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We take a simple Marketing System. How does this system look like? If you see thissystem this marketing system can be looked upon as a set of significant institutions andflows that connect an organization to its markets. It is a very simple definition which isbeing projected now. You are looking at a marketing system as a set of significantinstitutions and flows connecting an organization to its markets. So, you have acompany, you have a market kindly note that this is a very simple system. What does thecompany do? It produces goods and services, it offers it to the market.Now, what does the market do? Market gives money in return to the company that is thesales are done by this goods and services. It gets back to the company in the form ofmoney. In this whole process this company is communicating with a market.What do you mean by communicating with a market? It is telling the market about itsgoods and services what all it can do and the market is also communicating with a
company. What is that company, what is that communication? It is providinginformation to the company on the communication it is receiving from the company. Inother words, it is a feedback, which the company gets from the market on its goods andservices.So, in essence what are we having? We are having a company; kindly note again this is asimplistic representation of a marketing system. You have a company you have a market.The company puts goods and services into the market. In return the market gives thecompany money in terms of sales. In the process company communicates with a market.How does it communicate with a market? It tells the market what does the goods andservices which are produced by the company, how good they are for used by the marketconcerned. And the market in return provides information on this communication whichwe now call it as market feedback.So, a simplistic market system just visualizes company and markets and these types offlows this is indicated in this diagram.(Refer Slide Time: 04:01)
Now, before we go further on this customer delivered value all those types of things wewill try to visualize the marketing environment as it exist in the present day.
(Refer Slide Time: 04:07)
So, what was presented was a simple marketing environment system. Now the presentday marketing system is not very simple kindly note that. It is quite a complicatedsystem and what is the type of complications that you are seeing in the present daymarketing environment. If you look at this particular figure this becomes more clear. Ifyou look at a company for any company you will have competitors and you have thepublic’s that is the people who have to accept your product. Then when you areoperating in a business environment, so many economic factors come into play.Further, the demographics of the market will also come into play, your product might befit for a particular age group might not be fit for all age groups. Then the physical systemhow do you actually deliver this product, the logistics side of it, then what is the type oftechnological changes that might influence the composition of the market environment.So, many changes take place in the on the technological front.Similarly when a company is operating the political environment in which it has tooperate, whether it operates in a democracy or whether it operates in a militaryenvironment, whether it operates in a free market or whether it operates in a constrainedmarket all these types of things come into play. Added to that the types of legal barriers,which a company has to face in the market, then there is a problem of the society whereit operates that is the social factors then there is also the cultural factors. Some of the
products that you may like to introduce in the marketplace may not be acceptable to thatculture.So, that culture may be repugnant to the user of your product, it might not like to use thisproduct. So, broadly looking at it you can look at this whole environment in thisdiagram, the middle portion of this diagram is rectangular. In that one rectangular youhave a smaller rectangular block which you can see and that rectangular block has whatis got the suppliers. The suppliers are those people who are supplying the raw materialsto the company and what does the company do from the raw materials it converts theseraw materials into finished products and when it comes as a finished product themarketing department takes over.So, it reaches the consumers through what we call the marketing intermediaries, themarketing department many times goes through these marketing intermediaries. Whatare these marketing intermediaries? These marketing intermediaries can be visualized asagent middlemen or merchant middlemen. So, what is this agent middlemen? This agentmiddlemen are the people who take your product negotiate contracts, but do not take titleto your merchandise kindly note that, they find the consumers or the customers for youthey negotiate contracts, but they do not take title to your merchandise.The other type of middlemen that you can have is what is called the merchantmiddlemen. What is this merchant middlemen? They are the people who buy take title toyour product and resell the merchandise.So, the your product will not be going in your company’s name it may be going in someother company’s name ok. So, this is a type of two middlemen’s who operate in amarket. So, you can visualize the very simple situation, take your fruits and vegetableswhich are coming into a main market in a city like in Bangalore in the city market. Youdo not know who is the person who is producing your fruits or vegetables it is picked upfrom someplace, who picks it up the person who picks it up is a middlemen and themiddlemen comes and puts that product this is a fruits and vegetables into the citymarket and you take these fruits and vegetables from that. Now the change it scenarioinstead of that city market you are also having.So, many other retailers one of the retailers you can think of is your big bazaar, go to anybig bazaar you can find all these fruits and vegetables. You do not know how these fruits
