principles marketing[1] 7
DESCRIPTION
Marketing PrinciplesTRANSCRIPT
BACKGROUND TO PRINCIPLES OF MARKETING
INTRODUCTION TO MARKETING
Every business, service or product oriented organization must
complete its operation by disposing of its products or rendering its
services to the customers.
Various marketing concepts hold that customers will generally not buy
a product they don’t know or they have not been asked/convinced to
buy. It is therefore the role of the marketing function in any business to
fill this gap and complete the business operation.
Definition of Marketing
The Chartered Institute of Marketing of the United Kingdom defines
marketing as, “The management process which identifies, anticipates,
and supplies customer needs efficiently and profitably.”
Kibera (1996) defines marketing as “the performance of business and
non-business activities which attempt to satisfy a target individual or
group needs and wants for mutual benefit or benefits.”
Kotler (2006), the American marketing guru provides the definition of
marketing as “A social and managerial process whereby individuals
and groups obtain what they need and want through creating and
exchanging products and value with others.”
Kotler and Armstrong (2008) define marketing as “The process by
which companies create value for customers and build strong customer
relationships in order to capture value from customers in return.”
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Core Marketing Concepts
1. Needs – The basic concept underlying marketing is that of
human needs. Needs comprise of those things that human
beings feel they cannot do without e.g. food, clothing, shelter,
safety, education etc.
2. Wants – Are forms of human needs that improve on their well
being but which they can do without. Wants are the form of
human needs taken as they are shaped by culture and individual
personality for example urbanites want Television sets.
3. Demand –Demand is the quantity of a commodity that
consumers are willing and able to buy at a given price over a
given time period other factors held constant. When a want is
backed by buying power it becomes demand.
4. Product – Is anything that can be offered to satisfy needs or
wants. It can be tangible or intangible.
5. Market – A constituency of potential customers sharing
particular needs or wants and who might be willing and able to
engage in exchange to satisfy that
need or want.
A market also refers to where buyers and sellers meet to
transact.
6. Marketing offer – Is a combination of products or service
presented to the market to satisfy a need or a want.
7. Value and Satisfaction – Value is the ability of a commodity to
satisfy human wants. It also refereed to as quality or utility.
Customers look for value in a product before paying for it. The
ability of a product to meet customer expectations results in
customer satisfaction.
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8. Exchange – Is the act of obtaining a desired object from
someone by offering something in return.
9. Transaction – An exchange of values between two or more
parties, where either party gains.
10. Marketing Management – Is the art and science of choosing
target markets and building relationships with them.
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What is marketed?
1. Goods2. Services3. Events4. Experiences5. Persons
6. Places7. Properties8. Organizations9. Information10. Ideas
MARKETING PHILOSOPHIES
A marketing philosophy according to Kotler (2006) is a marketing logic which an organisation uses to relate to its market.
Marketing has evolved overtime starting from days when firms concentrated in production to meet excess demand, to modern days when firms strive to meet customer expectation in the face of increased competition.
This historical evolution of marketing is discussed in five competing concepts as follows. The competing concepts are also referred to as marketing philosophies.
1. The Production Concept - It is the idea that consumers will buy products which are
highly available and affordable.- Therefore businesses managers should concentrate on
achieving high production efficiency, low costs, and mass distribution.
- They assume that consumers are primarily interested in product availability and low prices.
- Though one of the oldest marketing concepts it is still widely adopted by leading firms like e.g. Coca cola
2. The Product Concept- This concept holds that consumers will favour products
that offer the best quality, performance and features.- Therefore the organisation should devote its energy in
making continuous improvements to the product e.g. Auto mobile industry
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- However overemphasis on product development might also lead to marketing myopia. Marketing myopia refers to a mistake of paying more attention to specific product features a company offers than to the benefits and experiences produced.
3. The Selling Concept- The idea that consumers will not buy enough of the
organizations products unless the organisation undertakes large scale selling and promotional effort
- This concept is typically practiced by unsought goods providers e.g. Insurance services.
4. Marketing Concept
- The marketing management philosophy holds that
achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the
desired satisfaction better than competitors do.
- Under this concept, customer satisfaction is the path to
sales and profits. Hence the slogan, “the customer is the
king as is adopted by some organisations.”
- Customer driven companies undertake massive marketing
research on customer needs and desires, gather new
product and service ideas and test product improvements.
The Selling and Marketing Concepts Contrasted
Starting Focus Means Ends
Point
The selling
Concept
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Factory Existing Selling ProfitsProducts and Through
Promoting sales volume
MarketCustomer Intergrated ProfitsNeeds marketing through
Customer satisfaction
Consumer(Wants satisfaction)
Company(Profits)
Society (Human welfare)
The marketing
Concept
5. Societal Marketing Concept
Holds that customers will favour products and services that
attempt to promote the values of the society, hence the
emergence of corporate social responsibility in the recent past as
a core marketing strategy e.g. Safaricom, Celtel, KCB.
It is a principle of enlightened marketing that holds that a
company should make good marketing decisions by considering
consumers wants, the company’s requirements, consumer’s long
run interests and society’s long run interests.
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Societal marketing concept
CUSTOMER RELATIONSHIP MARKETING (CRM)
CRM is defined as the overall process of building and maintaining
profitable ties between organizations and customers by delivering
superior customer values and satisfaction.
Overtime, relationship marketing has grown and replaced transactional
marketing as summarized in the table below.
Transactional marketing(One way communication)
Relationship marketing(Two way communication)
Focus on a single sale Product features oriented Short time scale Little customer service Limited customer
commitment Moderate customer contact Quality is the concern of
production
Focus on customer retention Orientation on product
benefits Long timescale High customer service High customer commitment High customer contact Quality is the concern of all
CRM therefore involves attracting, retaining and growing customers.
Basic Tenets of CRM
To effectively manage customer relationship, marketers normally
employ the following three approaches:
1. Customer Value and Satisfaction
Customer perceived value is the customer’s evaluation of the
difference between the benefits and costs of a marketing offer
relative to those of the competing offers. Whereas the customer
may not be accurate in judging the cost and values, they would
always want to maximize their benefits at minimum cost.
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Customer satisfaction refers to a products perceived
performance as compared to the buyers’ expectation. If the
products performance falls short of expectation the customer is
dissatisfied and vice versa. Smart companies aim at delighting
customers by exceeding their expectation.
2. Customer loyalty and retention
Satisfied customers produce several benefits to the company
including
(a) They are less price sensitive.
(b) They spread a favourably word of mouth to others about
the company
(c) They remain loyal for a longer time.
(d) They buy a wider range of products(e) They cost less to service as they are familiar with the
product and business design(f) They exhibit strong Lifetime Customer Value (LCV) as the
customer grows through the loyalty ladder from prospect, to customer, to client to a supporter, and finally to an advocate as shown below
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Hence for companies to retain their customers for a longer
period, they must aim high in satisfying their needs and wants.
3. Growing share of customers
Marketers are pre-occupied by the want to increase their share
of customers i.e. the share they get of the customers
purchasing in their product categories.
To increase share of customers,
(a) Firms can offer greater variety to current customers
(b) Train employees to cross sell - Cross selling means getting
more business from current customers of one product by
selling them additional offering e.g. offering a customer
who comes to buy a suit, a shirt, tie, a belt and shoes.
Brainstorming Session
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Zero defects. The following story is well known but it is worth
repeating. An IBM plant in Windsor, Ontario, is said to have
ordered a shipment of components from a Japanese firm,
specifying an acceptable quality level (AQL) of three defective
components per 10,000 shipped. In a covering letter
accompanying the shipment, the Japanese company apologized
and said it had met with great difficulty producing these
defective parts, and had been unable to understand why they
were required. They wrote: “We Japanese have hard time
understanding North American business practices, but the three
defective parts per 10,000 have been included and are wrapped
separately. Hope this pleases.”
Challenge
Do you think it was fair for the Japanese firm to have
supplied the defective parts? Why?
The Concept of De-marketing
Most companies’ in the hotel industry have trouble meeting demand
during peak usage times. In this and other excess demand situations a
need to carry out activities that may discourage the high demand is
necessary. This is called De-marketing.
De-marketing is marketing to reduce demand temporarily or
permanently. The aim is not to destroy demand but to reduce or shift
it.
MARKETING MANAGEMENT AND THE MARKETING MIX
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Marketing management aims at designing strategies that will build
profitable relationships with the target customers. To do so every
organization endeavors to adopt an effective marketing mix.
The marketing mix is a combination of controllable, tactical marketing tools that a firm blends to produce the response it wants in the target market. The marketing mixes consist of everything the firm can do to influence the demand for its product.
The many possibilities can be collected into four groups of variables also known as the “four Ps” of marketing mix i.e. product, price, place and promotion.The conventional 4 P’s of marketing have since been expanded to 7 P’s as :
Marketing Mix
Description
Product The goods and services on offer and their quality, feature, and design.
Price That which consumers are willing to pay to get a unit of the product or services
Place The distribution methodology of the products or service to the market place or target market
Promotion The selling activity used to motivate the customers and entice them to buy more of the product
People People are the human beings who drive product or service delivery
Process The framework that is followed in the marketing and delivery of products and services
Physical evidence
The tangible elements of services, ideas or any other intangible products put on offer
MARKETING CHALLENGES IN THE NEXT MILLENNIUM
There have been a number of concerns of marketing in this highly dynamic global world and these must constitute the bulk of challenges that a marketing student must also face.
1. Growth of Non profit Marketing
Schools, Hospitals, churches, the Army, the police and Museums are now practicing marketing, an activity that was the preserve of highly competitive profit making enterprises.
