Lec No.02 & 10 - Market Structure, Conduct and Performance, Maketing Mix.pptx

Market structure

1. Lec 2 Market structure, marketing mix and market segmentation, classification and characteristics of agricultural markets

2. Market structure The term structure refers to something that has organization and dimension – shape , size and design ; and which is evolved for the purpose of performing a function . A function modifies the structure, and the nature of the existing structure limits the performance of functions.

3. Market structure Market structure refers to those organizational characteristics of a market which influence the nature of competition and pricing, and affect the conduct of business firms Market structure refers to those characteristics of the market which affect the trader's behavior and their performances ; Market structure is the formal organization of the functional activity of a marketing institution.

4. COMPONENTS OF A MARKET STRUCTURE 1. Concentration of market power – It is an important element determining the nature of competition and consequently of market conduct and performance. This is measured by the number and size of firms existing in the market. A high degree of market concentration restricts the movement of goods between buyers and sellers at fair and competitive prices and creates an oligopoly or oligopsony situation in the market.

5. COMPONENTS OF A MARKET STRUCTURE 2. Degree of product differentiation – Whether or not the products are homogeneous affects the market structure. If products are homogeneous, the price variations in the market will not be wide. When products are homogeneous, firms have the tendency to charge different prices for their products.

6. COMPONENTS OF A MARKET STRUCTURE 3. Conditions for entry of firms in the market – another dimension of the market structure is the restriction, if any, on the entry of firms in the market. Sometimes, a few big firms do not allow new firms to enter the market or make their entry difficult by their dominance in the market. There may also be some government restrictions on the entry of firms.

7. COMPONENTS OF A MARKET STRUCTURE 4. Flow of market information – A well-organized market intelligence information system helps all the buyers and sellers to freely interact with one another in arriving at prices and striking deals.

8. COMPONENTS OF A MARKET STRUCTURE 5. Degree of integration – the behaviour of an integrated market will be different from that of a market where there is no or less integration either among the firms or of their activities. The structural characteristics of the market govern the behaviour of the firms in planning strategies for their selling and buying operations.

9. Dynamics of Market Structure – Conduct and performance The market structure determines the market conduct and performance. The term market conduct refers to the patterns of behaviour of firms, especially in relation to pricing and their practices in adapting and adjusting to the market in which they function.

10. Market Conduct It includes, Market sharing and price setting policies; Policies aimed at coercing rivals; and Policies towards setting the quality of products.

11. Market Performance The term market performance refers to the economic results that flow from the industry as each firm pursues its line of conduct. Criteria for measuring market performance: Efficiency in the use of resources, including real cost of performing various marketing functions. The existence of monopoly or monopoly profits, including the relationship of margins with the average cost of performing various functions.

12. Market Performance Dynamic progressiveness of the system in adjusting the size and number of firms in relation to the volume of business, in adopting technological innovations and in finding and inventing new forms of products so as to maximize general social welfare.

13. Market Performance Whether or not the system aggravates the problem of inequalities in inter-personal, inter-regional or inter-group incomes. For example, inequalities increase under the following situations: A market intermediary may pocket a return greater than its real contribution to the national product. Small farmers are discriminated against when they are offered a lower return because of the low quantum of surplus. Inter-product price parity is substantially distributed by new uses for some products and wide variations and rigidities in the production pattern between regions.

14. Market Performance – Satisfactory Market Performance Production pattern – Significant changes occur in the production pattern because of technological, economic and institutional factors. The market structure should be re-oriented to keep pace with such changes. Demand pattern – the demand for various products, specially in terms of form and quality, keeps on changing because of change in incomes, the patten of distribution among consumers, and changes in their tastes and habits. The market structure should be re-oriented to keep it in harmony with the changes in demand.

15. Market Performance – Satisfactory Market Performance Costs and Patterns of Marketing Functions – Marketing functions such as transportation, storage, financing and dissemination of market information, have a great bearing on the type of market structure. Government policies regarding purchases, sales and subsidies affect the performance of market functions. The market structure should keep on adjusting to the changes in costs and government policy.

16. Market Performance – Satisfactory Market Performance Technological Change in Industry – Technological changes necessitate changes in the market structure through adjustments in the scale of business, the number of firms, and in their financial requirements.

17. Marketing mix American marketing expert James Culliton coined the term ‘marketing mix’ which was later popularized by Neil H. Borden . American professor of marketing Jerome McCarthy described the marketing mix in term of four Ps i.e. product , place , price and promotion .