and vegetables have actually made their way into the big bazaar is it the farmer who isgiving it or is it somebody else, know the farmer is not directly giving it to the bigbazaar. It is coming to them through the middlemen. So, basically who are the types ofthis means these middlemen they are basically agent middlemen, who are taking fromthe farmer bringing it to the big bazaar or the city market and you as customer ncustomer take this vegetables depending on your requirement of fruits depending onwhat you require whereas, in the case of the merchant middlemen what happens themerchant middlemen takes the title to your product.So, the product is no longer marketed in your company’s name it is marketed in hiscompany’s name. So, who is a good well known merchant middlemen in the Indianmarket, a well known merchant middlemen in the Indian market is Voltas. Take themany products which are coming from Voltas, many of them are not manufactured byVoltas. Suppose you turn the product upside down you find a small label there productmanufactured by this in this particular industrial saber thane or this industrial saber insome other place.So, these, but the product is going as a product of Voltas. So, Voltas is having a name inthe market and the consumer attaches importance to this Voltas name in the marketplacehe thinks that being a product coming from Voltas it will always conform to certainstandards.So, here is this particular diagram giving you this role of the marketing intermediaries.This marketing intermediaries there can be two types of marketing intermediaries one isthe agent middlemen and the second is the merchant middlemen through this yourproduct that is the company’s product reaches the customer. Take the outer rectangle youhave competitors for your company you have the public’s coming, both of themcompetitors will also try to imitate your product give a terrific competition to what youwant to put out into the marketplace.The publics are the ones who give a lot of feedback whether this product is good notgood word of mouth publicity all those types of things. Now in addition to all this theseare the different environments which I listed already you have an economic environment.You have a demographic environment political factors, legal factors, socio culturalenvironment technological challenges for your product and the physical aspects the
delivery or the logistics what you are seeing. Now as supply chain, so all this is cominggetting incorporated in the present today in different forms, you have a supply chainmanagement you have another several thing is getting linked to the market.Now suppose when you are operating in this type of a market you are susceptible tothreats that is you always face threats in the marketplace. What is this threat? This threatstands for challenges posed by an unfavorable trend or specific disturbance in theenvironment which would lead in the absence of a purposeful marketing action to thestagnation or demise of a company product.So, when environmental threat becomes a very important aspect, which the company hasto really be very cautious. And when operating in a dynamic marketing environmentthese threats are also very common you cannot avoid these threats at all and when itcomes you must find out how do you really cope with these threats. So, whether it is achallenge posed by a new entrant or an existing market player whatever it is you have toface that. Now here is the role of the market intermediaries. They can help you to copewith this environmental threat they can help you with this market search physicaldistribution communication negotiation and title transfer much better than you that is acompany itself.So, because they are adept in this system, so they know what are all the intricacies thatare involved and they are well equipped to handle all these intricacies much better thanthe company itself. So, this is the way in environment functions and when thisenvironment functions in this manner. The other important aspect which you have to takeinto account is from the point of view of the customer.You are putting the end product into the marketplace, when you are putting the endproduct into the marketplace. How does the customer view your product that is what arethe types of factors he takes into account before he decides whether he should go in foryour product or he should going for somebody else product maybe your competitive.This is represented in this particular diagram as determinants of customer deliveredvalue. W hat is this customer delivered value.If you see the left hand side of this diagram you see five values one is the image valuepersonally personal value services value product value becoming the total customervalue, these four values adding together giving you that total customer value. Come to
the right side, you have the costs again you are looking at four types of costs one is thepsychic cost, second is the energy cost, third is the time cost forth is the monetary cost allthis adding the to the total customer cost now the question. When does the customerprefer a particular product, the simple answer would be when his customer value is muchmore than the customer cost? So, the total customer value should be much more than thattotal customer cost, that becomes the customer delivered value are you getting this.So, the customer delivered value is nothing, but the excess of the total customer value orthe total customer cost, suppose it does ont become access you the customer may notprefer your product he may prefer the competitors product because it may be giving youexcess. So, some of these terms which are used in this diagram much of many of themmight be very obvious.What does the product do for you that is