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Challenges in these fields include: Declining enrolment, Competition, Cost of service and Public relation
2. Rapid Globalisation
It is definite that today the world has become a global village. That which used to be exclusively for a particular market and culture is now a product of the entire universe with the improved transport and communication systems. When blending the Marketing Mix, we must now take into consideration the variable and diversified global preferences.
3. The Challenging World Economy
A larger part of the world is becoming poorer and making the global economy growth sluggish. This is a big challenge on pricing and quality. Wal-Mart for instance echoes that they sell for less. Why? Because they are aware of the challenge.
4. The Call for More Ethics and Social Responsibility
People don’t just buy successful products but ethically produced and sold products. The society would want to know how they benefit from a product they buy.
5. The New Marketing Landscape
The new marketing landscape loudly screams, “The Customer is everything”. The past theoretical and highly academic texts of marketing are being challenged with the new teaching and gospel represented by a number of publications whose titles tell clearly of the new marketing landscape, for instance: The Customer Driven Company, The customer is always right, Keep the Customer, Customer for Life Total customer service: The Ultimate weapon.
6. The New Digital Age
The explosive growth in computers, telecommunication, information, transportation and other technologies has had a major impact on the ways companies bring value to their customers
Advancement in technology has seen the marketer adopt new approaches such as videoconferencing, internet marketing, customer
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database management, interactive Television, cell phones, websites etc.
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MARKETING ENVIRONMENT
A company’s marketing environment consists of factors and forces that
may affect marketing management’s ability to built and maintain
successful relationship with customers.
The marketing environment offers both opportunities and threats.
Successful companies are those that adapt to the environmental
changes quickly and turn the threats to opportunities of growth.
Marketers understand their environments by conducting environmental
scanning. Environmental scanning is the practice of keeping track of
external changes that can affect markets including the demand for
goods and services of an organization.
The marketing environment has two broad dimensions:
(a) Micro environment
(b) Macro environment
THE MICRO MARKETING ENVIRONMENT
These are factors very close to the company that affects its abilities to
service its customers. The internal forces include; the company,
supplier, customer markets, publics and marketing intermediaries.
1. The Company
The marketing manager is influenced by the other company
departments; hence he/she must work closely with them.
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Top management for instance sets the company’s mission,
objectives, broad strategies and policies the marketing and
finance department’s sources for funds to carry out the
marketing plan. The R&D department focuses on designing
products that are attractive and satisfy customer needs.
Purchasing department worries about getting quality material
input, while production department produces the desired
product. All these departments interdependent on each other
and impact on the marketing departments plans and actions.
2. The Suppliers
- Suppliers provide the resources needed by the company to
produce its goods and services.
- Marketing managers must watch supply availability to
avoid deficiency of the product in the market.
- Marketers should monitor price trends of their key inputs
e.g. petroleum products, rubber, etc. rising supply costs
translates to increased production cost which forces selling
price to go up.
3. Customer Markets
A customer is one who buys a company’s final product in
exchange for a monetary value. Marketers must understand the
types of customer markets and where possible use price
discrimination on these markets. Five types of markets are
explained below:
(a) Consumer markets – Consist of individuals and firms that
buy goods and services for final consumption.
(b) Industrial markets – Buys goods and services for further
processing or for use in their production process.
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(c) Resellers markets – Buys goods and services to resell at a
profit.
(d) Government markets – Made up of government agencies
that buy goods and services to produce public goods or
services.
(e) International markets – Consist of buyers in other countries
including consumers, producers, resellers and
governments.
4. Publics
Publics are groups that have an actual or potential interest in an
organisation’s ability to achieve its marketing objectives. They
include:
(a) Financial Publics – They influence the ability of a firm to
obtain funds for conducting its marketing programs. They
include banks, investment houses and stockholders.
(b) Media publics – Include newspapers, magazines, radio and
television stations that carry news, features and editorial
opinion. The marketer must know how to interact with the
media for regular coverage of the organisation.
(c) Government publics – Marketers must always consult the
company lawyers on issues of product safety,
advertisement etc.
(d) Citizen action publics – A company’s public relations sector
must stay in term with consumers and consumer action
groups and attend to their concerns.
(e) Internal publics – Includes workers, management,
volunteers, board of director etc. Companies must
motivate their internal publics. It motivates marketing
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force strive hard to attaining the set goals and this spills
over to external publics.
5. Marketing Intermediaries
These are forces that can help the company promote, sell and
distribute its products to the final buyer. They include resellers,
physical distribution firms and marketing service agencies.
(a) Resellers – Are distribution channel firms that help the
company find customers e.g. wholesalers, distributors,
retailers (Nakumatt, Uchumi, Tuskys). These organizations
often have enough monopsony power to dictate terms or
even shut the manufacturer out of large markets.
(b) Physical distribution firms (transporters) – Are firms that
help the company move its goods from the point of
manufacturer to the final consumers. The marketer must
balance factors like costs, delivery time and safety.
(c) Marketing service agencies – Are research firms (Steadman
Group), advertising agencies, (Adopt A Light, Eagles
Outdoor, Monier Outdoor, The Scann Group), media houses
(Nation, Standard, Royal Media, KBC) and marketing
consultants. Such firm’s help the company promote and
target its products to the right markets. The marketer
must consider price, service quality, target market etc.
before choosing a marketing agency.
MACRO MARKETING ENVIRONMENT
Macro marketing environmental are factors that are outside the
company’s control and often pose threats or provide opportunities to
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the company. The external forces are often discussed under the
PLEST or PEST frame work as follows:
1. Political
2. Legal environment
3. Economic environment
4. Social environment (demographic environment)
5. Technological environment
1. Political and Legal factors
- These comprises of laws, regulations, government
agencies and social pressure groups that include and limit
various organizational marketing effort.
- Every marketing activity is subject to a wide range of laws
and regulations.
- These legislations have been enacted for the following
reasons:
(a) To protect companies from each other e.g. patent
rights.
(b) To protect consumers from unfair business practices
e.g. labels on cigarettes “… smoking kills …”, “don’t
drink and drive …”
(c) To protect consumers from overpricing e.g. laws
requiring banks to charge up to a given interest rate.
- Marketers need to know the major laws protecting
consumers, society and competition.
2. Economic Environment
- These are factors that affect consumer buying power and
spending pattern.
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- Marketers must understand economic trends. During
periods of boom (prosperity), production and employment
are high. Consumers demand more goods and services.
They spend freely on basic and luxury goods.
- During periods of inflation, prices rise faster than
production of goods. Consumer’s income is not sufficient
to sustain them hence low demand for goods/services
- During periods of recession, production and employment
decreases, this is followed by reduced consumption of
luxury goods as people stick to the basic needs only.
- During recovery, production starts to increase,
unemployment decreases and consumers start spending
more money in their purchases.
- Hence marketers engage in aggressive marketing
campaign, during periods of recession and decline and in
times of economic boom, some firms adopt the
Demarketing concept. Demarketing is an effort to reduce
demand for a product.
- An increase in government taxes automatically reduces
consumers’ disposable income. Marketers must
understand the implication of a VAT tax increase from 16%
to 18% for instance.
3. Demographic Environment
- Demography is the study of human population in terms of
size, density, location, age, gender, race, etc.
- The growing world population for instance has the
following implications to a marketer:
(a) A growing population means growing human needs
to satisfy.
(b) Depending on the population’s purchasing power, it
may mean growing marketing opportunities.
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- Marketers therefore have to keep close track of the
demographic trends because people make up markets
both at home and abroad.
- Marketers have to track changes in age, family structures,
geographic population shifts, population diversity etc.
4. Technological Environment
- Refers to forces that create new technologies, new
products and market opportunities e.g. internet, mobile
phones, computers, credit cards, television, etc.
- New technologies create new markets and opportunities.
Companies that do not keep up with technological change
soon find their products having been rendered obsolete.
- Through research and development, companies are able to
produce practical and affordable versions of products.
5. The Competitive Environment
- A firm’s competitors are those organizations who produce
and sell similar or identical products/service to those of the
firm.
- Successful firms are those that provide greater customer
value and satisfaction relative to competition.
- Marketers must gain strategic advantage by positioning
their product offerings strongly against competitor’s
offerings.
- Economists describe three main types of competition:
(i) Pure competition – Occurs when similar products are
offered, there are many buyers and sellers, the
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sellers can freely enter the market or exit it and both
buyers and sellers have free access to information.
Marketers must understand firms under perfect
competition take prices as given by the market and
that any marketing effort they engage only creates
awareness and might not affect the quantity
demanded directly e.g. the cooking oil industry in
Kenya is made up of Bidco, Unilever, Kapa, Pwani
etc.
(ii) Monopolistic competition – Occurs when there are a
few large sellers in the market. No free entry or exit
from the market, information does not flow freely
and each firm has full control of its demand curve.
Firms limit quantity supplied and charge high prices
to maximize profits. e.g. Celtel, Safaricom and
Telcom.
(iii) Oligopoly – Occurs where products are similar but
differentiated. There are a few sellers and no free
flow of information. Firms have full control of their
prices such that a price reduction by one firm is
quickly followed by competing firms to secure their
market share but a price increment by one
oligopolist is not necessarily followed by the other
firms. e.g. Shell, Kenol Kobil, Total, Caltex, in the oil
business in Kenya.
- Competition largely poses the problem of pricing that the
marketer must always try to resolve. The other competitive
forces are threat of new entrants, threat of substitute
products and bargaining power of suppliers.( See Porters
Model).
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ANALYSING THE COMPETITIVE ENVIRONMENT
There are two models commonly employed in analysis of the
competitive marketing environment of the organization:
1. Competitive Forces Model
2. SWOT analysis
MICHAEL PORTER AND THE COMPETITIVE FORCES MODEL
- The competitive forces model was developed by Michael Porter of Harvard University in 1980.