18. Marketing mix The marketing mix connects the way in which a firm or industry combines its pricing, promotional and distribution strategies which appeal the consumers. 4 Elements of Marketing mix: Product Place Price Promotion

19. Product A product is anything which is capable of satisfying a want . A product is the main focus of any marketing planning which determines the success or failure of the firm. A product is not a simply physical item but a mixture of tangible and intangible characteristics including packaging, colour and price.

20. Product A product can be anything and ranges from goods (toothbrush), services (hospitals), experiences (waterpark), events (Marathon run), concepts (polio eradication), ideas (women empowerment) propositions (love for the country), places (Taj Mahal), nations (India), properties (textile, agricultural land), organizations (IIMs, IITs), information (websites). A product is any item of value offered to the customer for attention, purchase, use and disposal of consumers for satisfaction of their needs and wants.

21. Price Pricing is the secret component of marketing mix. Price is the only component of marketing mix which provides revenue to the firms. For all other Ps of marketing mix, organization has to spend money. Price is referred by many terms such as rent, tuition, fare, rate, interest, due, premium, honorarium, bribe etc.

22. Price The key factor to be considered in determining products price depends upon the value placed by consumer on the products which is derived from consumer’s perception of the total satisfaction provided by the product. If the price is higher than the perceived value, the exchange between buyer and seller does not result.

23. Price setting by the firm Selecting the pricing objective: It may be survival, maximum current profit, maximum market share, maximum market skimming, product quality leadership or other objectives . Determining demand: It employs various methods of demand estimation and takes into consideration price elasticity . Estimating cost: It aims at finding out the cost of production and segregating it into fixed and variable cost . Analyzing competitors, cost, price and offers.

24. Price setting by the firm Selecting a pricing method: Different methods are adopted by firms based upon marketing objectives and competitive scenario. This includes mark up pricing, target return pricing, perceived value pricing, value pricing, going rate pricing, auction type pricing . Deciding the final price: Considering its impact on other marketing activities and based upon company pricing policy, a final price for the product is selected.

25. Place Place is third P of marketing mix. This involves network of distribution channel through which product reach the final consumer. It is essential that finished goods are made available at customer points, of desired quality in sufficient numbers at right time. This is made possible through marketing channels. A marketing channel is a system of relationship among participating members which make the final product available to the consumer.

26. Promotion It is the face of the company. It refers to tools of communicating message to the customer. It includes advertising, sales promotion, personnel selling, public relations, publicity, events & experiences, direct marketing, interactive marketing, word of mouth marketing.

27. Important Decisions of Marketing Mix Product Price Place Promotion Brand name Styling Functionality Safety Quality Warranty Packaging Accessories & Services Pricing Strategy Volume discount & wholesale pricing Seasonal pricing Cash & early payment discount Price flexibility Bundling Distribution Channels Market Coverage Inventory Management Specific Channel Members Distribution Centers Warehousing Order Processing Transportation Reverse Logistics Strategy (Pull Push) Advertising Personnel Selling and Sales force Public Relations & Publicity Marketing communication on budget.

28. Market Segmentation Market segmentation is a process of dividing customers into different groups or segments having similar wants. By doing so, each can be targeted and reached with a distinct marketing mix . The marketing technique of developing separate products and marketing programmes to appear to different consumer classes is called market segmentation.

29. Market Segmentation Markets are in a better position to locate and compare marketing opportunities. Markets can effectively formulate and implement marketing programmes which will be tuned with the demand of the segment of the market. Marketers can make finer adjustments in their products and marketing communication. Marketers can avoid fierce competition by assessing the strength and weakness of the competitors. It leads to a more effective utilization of marketing resources.

30. Types of Market Segmentation

31. Demographic Market Segmentation Age Gender Income Location Family Situation Annual Income Education Ethnicity

32. Psychographic Market Segmentation The basis of such segmentation is the lifestyle of the individuals. The individual’s attitude, interest, value help the marketers to classify them into small groups. Personality traits Values Attitudes Interests Lifestyles

33. Psychographic Market Segmentation Psychological influences Subconscious and conscious beliefs Motivations Priorities

34. Behavioral Segmentation The loyalties of the customers towards a particular brand help the marketers to classify them into smaller groups, each group comprising of individuals loyal towards a particular brand. Purchasing habits Spending habits User status Brand interactions

35. Geographic segmentation In this method the market is divided on the bases of different geographic regions. This is useful for organizations which intend to slowly grow and enter different regions/ market in sequences. This is usually the starting point for segmentation. It is believed that each geographic area has similar preferences and consumption patterns.

36. Geographic segmentation One of the most common geographic segmentation in India is about urban and rural areas. Urban and rural areas show differences in education level, income and spending patterns, socio cultural aspects etc. Country State Region City Postcode