is very much
useful in introducing new products to consumers. It
motivates dealers to buy in huge quantity, dealers get
immediate benefit in the form of price reduction.
2. Merchandise allowance
Manufacturer may offer an allowance in return for the
retailer’s agreement to feature the manufacturer’s
product in some way. For example, an advertisement
allowance compensates retailers for advertising the
product. A display allowance compensate the retailers
for the usage of special displays.
3. Price deals
Price deals relate to the quantity of purchase. In addition to
regular discounts, dealers are allowed special discount for a
specified quantity of purchase. Thus, special discount is over and
above regular discount given to dealers.
4. Push money or premium
Premium is a product usually offered free or at less than its usual
price. Premium encourages resellers to buy a certain quantity.
Manufacturers may also offer push money. It is cash or gifts given
to dealers to push a particular manufacturer’s goods.
5. Cooperative advertising
Dealers are given an allowance to advertise the manufacturer’s
product. Dealers claim such allowance by producing to the
manufacturer the proof of advertisement.
6. Dealers’ sales contests
A sales contest is a contest for dealers to encourage
them to increase their sales performance over a
period of time. Sales contests recognize good
performers. They may be in the form of holiday
trips, cash prizes or other gifts. Some companies
award points for performance to achievers.
7. Point of purchase
Point of purchase display is a silent salesman. It calls
the attention of the customer to the product with
the hope of initiating buying action. This device is
known by several names such as dealer aids, dealer
displays, merchandising and point of sale materials.
Major
Major Public
Public Relations
Relations Tools
Tools
Web
WebSite
Site
Public
Public News
News
Service
Service
Activities
Activities

Speeches
Speeches
Corporate
Corporate
Identity
Identity
Materials
Materials

Special
Special
Audiovisual
Audiovisual Events
Events
Materials
Materials Written
Written
Materials
Materials
Channels of Distribution:
A distribution channel is the route through
which goods or services move from the
company to the customer or the transfer of
payment happens from the customer to the
company.
Distribution channels can mean selling of
products directly or selling through wholesalers,
retailers etc. The same applies for payment
transfer from customers to company; it can
move through a path or can be sent directly to
the company
Objectives of Distribution Channels:
To ensure availability of products at the point of
sale
To build channel member’s loyalty
To stimulate channel members to put greater
selling efforts
To develop management efficiency in channel
organization
To identify the organization at the level
To have an efficient and effective distribution
system for making the products and services
available readily, regularly, equitably and fresh.
 The Role of Distribution Activities
in Marketing
Types of Distribution Channels
 Direct channel
• A distribution system without intermediaries
 Indirect channel
• A distribution system with one or more
intermediaries.
 Dual distribution
• A distribution system with more than one channel.
Major Channels of Distribution

Here is a list of some of the major channels of

distribution −
Manufacturer → Consumer
Manufacturer → Retailer → Customer
Manufacturer → Wholesaler → Customer
Manufacturer → Wholesaler → Retailer → Customer
Manufacturer → Agent → Retailer → Customer
Manufacturer → Agent → Wholesaler → Customer
Manufacturer → Agent → Wholesaler → Retailer →
Customer
Alternative
Channels of
Distribution

Exhibit 8-1
Functions of Channels of distribution
Information
The channels members provide information about
customers, Competitors and other parties in the marketing
environment
Promotion
The intermediaries almost work like company sales
people and promote the products and services offered by the
company to the customers. They spread favorable
communication about product and services
Contact
Finding and communicating with prospective buyers
Matching
Shaping and fitting the offer to the buyers
need including activities such as assembling,
grading, packaging
Negotiation
The negotiable with both company and
buyers to reach final agreement on price and
other conditions
Ordering
They provide backward communication
regarding the intentions of the buyers and their
orders to the manufacturers.
Financing
The channel members acquire and use
funds to cover the cost of distribution
Risk taking
The channel members take the risk and
carrying the distribution work
Physical flow
Movement of physical products from raw
material to final consumers
Title
The actual transfer of ownership from one to
another
75
76
Introduction Stage

Sales are generally low and somewhat slow to take off

Production costs are high because of significant

scale economies
Marketing costs for costumer awareness,
interest and trial are high
Profits are low, because to low sales
Competitors tend to be few in number

77
78
• Growth
– Sales increase rapidly
• Positive word of mouth
• Increasing number of competitors
• Promotion effect
– Costs are declining because of longer production
runs due to increased sales
– Profits are increasing significantly
– Customers are the early adopters (the word of
mouth people)
– Competition continues to grow throughout this stage
79
80
81
• Maturity
– Sales continues to grow in the early stages of
maturity
– Costs continue to rise
– The only remaining customers to enter the market
are the Late majority and the laggards (Those most hesitant
to adopt new products)

– Competition is the most intense

82
83
• Decline
– Sales continue to deteriorate through decline
– Profits continue to erode during this stage
– Customers are primary laggards
– Generally are a significant number of competitors
still in the industry at the beginning of the decline
stage

84
85
• ABC analysis
• ABC method of inventory control involves a system
that controls inventory and is used for materials and
throughout the distribution management. It is also
known as selective inventory control or SIC.
• ABC analysis is a method in which inventory is divided
into three categories, i.e. A, B, and C in descending
value. The items in the A category have the highest
value, B category items are of lower value than A, and
C category items have the lowest value.
• Item A:
• In the ABC model of inventory control, items
categorized under A are goods that register
the highest value in terms of annual
consumption. It is interesting to note that the
top 70 to 80 percent of the yearly
consumption value of the company comes
from only about 10 to 20 percent of the total
inventory items. Hence, it is crucial to
prioritize these items.
• Item B:
• These are items that have a medium
consumption value. These amount to about 30
percent of the total inventory in a company
which accounts for about 15 to 20 percent of
annual consumption value.
• Item C:
• The items placed in this category have the lowest
consumption value and account for less than 10
percent of the annual consumption value that
comes from about 50 percent of the total inventory
items.