- He argues that the intensity of competition in an industry is neither a matter of coincidence or bad luck, but rather the way the industry is structured.
- He therefore identifies FIVE forces that he says influence the nature of competition in an industry. These include:
1. Threats of entry2. The supplier power3. Buyer power4. Substitute products5. Rivalry (jockeying for positions)
SWOT ANALYSIS
SWOT model is a summary of the pertinent characteristics of the
marketing environment that may affect the future business plans of a
business.
SWOT is an acronym standing for:
1. Strengths
2. Weaknesses
3. Opportunities
4. Threats.
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GROUP ASSIGNMENT
a) Distinguish between marketing intelligence and marketing
information
[10 marks]
b) Identify one organisation of your choice, and discuss how they
would go about conducting a marketing research to solve a
problem they are currently faced with.( Use the marketing
research process).
[20 marks]
REQUIRED
To be done in Groups of Five
Typed using Times New Roman font 12
Cover page
Attach reference page i.e. Harvard system of referencing
Spiral Bound
One report written and Submitted Two weeks from Today
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CONSUMER BUYING BEHAVIOUR
Consumer buyer behaviour is the behaviour exhibited by the final
users – Individuals and households who buy goods and services for
personal consumption.
Customer versus Consumer
A customer is one who buys the product from the seller. The consumer
is one who finally uses the product for own satisfaction. For instance a
mother buys ice-cream and the child eats the ice-cream. The mother is
the customer and the child the ultimate consumer. Marketers must
understand the consumer buying behavior and the customer buying
behaviuor.
Basic Model of Consumer Behaviour
The central question that concerns marketers is how do consumers
respond to the various marketing efforts the company employs? A
company that is able to precisely understand and supply customer
expectation of value tends to have an advantage over competition.
The model of buyer behaviour below has been presented by Kotler
(2006) in an attempt to explain the consumer buyer behaviour.
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Marketing and other Stimuli
Marketing Other
Product Economy
Price Technology
Place Political
Promotion Cultural
Buyers Black Box
Buyer BuyerCharacteristics
Decision
Process
Buyer Response
Product Choice
Brand Choice
Dealer Choice
Purchase Choice
Purchase amount
The figure shows that the marketing stimuli and other factors enter the
buyer “black box” and produce certain responses. Marketer’s stimuli
consist of all the marketing effort of an organization broadly captured
in the four P’s of Product, Price, Place and Promotion. Other stimuli
include major forces and events in the buyer’s environment i.e.
economic, technology, political and cultural forces.
After receiving a stimuli the buyers the enter a black box during which
the buyer thinks, weighs, chooses and makes a decision. The decision
making process is influenced by buyer characteristics as discussed
below.
The decision made is displayed in the buyer response comprising of
choosing a product, brand, dealer, purchase and quantity to purchase.
Marketers attempt to understand how the stimuli are converted to
response, and often manipulate the external stimuli to favour their
marketing offer.
CHARACTERISTICS AFFECTING CONSUMER BUYING BEHAVIOUR
The character of a consumer will largely be affected by the following
factors:
1. Cultural factors
2. Social factors
3. Personal factors
4. Psychological factors
1. Cultural Factors
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The marketer must understand the role played by the buyer’s
culture, subculture and social class.
(a) Culture – Culture affects a person’s wants and behaviour.
Growing up in a society a child learns basic values,
perceptions, wants and behaviours from the family and
other important institutions e.g. different cultures assign
different meanings to colour. White is usually associated
with purity and cleanliness in Western communities.
However it can signify death in Asian countries. Also
according to Taiwan culture, a man puts on green cloths to
signify his wife has been unfaithful.
(b) Subculture – Subculture include nationalities, religions,
racial groups, and geographic regions. Many subcultures
make up important market segments and marketers often
design products tailored to their needs e.g the Black
Americans in the United States are strongly motivated by
quality and selection. They place more importance on
brand names and are more brand loyal.
(c) Social class – Social classes are society’s relatively
permanent and ordered divisions whose members share
similar values, interests and behaviours e.g. of social class:
upper class, middle class, lower class.
Social class is determined by many factors like income,
occupation, education, wealth and other variables.
Marketers are interested in social class because people
within a given social class tend to exhibit similar buying
behaviour. Social classes show distinct product and brand
preferences in areas like clothing, home furnishings,
automobiles etc.
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2. Social Factors
The buyer’s behaviour may also be influenced by social factors,
such as groups, the family, social roles and status.
(a) Groups - Groups are combinations of two or more people
who have come together or interact to accomplish
individual or mutual goals.
A group member is influenced by the other members as
he/she strives to belong. Marketers try to identify the
reference groups of their target markets. Reference
groups expose a person to new behaviours, lifestyles and
create pressure to conform e.g. a group of young people
can be attracted to the football game and would wish to
put on branded products just like the football player whom
they wish to imitate.
(b) Family
Marketers are interested in the roles and influence of the
husband, wife, children and house help on the purchase of
different products and service. In most families, the wife is
the main buyer of food, household products and clothes.
The husband is the main buyer f hardware, car or even a
home. However changes in the market trend have seen
women take up the reverse roles.
Children and house helps are the main consumers of T.V.
adverts and may from time to time influence the family
buying decisions.
(c) Roles and Status
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A role consist of the activities a person is expected to
perform according to the people around them e.g Mary is a
daughter to her parents, she plays the role of a daughter,
in her family, she plays the role of a wife, in her company
she plays the role of the brand manager. Each of her roles
influences her buying behaviour.
3. Personal factors
These are common individual characteristics that can influence
one’s behaviour or decisions. They include the buyer’s age and
life cycle stage, occupation, economic situation, lifestyle,
personality and self concept.
(a) Age and Lifecycle Stage
Marketers often define their target markets in terms of the
life-cycle stage and develop appropriate products and
marketing plans for each stage.
Traditionally family life-cycle include young singles,
married couples with children, and the elderly. Markets
strive to capture brand loyalty of consumers at a young
age and develop long term relationship.
(b) Economic Situation
Economic situation of an individual affect his/her buying
ability. A high income earner has more income to spend
and a low income earner has little income to spend.
Marketers of income sensitive goods watch trends in
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personal income, savings and interest rates. During
economic recession, marketers must re-price reposition or
even redesign their products.
(c) Lifestyle
Lifestyle is a person’s pattern of living as expressed in his
or her activities, interest and opinions. Marketers classify
people based on how they spend their money and time as
follows:
(i) Status oriented buyers – Base their purchases on the
actions and opinions of others.
(ii) Action oriented buyers – Are driven by their desire for
acting, risk taking and variety.
(iii) Principle oriented buyers – Consumers who buy
based on their views of the world.
Based on lifestyle, consumers can also be classified as:
(i) Actualisers – People with so many resources that
they can indulge in any of the orientations above.
(ii) Achievers – People with middle income and just
enough resources. They strive to be actualisers and
are often status oriented.
(iii) Strivers – People with little resources and are
principle oriented.
(iv) Strugglers – People with too few or no resources.
They are often not included in any consumer
orientation.
Lifestyle study is used by marketers to design appropriate
adverts for each class of consumers.
(e) Personality and Self-concept
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Personality is the distinguishing psychological
characteristic that leads to relatively consisted and lasting
responses to one’s own environment.
Personality can be described as self-confident, dominant,
social, defensive, adaptable and aggressive.
Personality is useful in analyzing consumer behaviour for
certain products e.g. coffee marketers have discovered
that heavy coffee drinkers are highly sociable.
4. Psychological Factors
A person’s buying choices are further influenced by
motivation, perception, learning, beliefs and attitudes.
(a) Motivation
A motive (drive) is a need that is sufficiently pressing to
direct the person to seek satisfaction.
Many marketers develop adverts bearing in mind their
products ability to quench the buyers motive e.g. the Pepsi
slogan “dear for more”, The Sprite advert “obey your
thirst”, Nakumatt slogan “You need it you get it”, Toyota
Pickup advert, ‘Shujaa wa Kazi’ etc.
(b) Perception
Perception is the process by which people select, organize
and interpret information for form a meaningful picture of
the world. There are three perceptual processes:
(i) Selective attention
(ii) Selective distortion
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(iii) Selective retention
Selective attention is the tendency for people to screen
out most of the information to which they are exposed e.g.
consumers in Kenya are exposed to over 1,000 adverts
everyday. Do they pay attention to any of them?
Marketers must strive to capture consumer attention.
Selective distortion is the tendency of people to
interpret information in a way that will support what they
already believe. Marketers must try and understand the
mindset of consumers and how this will affect
interpretations of adverts and sales information.
Selective retention is the tendency of people to retain
information that supports their attitudes and beliefs. This
explains why marketers use so much drama and repetition
in sending messages to their market e.g. action hits pain
hard, Doom advert etc.
(c) Learning
Learning describes changes in an individual’s behaviour
arising from experience. Most human behaviour is learned.
Learning occurs through the interplay of drives, stimuli,
cues, responses and reinforcement e.g if a consumer buys
a Nokia phone, if his experience with the phone is
rewarding he will in future reinforce this behaviour by
buying it again. But if it is not rewarding he will not
reinforce the need for that product.
(d) Beliefs
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A belief is a descriptive thought that a person has about
something e.g. Kenyans have an attitude that Nissan cars
are not durable on Kenyan roads and are highly in favour
of Toyota cars. These beliefs may be based on real
knowledge, opinion or faith.
Marketers must understand the beliefs that people
formulate about a specific product because the belief make
up product and brand images.
If some beliefs are wrong and prevent purchase, a
marketer launches a campaign to correct them e.g. the Jik
advert on detergents that bleach and tear your garments,
the Nissan X-trail advert that depicts Nissan on rough
roads.