a product value or what are the services do foryou that is your services value and what does the what are the personal value supposeyour product consumer durable product it requires attention on a regular basis. Howgood is your company to give that attention and how can your company provideinformation to the consumer on the usage and the maintenance of the product on aregular basis. So, take whether it is a washing machine or whether it is a micro oven orsome other product.Now, what is now you find that many of the Indian families use dishwashers also. Thenwhat is his image value that is from which company is this product coming in a washingmachine which used to come from a company like IFB always used to have edge in thewash in this market a few years back. But what is the present day scenario, the presentday scenario is where you have number of company’s players in the marketplace it maybe an LG or it may be a Samsung or some other companies or it may be a whirlpool.All these players putting their washing machine into the market and the consumer has abig choice he can pick up his washing machine from any of these products he need notnecessarily stick to earlier situations where he used where people used to say this is awashing machine coming from IFB.So, it is it should be very good the other companies which are putting out the washingmachines in the present day market or as good IFB. The IFB says that no we are betterthan them; it is required for them to prove that they are better than the competitors to
exist in the marketplace. Similarly with respect to this total customer cost look at thisdiagram, here what is called a psychic cost? What is this psychic Cost? This is the moreto do with the psychology of the individual.So, you do a lot of searching for a particular product and when this lot of searching leadsyou to a particular manufacture, you invest your time and you have to attribute at cost forthis investing of the time. You say you say let us say you searched all these products allthese manufacturers of washing machine and you came to the conclusion that IFB is thebest. Let us say then there is a certain psychic cost involved coupled with that there is acertain amount of energy that he has spent.In coming to this conclusion coupled to that you have spent a considerable amount oftime in coming to the conclusion that this IFB is the best with respect to this washingmachine. Added to all that you have to give the cost of the product as required by thecustomer as required by the company. So, there is a monetary cost, when you add allthese costs you get the total customer cost.So, it is not just to the price of the product which is put by the company kindly note thatalso. The price end price of the product which you are paying you have to add these costsalso, that is the time cost the energy cost the psychic cost it gives you the total customercost. So, when your total customer value which is coming out by the purchase of thisproduct is more than the total customer cost, then the customer delivered value will bepositive.Otherwise you have a situation where the customer is not getting the desired value fromyour product. When he is not getting the desired value from your product there is noreason for him to prefer your product kindly note that. So, this diagram a very welldepicted diagram gives you what we call in the marketing terminology.That determinants of customer delivered value, what are all the determinants. So, on theleft hand side you have the value determinants, on the right hand side you have the costdeterminants. You find in each of these right hand side and the left hand side four valuedeterminants, the image value the personal value the services value and the product valuemaking up to total customer value on the cost side the psychic costs, the energy cost, thetime cost and the monetary cost making up to total customer cost. The end the totalcustomer value and the total customer cost in turn gives what is called the customer
delivered value. So, this is how a market looks at a product, this is how a marketnormally looks at any product which is put for consumption in the marketplace and moreso when it is a consumer durable and more.So when it is a high value product. Let us say you are looking at an automobile let us sayyou want to take a car from the market the type of cost that you incur is not just themonetary cost of the product, you incur all these costs you will be consulting with peoplewhom, you know you will be consulting with the users of that particular car. You will inaddition to their what the company says in other words you are not making an immediatedecision about the car that you are going to purchase.So, many feeds will come to you this car is not up to the mark do not take it rate thinkabout this taking of the car all those types of things. So, taking all those factors intoaccount only you will decide which one to take.So, it is not just the monetary cost the other three costs are also involved, that is the timecost energy cost and the psychic cost. Whereas, the value that you are going to get hasthese four components that is the image value, personal value, services value and theproduct value. So, this total customer value and the total customer cost giving what wecall the customer delivered value. So, these are the different determinants of thiscustomer delivered value and it becomes extremely important in a marketingenvironment and that too in a competitive marketing environment that you are facing inthe Indian market.Today you any product that you are going to introduce in the marketplace or thinking ofintroducing in a marketplace has to go through all these compartments kindly note that.So, when it when you are able to really push it through all these compartmentssuccessfully, then only you are going to have a successful product in the marketplace.So, we will with this we will stop here we will continue in the next class.