• Note: The annual consumption value is calculated

by the formula: (Annual demand) × (item cost per
unit)
• Item A:
• a) These are subjected to strict inventory control
and are given highly secured areas in terms of
storage
• b) These goods have a better forecast for sales
• c) These are also the items that require frequent
reorders on a daily or a weekly basis
• d) They are kept as a priority item and efforts are
made to avoid unavailability or stock-out of these
items
• Item B:
• a) These items are not as important as items
under section A or as trivial as items
categorized under C
• b) The important thing to note is that since
these items lie in between A and C, they are
monitored for potential inclusion towards
category A or in a contrary situation towards
category C
• Item C
• a) These items are manufactured less often and follow
the policy of having only one of its item on hand or in
some cases they are reordered when a purchase is
actually made
• b) Since these are low demand goods with a
comparatively higher risk of cost in terms of excessive
inventory, it is an ideal situation for these items to
stock-out after each purchase
• c) The questions managers find themselves dealing
with when it comes to items in category C is not how
many units to keep in stock but rather whether it is
even needed to have to these items in store at all.
Advantages of Implementing the ABC Method of
Inventory Control

• This method helps businesses to maintain control over

the costly items which have large amounts of capital
invested in them.
• It provides a method to the madness of keeping track of
all the inventory. Not only does it reduce unnecessary
staff expenses but more importantly it ensures optimum
levels of stock is maintained at all times.
• The ABC method makes sure that the stock turnover
ratio is maintained at a comparatively higher level
through a systematic control of inventories.
• The storage expenses are cut down considerably with
this tool.
 Disadvantages of using the ABC Analysis

• For this method to work and render successful

results, there must be proper standardization in
place for materials in the store.
• It requires a good system of coding of materials
already in operation for this analysis to work.
• Since this analysis takes into consideration the
monetary value of the items, it ignores other
factors that may be more important for your
business. Hence, this distinction is vital.
 Market segmentation
• Market segmentation can help you to target
just the people most likely to become satisfied
customers of your company or enthusiastic
consumers of your content. To segment a
market, you split it up into groups that have
similar characteristics. You can base a segment
on one or more qualities. Splitting up an
audience in this way allows for more precisely
targeted marketing and personalized content.
 Types of Market Segmentation

• 1. Demographic Segmentation
• Demographic segmentation is one of the most
common forms. It refers to splitting up
audiences based on observable,
people-based differences. These qualities
include things like age, sex, marital status,
family size, occupation, education level,
income, race, nationality and religion.
• 2. Behavioral Segmentation
• You can also segment your market based on consumers’
behaviors, especially regarding your product. Dividing your
audience based on behaviors they display allows you to create
messaging that caters to those behaviors. Many of the actions
you might look at relate to how someone interacts with your
product, website, app or brand.
• Some types of behaviors to look at include:
• Online shopping habits: You might consider a users’ online
shopping habits across all sites, as this may correlate with the
likelihood they will make an online purchase on your website.
• Actions taken on a website: You can track actions users take
on your online properties to better understand how they
interact with them. You might look at how long someone stays
on your site, whether they read articles all the way to the end,
the types of content they click on and more.
• 3. Geographic Segmentation
• Geographic segmentation, splitting up your market
based on their location, is a basic but highly useful
segmentation strategy. A customer’s location can help
you better understand their needs and enable you to
send out location-specific ads.
• There are several kinds of geographic
segmentation. The most basic is identifying users based
on their locations such as their country, state, county
and zip code. You can also identify consumers based on
the characteristics of the area they live in, such as its
climate, the population density and whether it’s urban,
suburban or rural.
• 4. Psychographic Segmentation
• Psychographic segmentation is similar to
demographic segmentation, but it deals with
characteristics that are more mental and emotional.
These attributes may not be as easy to observe as
demographics, but they can give you valuable insight
into your audience’s motives, preferences and needs.
Understanding these aspects of your audience can
help you to create content that appeals to them
more effectively. Some examples of psychographic
characteristics include personality traits, interests,
beliefs, values, attitudes and lifestyles
 Benefits of Market Segmentation
• 1. Improves Campaign Performance
• Market segmentation can help you to improve the
performance of your marketing campaigns by helping you to
target the right people with the right messaging at the right
time. Segmentation enables you to learn more about your
audience so you can better tailor your messaging to their
preferences and needs.
• 2. Informs Product Development
• Market segmentation can also help companies to develop
products that better meet the needs of their customers. You
can create products to appeal to needs your main market
segment may have and develop different products tailored to
different parts of your customer base.
• 3. Reveals Areas to Expand
• Market segmentation can also help businesses
to identify audience segments that they are
not currently reaching with their marketing
efforts and then expand into new markets.
• 4. Improves Business Focus
• Market segmentation can also help businesses
to focus their efforts, which enables them to
establish a brand identity and specialize in a
particular type of products
• Informs Other Business Decisions
• Market segmentation can also help to inform
other important business decisions regarding
how you get your product to customers. These
decisions may involve matters such as pricing
and distribution.