(e) Attitudes
Attitude is a person’s consistently favourable or
unfavourable evaluation, feelings and tendencies toward
an object or idea e.g. people have the attitude that
Japanese electronics are quality products while Chinese
electronics are poor quality products.
A marketer must understand people’s attitudes and try to
change them to their benefit.
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TYPES OF BUYING-DECISION BEHAVIOUR
There are four types of buying behaviour:
1. Complex buying behaviour
2. Dissonance reducing buying behaviour.
3. Habitual buying behaviour
4. Variety seeking buying behaviour
High Involvement Low Involvement
Significant
difference between
brands
Complex buying
behaviour
Variety seeking
buying behaviour
Few difference
between brands
Dissonance reducing
buying behaviour
Habitual buying
behaviour
Complex Buying Behaviour
This is a buying behaviour characterized by high consumer
involvement in a purchase and significant perceived differences among
brands.
The consumer involvement is high when the product is expensive,
risky, purchased infrequently and it is highly self expressive. Hence
the consumer has a lot to learn about the product e.g. buying a
computer, car etc. The buyer first develops beliefs about the product,
then attitudes, and then makes a thoughtful purchase choice.
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Marketers of high involvement products must help buyers learn about
the product benefits and features. They can do this by availing a
catalogue or describing the brands benefits using print media.
Dissonance – Reducing Buying Behaviour
This is a buying behaviour that occurs when consumers are highly
involved with an expensive infrequent or risky purchase, but sees little
difference among brands e.g. buying a music system, a carpet etc.
A consumer buying a music system may face a high involvement
decision because the system is expensive and self-expressive yet
buyers may think all the music systems in a given price range are the
same. After purchase a consumer might experience post-purchase
dissonance (discomfort). The marketers must provide after sales
services and reassure the consumers that all is well.
Habitual Buying Behaviour
It is a consumer buying behaviour characterized by low consumer
involvement and a few significant perceived brand differences.
For example bread. Consumers have little involvement in this product
category, they simply go to a shop and pick a loaf of bread. If they
keep buying the same brand, it is out of habit rather than strong brand
loyalty. Consumers appear to have low involvement with low priced
products.
Because buyers are not committed to any brands, marketers of low-
involvement products will use price and sales promotions to create
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brand familiarity. Television ads are more effective in such
promotions.
Variety-Seeking Buying Behaviour
This is a consumer buying behaviour characterized by low consumer
involvement but significant perceived brand differences.
For example cooking fat. A consumer may buy Kasuku brand without
much evaluation then evaluate the brand during consumption. Next
time the consumer may buy Tily, yet another time Kimbo. Brand
switching occurs for the sake of variety rather than because of
dissatisfaction.
For such products, the marketing strategy may differ for the market
leader and for followers. The market leader will try to encourage
habitual buying behaviour by dominating shelf space, running frequent
reminder adverts e.g. Kimbo, Kasuku. Challenging firms will encourage
variety seeking by offering lower prices, special deals, and free
samples e.g. Mpishi Poa.
CONSUMER BUYING ROLES
Purchasing decisions are made by various people from the initiation of
a purchase idea to the final purchase of the product. The following are
the various roles in the consumer buying process:
1. The Initiator – This is the person who first suggest or thinks of the
idea of a particular product or service.
2. The Influencer – This is the person in the active buying process
whose views or advice influence the buying decision.
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3. The Decider – This is the person who finally makes the final
buying decisions, or any part of it. This includes the decisions on
whether to buy, when to buy, how to buy and from whom to buy.
4. The buyer – This is the person who finally makes the actual
buying. He carries out the actual and physical purchase of the
object.
5. The User – This is the person who uses the purchased product.
In marketing there is a great need to differentiate between the
customer and consumer of the product.
A marketer must know these roles in order to help him/her develop a
systematic way of evaluating and negotiating a purchase especially for
organizational markets.
THE BUYER DECISION PROCESS
A consumer goes through a series of rational steps in the buying
decision process. These include:
1. Need Recognition
At this decision stage, the buyer recognizes a problem or need.
The buyer senses a difference between his actual state and some
desired state.
A need can be triggered by internal stimuli when one of the
persons needs e.g. hunger, thirst, desire etc. rises to a level high
enough to become a drive. The need can also be triggered by
external stimuli like an advert or a sales person talking of the
product.
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The marketer at this stage should carry out market research to
understand consumer needs and looks for ways of satisfying
them.
2. Information Search
The stage in which the consumer is aroused to search for more
information. The consumer may move from a state of active
information search to a state of heightened attention where the
consumer actively seeks information from:
(a) Personal sources (family, friends, neighbors)
(b) Commercial sources (advertising, salespeople,
dealers)
(c) Public sources (mass media, consumer awareness
org.)
(d) Experimental sources (handling, examining, using
the product)
Companies have realized that people who ask others (word of
mouth sources) end in buying. It is convincing and a more cost
effective strategy.
3. Evaluation of Alternatives
At this stage, the consumer uses information to evaluate
alternative brands in the choice set. Consumers sometimes make
careful calculations and logical thinking of the product benefits
and features (complex buying behaviour). At other times,
consumers do little or no evaluation, instead they buy on impulse
and rely on intuition. Some other times consumers make buying
decisions on their own, sometimes they turn to friends, consumer
guides or salespeople.
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Marketers should study buyers to find out how they actually
evaluate brand alternatives.
4. Purchase Decisions
- At this stage, the buyer makes a decision of which brand to
buy. Two factors may influence the buyers’ decision at this
stage:
(a) Others attitude over the product i.e. view of
friends/relatives
(b) Unexpected situational changes e.g. change in
product price, change in buyers income etc.
5. Post-purchase Behaviour
- At this stage, the consumers take further action after
purchasing the product based on their satisfaction or
dissatisfaction.
- If the product falls short of expectations, the consumer is
disappointed (cognitive dissonance). If it meets
expectations, the consumer is satisfied, if it exceeds
expectations, the consumer is delighted.
- Marketers must at all times strive to satisfy the consumer
in order to retain the existing customers and get new
customers.
THE BUYING DECISION PROCESS FOR A NEW PRODUCT
A new product is a good or service or idea that is perceived by some
potential customers as new.
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New products take sometime before they are finally adopted for use by
the consumers. The process through which a new idea or product is
received and consequently accepted is referred to as the adoption
process.
Adoption Process
This is the mental process through which an individual passes from
first hearing about an innovation to final acceptance of the product.
Stages in the Adoption Process
Consumers go through five stages in the process of adopting a new
product:
(i) Awareness – The consumer gets to know of the new product,
but lacks information about it.
(ii) Interest – The consumer seeks information about the new
product.
(iii) Evaluation – On receiving additional information on the product,
the potential consumer make a consideration as to whether
trying out the new product makes sense.
(iv) Trial – The consumer makes a trial of the new product on a small
scale. This is to help in estimation of the products value.
(v) Adoption – On receiving full satisfaction after the trial, the
consumer decides to make full use and adoption of the new
product.
Adoption Rate of a New Product
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14%EarlyAdopters
34%EarlyMajority
34%LateMajority
16%Laggards
3%Innovators
According to Rogers theory of innovation, people differ greatly in their
readiness to try new products. There are five groups of people based
on their adoption rate.
(i) Innovators – Are venturesome. They try new ideas as soon as
they get to know of it irrespective of the risk.
(ii) Early adopters – They are guided by respect. They are opinion
leaders in their communities and adopt new ideas early but
carefully.
(iii) Early majority – They are rarely leaders but they adopt new ideas
before the average person.
(iv) The late majority – Are skeptical individuals. They adopt an
innovation only after a majority of people have tried it.
(v) Laggards – Are traditions bound – They are suspicious of changes
and adopt the innovation only when it has become something of
a tradition itself.
Rogers classified these grioupings as shown below:
In general, innovators and early adopters are relatively younger, better
educated, and higher income than late adopters and non adopters.
Marketers with new innovations should research the characteristics of
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innovators and early adopters and should direct marketing efforts
towards them.
INDUSTRIAL MARKETING
It is the managerial effort directed toward satisfying wants and needs
of organization through the exchange process. It also referred to as
Business to Business Marketing
Definition of industrial goods
These are goods intended for use in the making of other products or
for rendering a service in the operation of a business or institutional
enterprise. Examples of Industrial goods: steel, cement, mechanical
equipment, factory tools, office desks etc
The General Characteristics of the Business Markets
1. Has fewer buyers in number
2. Has larger buyers in terms of quantity demanded
3. Has close suppliers to buyer relationship
4. Has geographical concentration of buyers
5. Buying is derived demand dependent
6. Inelastic demand: not affected by price much
7. Fluctuating demand
8. Professional purchasing
9. Has several buying influences
10.Direct purchasing: not via intermediaries
11.Possibility of purchase reciprocity
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Who influences the buying process in organization?
(Participants)
1. The Initiator – Is the person who first identifies a need to buy within
the organization
2. The User – The organization members who use the product and
service
3. The Influencer: Those individuals inside or outside the organization
who influence the decisions process by providing information on
criteria for evaluating buying alternatives or by establishing
product specifications. Includes Technical people like Design
Engineers, Quality Control Inspectors etc.
4. The Approvers – Include individuals who agree to the buying
decision based on resource availability mostly fro the Finance
department.
5. The Decider – Those organizational members who have formal or
informal authority to actually make the buying decision e.g. the
CEO
6. The Buyer – Is an organizational member with formal authority to
select the suppliers and implement the procedures involved in
purchasing e.g. Purchasing officer
7. Gatekeepers – Are organizational members who control the flow of
information into the buying centre e.g. The Purchasing Manager,
Secretary, Receptionist etc
The Seven are also referred to as the buying centers. Buying centers
are key groups of persons within the organization who influence the
decisions on what is bought in the organization.
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1. Buying managers in industrial markets are known to assume some
common of roles in a buying process. These roles are classified into six groups.
identify and discuss them
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CUSTOMER DRIVEN MARKETING STRATEGY
Companies today recognize the fact that they cannot appeal to all
buyers in the market place in the same way. Thus firms have moved
away from mass marketing to target marketing i.e. identifying market
segments selecting one of them and developing products and
marketing programmes tailored to them. The major steps toward
designing a market driven marketing strategy include:
(i) Market Segmentation
(ii) Market Targeting
(iii) Market Positioning
(iv) Differentiation
MARKET SEGMENTATION
Market segmentation means dividing a market into distinct groups with
distinct needs, characteristics or behaviour who might require separate
products or market mixes.
A market segment is a group of customers who respond in a similar
way to a given set of marketing effort. The main strategies used in
segmenting consumer markets are; Geographic, Demographic,
behavioral and economic factors
(a) Geographic Factors
Geographic segmentation means dividing a market into different
geographical units such as nations, states, regions, cities, etc.
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Many companies in Kenya segment the country into five regions,
Nairobi, Mountain, Rift Valley, Nyanza and Coastal.
Companies do localize their products, advertising, promotion and sales
efforts to fit the needs of individual regions e.g. Daily National Nairobi
edition.
(b) Demographic Segmentation
Divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education,
religion, race, generation and nationality.
Using these variables, the market could be segmented as follows:
Based on age (children, youth, and adults), based on income (high
income, middle income, low income), and based on gender (for men,
women). Most cosmetic products are specially designed, promoted
and advertised to reinforce the feminine image e.g. Nivea.
(c) Behavioural Segmentation
Divides buyers into groups based on their knowledge, attitudes,
uses or response to a product. The segments that emerge
include:
(i) Occasion segmentation – Divides the market into groups
according to occasions when buyers get the idea to buy,
actually buy or use the purchased item e.g. coffee for cold
season.
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(ii) Benefit Segmentation – Divides the market into groups
according to the benefits that consumers seeks from the
product e.g for a laundry detergent like Omo, Sunlight, Jik,
etc. customer are segmented on the basis of benefits
sought e.g. The product gives benefits like cleaning, fabric
softening, strengthening and fresh smell.
(iii) Loyalty Status – A market can be segmented by consumer
loyalty. Consumers can be loyal to brands (Nike), stores
(Nakumatt, Wal-mart, Bata) and companies (Toyota, Ford).
Buyers can be divided according to loyalty as; completely
loyal, somewhat loyal or not loyal. A company can target
the less loyal customers and turn them to loyal customers.
(d) Economic Factors
Segments the market based on the economic strength of the
people. The market could be grouped into; upper market,
medium range and lower market. A shop in Moi Avenue could be
in the upper market, a shop on Tom Mboya Street medium range
and a shop in River Road lower market.
Importance of Segmentation
(a)It’s an acknowledgement that people are different and special
(b)It helps marketers define customer needs more precisely
(c) Helps marketers in developing market mixes and products to
meet need
(d)Helps in the allocation of resources because segments differ in
sizes
(e)Provides better evaluation of marketing performance in
segments
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Requirements for effective segmentation
1. Measurable – The size, purchasing power and profiles of
segments can be measured.
2. Accessible – The market segment can be reached and served.
E.g if your target market is school going students, the best time
to advertise is in the evenings.
3. Substantial – The market segments should be large and
profitable enough to serve e.g Toyota targets the African market
with economical cars, because the larger populations are
medium income earners.
4. Differentiable – The segments are conceptually distinguishable
and respond differently to different market mix elements and
programs e.g people in rural areas are price sensitive and averse
to highly price urnanites are less price sensitive.
5. Actionable – Effective programs can be designed for attracting
and serving the segments.
MARKET TARGETING
A target market is a set of buyers sharing common needs or
characteristics that the company decides to serve e.g. wholesalers who
stock cooking oil products could be a target market for a cooking oil
manufacturer like Bidco.
Market Targeting Strategies
After analyzing the various segments, the company must then decide
on the method to use in approaching the market. The strategies for
selecting a target market include:
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(i) Undifferentiated marketing
(ii) Differentiated marketing
(iii) Concentrated marketing
(iv) Micromarketing
Undifferentiated Marketing (Mass Marketing)
This is a situation in which a firm decides to ignore the various market
segments and go for the whole market with one type of product using
one form of marketing mix e.g. mass advertising of Equity Bank, mass
distribution of Jogoo maize flour, mass promotional campaigns of Coca-
Cola.
The main advantage of this strategy is that it is a cost saving approach
The main undoing of this strategy includes:
Makes a firm unimaginative Makes a firm vulnerable to competition
Differentiated Marketing (Segmented Marketing)
Using this strategy, a firm decides to target several market segments
and designs separated offers or market mix for each e.g. Toyota has
differentiated markets as follows:
(i) Toyota Prado/Lexus – For consumers who care about size,
strength, safety and not price.
(ii) Toyota Corolla – For consumers who care about fuel consumption
and are price sensitive.
The main advantage of this strategy is that may yield financial success with economies of scale in production and marketing.
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The main disadvantage of this strategy is that it is very costly strategy.
The high cost originates from; Product design cost, promotion costs for
different markets, inventory cost for various markets, research cost
amongst others.
Concentrated Marketing (Niche Marketing)
This is a strategy where a firm selects a market niche and concentrates
on it. It involves offering one product to one specific group.
Is especially appealing when company resources are limited. Instead
of going after small share of large markets, the firm goes after a large
share of one or a few segments or niches e.g. KCB has branches all
over the country, I & M Bank, has branches only in cities i.e. Nairobi,
Kisumu, Mombasa. I & M is applying niche marketing.
Micromarketing (One to One Marketing)
Micromarketing is the practice of tailoring products and marketing
programmes to suit the tastes of specific individuals and locations. It is
broadly divided into local marketing and individual marketing.
Local marketing is tailoring brands and promotions to the needs and
wants of local customer groups i.e. cities, neighborhoods or specific
stores
Individual marketing is the tailoring of products and marketing
programs to the needs and preferences of individual, customers also
called one to one marketing.
DIFFERENTIATION AND POSITIONING
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Product positioning means the way the product is defined by
consumers on important attributes i.e. the place the product occupies
in the mind of the consumers relative to competitors products. One
positioning expert once commented that “products are created in the
factory, but brands are created in the mind”
Toyota 110 is positioned as an economical car, Volvo positions on
safety and Mercedes is a luxuriuorise car, Hummer positioned on a
very high performance with a price tag to match.
Examples of positioning slogans:
(a)Safaricom: The better option
(b)Nakumatt: You need it we’ve got it
(c) Nation newspaper: The Truth
(d)Mash : We lead the leaders
(e)Kenya Airways: The pride of Africa
(f) Lexus: The passionate pursuit of excellence
(g)Mercedes: In a perfect world, everyone would drive a Mercedes
The Nature of Positioning
Positioning assumes that consumers compare products along
important features. To simplify the buying process, consumers
organize companies, products and services into categories and
position them in their minds
Positioning must clearly indicate these features lest it fails. The
marketer must position the market offer so that it gives them the
greatest possible advantage
Marketers must come up with excellent positioning maps. A
positioning map is an effort of the marketer to show consumer
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perception of their brands versus competing products on
important dimensions.
Positioning must be built around a differentiation gimmick
Marketing mix is used to facilitate positioning
Poor Positioning May Lead to:
1. Undesirable positioning: head on with stronger competition
2. Undesirable position: Position without demand from customers
3. Fuzzy positioning: Nobody knows what the distinctive feature
really is.
4. No positioning: Nobody has heard of the positioning
Bases for Positioning a Product
1. Benefits2. Price and quality combination3. Uses and application4. Product user position5. Product class position6. Positioning against Competitor (comparative)7. Origin positioning
Choosing a Differentiation and Positioning StrategyPositioning task takes four steps:(1) Identifying a set of possible competitive advantages(2) Choosing the right competitive advantages(3) Selecting an overall positioning strategy(4) Developing a Position Statement
(1) Identifying Possible Competitive Advantage
- A competitive advantage is an advantage over competitors
gained by offering consumers greater value, either through
lower prices or by providing more benefits that justify
higher prices.
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- A company’s marketing offer must be differentiated from
those of competitors along the lines of product attributes,
services quality, channels, people or physical evidence.
- The company must constantly compare the customer
satisfaction of its products, prices, channels and promotion
with those of chosen competitors.
(2) Choosing the Right Competitive Advantage
Sometimes a company realizes that it has several advantages
compared to competitors. It then has to choose how many
differences to promote and which ones.
HOW MANY DIFFERENCES TO PROMOTE – Often companies
choose one unique feature and insist that they are number
one in that area. But a company can also promote a
number of differences.
WHICH DIFFERENCES TO PROMOTE – Not all differences are
worth promoting. A difference is worth establishing to the
extent that it satisfies the following criteria: Important,
Distinctive, Superior, Communicable, preemptive (robust),
affordable and profitable.
(3) Selecting an overall positioning strategy
The full positioning of a brand is called value positioning.
Value positioning tells the customer everything about the
benefits they will get from a brand. There are four approaches
to value positioning i.e. More for more(pay more get more
value), more for same, the same for less, less for much less
and more for less.
(3) Developing a Position Statement
- A positioning statement summarizes company or brand
positioning.
- A good positioning statement should follow this form:
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To (target segment and need) our (customers), our (brand)
is (concept) the best in the market (point of difference).
e.g to all trendy men, Sir Henrys Suits offers the latest
designer suits, specially tailored to fit the modern fashion
and a look of elegance. Non compares with us in men’s
wear.
“Sir Henrys, the best a man can get.”
Challenges of Positioning
(a)Over positioning
(b)Under positioning
(c) Confused positioning
(d)Doubtful positioning: Buyers cannot believe
Tools to Facilitate Positioning1. Advertising
2. Pricing
3. Personnel
4. Product features
5. Branding
6. Slogan
7. Service environment
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MARKETING INFORMATION SYSTEMS AND MARKETING
RESEARCH
Marketing Information System (MIS)
Two definitions of a marketing information system (MIS) are:
(a) “A structured, interacting complex of persons, machines and
procedures designed to generate an orderly flow of pertinent
information, collected from both intra- and extra-firm sources, for
use as the basis for decision making in specified responsibility
areas of marketing management”.
(b) A system that “consists of people, equipment, and procedures to
gather, sort, analyse, evaluate and distribute needed, timely and
accurate information to marketing decision-makers”. (Phillip
Kotler).
These definitions imply that MIS is a system that is carefully designed
to process and avail pertinent and timely information to marketing-
decision makers.
The Components of MIS
A firm's marketing information system usually consists of four main
components: Internal Records System, Marketing Intelligence System,
Marketing Research System, and Marketing Decision Support System.
(a) Internal Records System (Internal Database)
The most basic information system used by marketing managers
is the "internal records system" or internal database". Internal
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records information" is information gathered from sources within
the organisation to evaluate marketing performance and to
detect marketing problems and opportunities. This information
may be largely derived from accounting database and may
include reports on sales, prices, accounts opening and closures,
customers' financial information and so on.
(b) Marketing Intelligence System (External Database)
While the internal records system supplies marketing managers
with "results data", the marketing intelligence system supplies
managers with "happenings data". Marketing intelligence
information is everyday information about developments in the
marketing environment that helps marketing managers prepare
and adjust marketing plans.
In many respects the marketing intelligence system can be
regarded as the "external database" of MIS because it covers all
types of information collected from external sources. It may take
the form of press cuttings, trade journals, discussions and
information from competing organizations or subscriptions to
some specified external database.
(c) Marketing Research System
The marketing research system is that component of the MIS
which gathers information by means of deliberate planned
focused studies on specific marketing problems facing the
organisation. Besides information from internal and marketing
intelligence sources, marketing managers often need focused
studies of specific problems and opportunities. For example, they
may need a market survey, a product-preference test, a sales
forecast by region or an advertising-effectiveness study.
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Marketing research information is used to identify and define
marketing opportunities and problems, to generate, refine, and
evaluate marketing actions; to monitor marketing performance;
and to improve understanding of the marketing process.
(d) Marketing Decision Support System
The marketing decision support system consists of a series of
analytical techniques which enable marketing managers to
process, interpret and make full use of information provided by
the other three sources. Various statistical tools, decision
models, systems and the use of microcomputer software and
high level programming may be integrated in the marketing
decision support system depending on the marketing decision-
makers information needs. The most commonly used decision
support systems include:
1. Time series sales models
2. Linear Programming
3. Analysis of variance (ANOVA) models
4. Regression and correlation models
The Role of MIS
In order to carry out their analysis, planning, and implementation and
control responsibilities, marketing managers need information about
developments in the marketing environment. The role of MIS is to:
a) Assess the manager's information needs;
b) Develop the needed information; and
c) Distribute the information in a timely fashion to the marketing
managers.
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The Marketing Research System
(a) Marketing Research Versus Market Research
According to Kotler (2001), marketing research is the systematic
design, collection, analysis, and reporting of data and findings
relevant to a specific marketing situation facing the company.
The American Marketing Association defines marketing research
as the systematic gathering, recording and analyzing of data
about problems relating to the marketing of goods and services.
Marketing research should not be confused with market
research, which refers to finding out information about the
market for a particular product or service.
The fundamental differences between marketing research and
market research are that:
Market research is a formal procedure for researching into
an identified market. It studies a market for a particular
product or service. The scope of market research activities
is limited to an identified "market" (or group of customers).
Marketing research is a formal procedure for researching
the entire marketing activity of an organisation.
Thus, market research is only one of the elements of marketing
research. Marketing research is broader than market research
and includes not only market research but also covers a wide
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variety of variables (pricing, distribution, advertising, etc) that
can affect the marketing of goods and services.
(b) Marketing Research System Versus Marketing
Information System (MIS)
Many people often confuse between the marketing research
system and MIS. Although the two systems share a common
purpose, i.e. providing information for marketing decision-
makers, some fine lines of contrast exist. These include the
following:
The focus of marketing research is on the handling of
external information while MIS handles both internal and
external information.
Marketing research is concerned with solving problems
while MIS is concerned with preventing as well as solving
problems.
Marketing research tends to operate on an ad hoc and
project-to project basis while MIS is a continuous process
especially in connection to the monitoring of the external
environment.
Marketing research tends to concentrate on past
information while MIS tends to be future oriented.
MIS, is often computer-based while a marketing research
system is not necessarily computerized.
A marketing research system is just one component of MIS
while MIS consists of other components (i.e. internal
records, marketing intelligence and marketing decision
support systems) besides marketing research.
(c) Importance of Marketing Research
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The importance of Marketing and Market research arise from the
fact that they provide information which can be used by
marketing decision makers. If the information provided is
accurate, reliable and timely, its use should reduce the risk
involved in decision making and thus increase the chances of
making the right choice as well as the opportunity for greater
monitoring and control of marketing operations.
Marketing research can help an organisation’s marketing
decision marker with the following decisions or questions:
What is the size of the market for a particular organisation
services?
Who are the organisation’s customers?
What are the organizations’ buying motives?
What are the trends in the market?
Is the organisation’s advertising well received?
Are customers satisfied with the organisation’s products?
What are the most attractive/least attractive features of
the organisation’s products compared to competitor's
products?
What is the size of the organisation’s market share?
When should an organisation launch a new product?
Why has the organisation lost customers to competitors?
etc.
The Marketing Research Process:
The six main stages in the research process are as follows:
1. Defining the problem
2. Defining the research objectives
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3. Developing the research design
4. Collecting the data
5. Analysing the data and
6. Presenting the findings
1. Defining the Problem
Defining the problem and the research objectives is the first and most
important step in the research process. A research problem is the
question or issue to be studied. It defines the focus of the study and
the direction of the research effort and resources.
Why must Research Problem be defined appropriately?
1. Because Research problem is the baseline foundation for any
research project.
2. No problem, No Research!
3. Wrong Problem, Wrong Research!
4. Unless the problem is well defined, the cost of information gathering
may well exceed the value of the findings
An old adage says, "A problem well defined is a problem half solved".
Defining the problem is often the hardest step in the research process.
A problem should not be defined too broadly nor too narrowly. If
management fails to define the problem clearly exploratory research
may be required to help bring the problem into focus.
2. Research Objectives
When the problem has been carefully defined, the marketing manager
and researcher must set the research objectives, that is, the outputs or
end results of the research effort.
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3. Developing the Research Plan (Research Design)
Research design is the framework or plan for the study used as a guide
in collecting and analysing data.
There are three types of research design that researchers often use:
i) Exploratory Research Design – Involves gathering
preliminary data to shed light on the nature of the problem
and possibly suggest some hypotheses or new ideas.
ii) Descriptive Research Design - Involves describing
certain variables of interest to the researcher. This is a
research design in which the major emphasis is on
determining the frequency with which something occurs or
the extent to which two variables co-vary
iii) Causal Research Design - Involves testing hypotheses
about cause and effect relationships e.g. does X cause Y?
Managers often start with explanatory research and latter follow with
descriptive or causal research. The research plan calls for decisions on
the data sources, research approaches, research instruments,
sampling plan and contact methods.
4. Data Collection
Data Sources
To meet the manager's information needs the research plan can call
for gathering secondary data, primary data, or both.
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Secondary data consist of information that already exists
somewhere having been collected for another purpose. The
internal sources of secondary data for an organisation
include the profit loss statements, balance sheets, sales
figures, sales-call reports, invoices, inventory records, and
prior research reports. External sources of secondary data
include government publications, periodicals and books,
and commercial data.
Primary data consist of original information gathered for
the specific purpose at hand. The normal source of primary
data is through direct interviewing of individuals or groups
of people.
Researchers usually start their investigation by reviewing literature on
secondary data to see whether their problem can be partly or wholly
solved without collecting costly primary data. Secondary data offer the
advantages of lower cost and quicker availability. On the other hand,
the data needed by the researcher might not exist, or the existing data
might be outdated, inaccurate, incomplete, or unreliable. In this case,
the researcher will have to collect primary data at greater cost and
longer delay but probably with more relevance and accuracy.
Research Approaches
Primary data can be collected in four broad ways: observation, focus
group, surveys and experiments.
Observational Research - is the gathering of primary data by
observing relevant people, actions and situations. It is best suited for
exploratory research purposes.
Focus - Group Research - is the gathering of primary data through
personal interviewing of a group that consist of six to ten people
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gathered for a few hours with a trained interviewer to talk about a
product, services or organization.
Focus-group research is a useful exploratory step to take before
designing a large - scale survey. It yields insights into consumer
perceptions, attitudes, and satisfaction that help define the issues to
be researched more formally. However, the interviewer needs
objectivity, knowledge of the subject matter and industry, and
knowledge of group dynamics and consumer behaviour otherwise the
results can be misleading.
Survey Research - the gathering of primary data by asking people
questions about their knowledge, attitudes, preferences, and buying
behaviour. Survey research stands midway between observational and
focus-group research, on the one hand, and experimental research on
the other hand.
Experimental Research - the gathering of primary data by selecting
matched groups of subjects, subjecting them to different treatments,
controlling extraneous variables, and checking whether observed
differences are statistically significant.
Experimental research is the most scientifically valid research. To the
extent that extraneous factors are eliminated or controlled, the
observed effects can be related to the variations in the stimuli. The
purpose of experimental research is to capture cause-and-effect
relationships by eliminating competing explanations of the observed
findings.
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Application of Research Approaches
Generally speaking, observation and focus groups are best suited for
exploratory research, surveys are best suited for descriptive research,
and experiments are best suited for causal research.
Research Instruments
Marketing researchers have a choice of two main research instruments
in collecting primary data: the questionnaire and mechanical devices.
1. Questionnaires: This is by far the most common instrument in
collecting primary data. Broadly speaking a questionnaire
consists of a set of questions presented to respondents for their
answers. The questionnaire is very flexible in that there are
many ways to ask questions. Questionnaires must be carefully
designed and tested before they can be used on a large scale.
2. Mechanical devices: These are less frequently used in
marketing research e.g. use of supermarket scanners and
surveillance cameras.
Sampling Plans
The marketing researcher must design a sampling plan which calls for
three decisions: Target population, sample size and sampling
procedure:
Target population. This answers, who is to be surveyed?
The marketing research must define the target population
that will be sampled.
Sample Size: This answers, how many people should be
surveyed?
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Large samples give more reliable results than small
samples. A sample is a segment of the population selected
for marketing research to represent the populations as a
whole.
Sampling Procedure: This answers, how should the
respondents be chosen? To obtain a representative
sample, probability sampling is usually used.
Contact Methods
This answers "How the subject should be contacted?" The
choices are mail, telephone, or personal interviews.
The mail questionnaire is the best way to reach
individuals who would not give personal interviews or
whose responses might be biased or distorted by the
interviews. Mail questionnaires require simple and clearly
worded questions, and the response rate is usually low
and/or slow.
Telephone interviewing is the best method for
gathering information quickly; the interviewer is also able
to clarify questions if they are not understood. The
response rate is typically higher than in the case of mailed
questionnaires. However, only people with telephones can
be interviewed and interviews have to be short and not too
personal.
Personal interviewing is the most versatile of the
three methods. It provides additional observations about
the respondent, such as dress and body language. Its main
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drawbacks are that it is the most expensive method and
requires more administrative planning and supervision. It is
also subject to interviewer bias or distortion.
(c) Collection of Data
After developing the research plan the researcher must collect
the data. This will involve:
i) Administering the questionnaire;
ii) Conducting in-depth interviews or group discussions with
the selected sample;
iii) Conducting discreet observations so that the targets do not
realize they are being observed and hence their behaviour;
iv) Conducting experiments.
(d) Analyzing the Data
The next step in the marketing research process is to extract
pertinent findings from the data. Depending on the type of
collection methods, the results will be analyzed accordingly:
Questionnaires will have to be pre-coded or input into a
computer by the interviewer.
Answers to in-depth interviews would be analysed by
identifying key statements from the interviews, and
common characteristics and attitudes identified.
The researcher will tabulate the data and develop one-way
and two-way frequency distributions.
Averages and measures of dispersion will be computed for
the major variables, etc.
5) Analyzing the Data
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The questionnaire is checked for completeness, comprehensibility and
legibility. The questionnaire is coded and transcribed. Once the data is
input in a computer it is then analyzed using computer spreadsheet
packages like excel , SPSS etc.
6) Presentation of the Findings
Involves the following two:-
a) Interpretation and collection of the results
b) Presentation of results
The information generated from the computer is interpreted often
using frequencies and percentages. The otherwise separate
information is collected to form one or a few meaningful points.
After interpretation the service researcher comes up with
recommendations to help solve the problem.
The researcher then writes a final report about the research findings. A
good research report must have:
a) A title page
b) Content page
c) Executive summary
d) An introduction
e) Terms of reference (objectives of the research)
f) The methodology of research
g) The main findings
h) Conclusions and recommendations
Oral Presentation
If the researcher is required to make an oral presentation of the study
the researcher should take into account the following factors:
a) The original research problem and objectives
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b) The extent to which the problem has been solved
c) The people present (i.e. key people)
d) The available time
e) The use of visual aids
f) Avoid use of jargon and technical language
g) Make presentation enjoyable and entertaining
h) Involve audience (i.e. ask for comments)
i) Put weighty focus on results and recommendations (because this
is what concerns the senior executives most).
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THE PRODUCT
NEW PRODUCT DEVELOPMENT STRATEGY
- A new product can be defined as anything that can be offered to
a market for attention, acquisition, use or consumption and that
might satisfy a want or need.
- The definition of a new product encompasses; original products,
product improvement, product modifications and new brands
that the firm develops through its own research and
development efforts.
- The new product development process takes the following eight
steps:
1. Idea generation
2. Idea Screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization
1. Idea Generation
- A company has to brainstorm and generate many ideas in
order to find a few good ones. There are two main sources
of new product ideas i.e. internal sources and external
sources.
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- Internal sources include a company top management,
manufacturing staff, the sales people and the research and
development departments.
- External sources include customers, competitors,
distributors, suppliers etc.
2. Idea Screening
- Involves filtering new product ideas in order to spot good
ideas and drop poor ones as soon as possible. Ideas are
subjected to selection criteria that include affordability,
acceptability, and reversibility.
3. Concept Development and Testing
- An attractive idea must be developed into a product
concept. A product concept is a detailed version of the
new product idea stated in meaningful consumer terms i.e.
presenting the consumer with descriptions and drawings to
get their reactions.
- Concept testing involves testing new product ideas with
groups of target consumers e.g. using questionnaire to ask
customers of their opinion of a new product.
4. Marketing Strategy Development
- Involves designing an initial marketing strategy for a new
product based on the product concept.
- The marketing strategy statement consist of three parts:
(a)Target market, market segment, the product
positioning
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(b)Market mix i.e. product, pricing, distribution and
promotion.
(c) Projecting possible viability of the product.
5. Business Analysis
- Business analysis involves a review of the sales, costs and
profit projections for a new product to find out whether
they satisfy the company’s objectives.
- If they do, the product moves to the product development
stage.
- To estimate sales, the company might study the sales
history of similar products and conduct surveys of market
opinion.
6. Product Development
- Involves the development of the product concept into a
physical product in order to ensure that the product idea
can be turned into a workable product.
- At this stage, the research and development department
develops a sample or prototype of the product.
Development of a successful prototype may go into weeks,
months or years.
7. Test Marketing
- This is a stage in which the product and marketing
program are tested in a more realistic market setting.
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- At this stage the company tests the entire marketing
program i.e. positioning strategy, advertising, distribution,
pricing, branding and packaging. Three approaches to test
market:
(a) Standard test markets – Is where a company selects a city
or town, conducts a full marketing campaign in this town
and uses shop audits, consumer and distribution surveys to
gauge product performance. The results are used to
forecast national sales and profits discover problems and
fine tune the marketing programme.
(b) Controlled Test markets – A group of customers are
selected, they are directed to participating shops. Within
the shops the company researchers have control factors
such as shelf placement, price packaging and promotions
for the product being tested. Behaviourscan is used to
track the consumer behaviour for new products from a
television set to a checkout counter. Detailed scanner
information on each consumer purchases is fed into a
central computer where it is combined with the consumer
demographic and TV viewing information, and analysis
done and conclusions drawn based on a daily or weekly
report.
(c) Simulated test markets – The Company shows
advertisements and promotions for a variety of products,
including the new product being tested to a sample of
consumers. It then gives the consumers a small amount of
money and invites them to a real or laboratory store where
they are allowed to buy anything using the money. The
researchers note how many consumers will buy the new
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product or competing brands. The researcher then asks the
consumers the reason for purchase or non purchase. Some
weeks later, they interview the consumers by phone to
determine product attitude, usage, satisfaction and
repurchase intentions.
8. Commercialization
- Test marketing gives management the information needed
to make a final decision about whether to launch the new
product or not.
- If the company decides to go ahead then it commercializes
the product. Commercialization is the introduction of a
new product into the market.
- The company launching a new product must first decide
on:
(i) Introduction timing – Depending on economic trends.
(ii) Where to launch the product – In a single location,
region, the whole nation or internationally. act
PRODUCT LIFE CYCLE
Management of every organisation knows that each product has a life
cycle that starts at conception of product idea and ends at the death of
a product. The company therefore aims at maximizing its profits before
the products useful life ends.
Assumptions of the PLC
i) A product has a limited life
ii) Product sales pass through distinct stages each posing
different challenges to the seller
iii) Product profit rise and fall at different stages
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Product Development stage
Introduction Growth Maturity Decline
Time
Profits curve
Innovators Middle majority
Early Laggards
iv) Each stage requires different financial, marketing,
manufacturing, purchasing and personnel strategies.
Stages in the Life Cycle
1. Product development CONCEPTION
2. Introduction BORN
3. Growth GROWTH
4. Maturity MATURITY
5. Decline DEATH
Profits & Losses
PLC curve
The diagram above shows the sales and profits over the products life
from inception to demise.
NB: The PLC shape presented above is a general shape but different
products will have different shapes.
MARKETING STRATEGIES AT THE VARIOUS STAGES OF THE PLC
1. INTRODUCTION STAGE
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Product development begins when the company finds and develops a
new product idea. During product development sales are zero and the
company’s investment costs mount. The introduction stage starts
when the new product is first launched.
In this stage, profits are negative or low because of low sales and high
distribution and promotional expenses.
A company that is pioneering a market must choose a launch strategy
that is consistent with the intended production positioning.
Firms therefore focus their selling to those buyers who are most ready
to buy and not on maximizing profits. These groups of first time
buyers are also called innovators.
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Strategies at the Introductory StageThere are four possible strategies at this stage and these are displayed
in the table below.
PROMOTION
(i) Rapid Skimming
An organisation can decide to employ rapid skimming if;
Large Part of the market is unaware of the product Market willing to buy at high price Competition is present Market is large
For Example Safaricom mobile phone service provider
(ii) Slow Skimming
An organisation may decide to employ slow skimming if;
Market is relatively limited in size Large part of the market is unaware of the product Market is willing to pay high prices A little threat in competition
(iii) Rapid Penetration
An organisation may decide to employ rapid penetration if; Market is large in size Market is relatively unaware of the product Market is price sensitive Potential competition exists For Example EABL and Alvaro(iv) Slow Penetration
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SLOW PENETRATION
Low Profile Strategy
RAPID PENETRATION
Pre-emptive Penetration Strategy
RAPID SKIMMING
High Profile Strategy
PRICE
SLOW SKIMMING
Selective Penetration Strategy
HIGH LOW
HIGH
LOW
An organisation may decide to employ slow penetration if;
Market is large Market is aware of the product Market is price sensitive Established competitors exist
For Example entry of Orange mobile phone service providers into Kenya
2. GROWTH STAGE
- In the growth stage, sales climb quickly. The early adopters start
to buy the product especially after hearing favourable word of
mouth about the product.
- The increasing profits soon attract new competitors who join the
market in the hope of gaining from this opportunity.
- The increase in competitors leads to an increase in the number
of distribution outlets and sales jump up.
- Educating the market remains key to marketers, while keeping
watch of competition.
- Profits increase as promotions are spread, while per unit cost
falls as indicated by the first growing profit curves.
Strategies here include:
i) The company improves product quality and adds new
product features to beat competition.
ii) The company opens new distribution channels.
iii) It shifts advertising from building product awareness to
building product conviction and loyalty.
iv) Prices may be lowered to attract new buyers or as a means
of creating competitive advantage.
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- A sustained effort on product improvement, promotion and
distribution may lead the company to capturing a dominant
position.
3. MATURITY STAGE
- This is the stage in the PLC in which sales growth slows or levels
off. This stage usually lasts longer than the growth stage.
- Most products die at this stage, because competition is greatest
at this point. It is divided into three:
a) Growth Maturity: This is the point where the growth rate
starts to decline
though some laggard buyers continue to come
in.
b) Stable Maturity: A stage where sales level off because the
market is
saturated.
c) Decaying Maturity: A stage where there is absolute decline
of sales because customers are seeking substitute products.
Competitors begin reducing prices, increase their advertising
and sales promotion and increase their research and
development budgets to find better versions of the product.
This eventually leads to a drop in profits.
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Strategies here include:
i) In modifying the market,
The company tries to increase the consumption of the
current segments. It also looks for ways of increasing
usage among present customers. The company can also
move into a new market segment.
ii) In modifying the product, quality, features, styles and
designs are upgraded to inspire more consumers to use it.
Alternatively, the company might add new features that
expand the products usefulness, safety or convenience.
iii) In modifying the promotional strategy, the company’s
objective will be to improve sales. It can cut prices to
attract new users and lure competitor’s customers. It can
launch a better advertising campaign or use aggressive
sales promotions, trade deals, price offs and contests.
iv) In terms of pricing, the company can maintain current
prices as long as they are competitive. The company might
reduce prices if doing so gives them a competitive
advantage.
4. DECLINE STAGE
- This is the PLC stage in which a products sales decline. Sales
may plunge to zero or they may drop to low levels where they
continue for many years.
- As sales decline, many competitors exit the market, drop smaller
market segments or cut off promotional budgets and reduce
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their prices further.
- A weak product can be costly to maintain. It takes a lot of
management time, it requires advertising and sales force
attention.
- Management therefore needs to identify the aging products and
decide whether to maintain, harvest or drop each of them.
Strategies here include:
i) Management may decide to maintain the product in the hope that
competitors will exit the industry, leaving the company with an
advantage.
ii) Harvest the declining product - which means reducing various
costs (e.g advertising sales force, research and development etc.)
and hope that sales hold up. If successful, harvesting increases the
company’s profits in the short run.
iii) Management may decide to drop the product. It can sell it to
another firm or simply liquidate it at salvage value.
iv) Management may decide to divest. Divesting strategies enables
management to do away with a product whose performance is
below expectation. Two approaches can be used;
a) Concentric diversification - Diversification is the creation of
products similar to the one existing or creating products
completely different from existing ones but which may appeal
to existing and new customers e.g. Coca cola deciding to
produce and sell Dasani water
b) Conglomerate diversification - Conglomerate diversification is
the involvement in production of products or provision of
services that are not related with the current products and
services e.g. EABL deciding to produce Alvaro.
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PRODUCT DECISIONS
A product is anything that can be offered to satisfy human needs.
Products are broadly divided into two depending on consumers who
use them:
(a) Consumer products
(b) Industrial products
(a) Consumer Products
- Are products bought by final consumers for personal use.
- Based on how consumers buy them, consumer products
are further classified as follows:
(i) Convenience products – are consumer products and
services that consumers buy frequently, immediately and
with little or no comparison and buying effort e.g. salt,
bread, soap etc.
(ii) Shopping products – are less frequently purchased
consumer products that customers compare carefully on
suitability, quality, price and style e.g. furniture, cars,
cooker, fridge.
(iii) Specialty products – Are consumer products and services
with unique characteristics or brand identification for which
a significant group of buyers is willing to make a special
purchase effort e.g. photographic equipment, designer
clothes, specific brands of cars (Hummer, Lexus).
(iv) Unsought products – Are consumer products that the
consumer either does not know about or knows about but
does not think of buying e.g. cemetery plots, life insurance.
(b) Industrial Products
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- Are those purchased for further processing or for use in
conducting a business.
- There are three groups of industrial products i.e.
(i) Materials and parts – Include raw materials and
manufactured materials and parts e.g wheat, cotton, crude
petroleum, iron ore, rubber, cement price and service are
the major marketing factors.
(ii) Capital items – Are industrial products that aide the buyer’s
production activities e.g factories, offices, generators,
forklift trucks etc.
(iii) Supplies and services – Supplies include stationery,
lubricants, brooms etc. They are purchased with little
effort.
PRODUCT DECISIONS
Marketers indulge in a number of product decisions the many of which
include
A. Product Attributes
Product attributes include quality, features and design.
Marketers make decisions about product attributes as follows:
1. Product quality – Refers to the ability of a product to
perform its functions as expected by the consumer or to
satisfy consumer needs.
2. Product features – Features are the external appearances
of a product that distinguishes it from other similar
products. Companies often conduct consumer surveys to
understand what consumers want and design features that
meet consumer needs. Common Products features include;
Packaging, Colour, Options, Sizes, Image amongst others.
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3. Product style and design – Style describes the appearance
of a product. A good design is that which contributes to
products usefulness as well as to its looks.
B. Product Line
- A product line is a group of products that are closely
related because they function in a similar manner, are sold
to the same customer groups, are marketed through the
same outlets or fall within a given price range.
Example of product lines:
(a) Toyota: Toyota Corolla :EE 90,100,110,120
Toyota Rav: Rav 4, Rav J
(b) EABL: Tusker, Guinness, Smirnoff, Alvaro
(c) Coca-cola; Fanta, Coke, Sprite, Bitter Lemon
- The major product line decisions include:
1. Product line length – Refers to the number of items in a
product line. The line is too short if the manager can
increase profits by adding items. The line is too long if the
manager can increase profits by dropping items e.g. by
adding Alvaro to their products EABL lengthened their line
2. Product line filling – Involves adding more items within the
present range of the line. This can be done for any of the
following reasons, to increase profits, satisfy dealers, or to
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utilize excess capacity e.g. Fanta orange, Fanta black
current and Fanta citrus.
3. Product line stretching – Occurs when a company
lengthens its product line beyond its current range. The
company can stretch downward (to penetrate a new
market currently held by competitors) or it may stretch
upward to add prestige to their current products e.g
Barclays Prestige Account.
C. Product Mix Decisions
A product mix (or product assortment) is the set of all product lines
and items that a particular seller offers for sale for example EABL
produces a product mix made up of Tusker, White Cup, Guinness,
Alvaro, Smirnoff amongst others. Toyota product mix include Toyota
Corolla, Toyota Caldina, Toyota Nadina. Toyota Prado, Toyota RAV 4,
Toyota Camry etc.
A product mix has four important decisions, product mix width, product
mix length, product mix depth and product mix consistency.
NB: 1. The product line decisions discussed above applies to the
product mix
2. The fewer the number of lines and product mixes, the better
for each company.
D) PRODUCT BRANDING
A brand is a name, term, sign, symbol or design that identifies the
maker or seller of a product or service and differentiates it from the
competitor’s products.
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Description of Brands
Brand name: Utter able or verbalized part of the brand i.e. Toyota, Kimbo, Imperial, Fanta, Safari Boot, Nike, Firestone.
Brand mark: Part of the brand that can only be recognized i.e. Merc Symbol,
Barclay eagle etc.
Trademark: Part of the brand given a legal protection. Trademark® is an exclusive right to use a brand or part of a brand
Copyright:This is the exclusive right to reproduce, publish and sell.
Brand equity: Monetary value of a brand. High brand loyalty builds higher brand
Equity: Coca Cola has brand equity of US$ 36 billion
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Significance of Branding to Consumers
(i) Identify the products they need faster.
(ii) Brands tell consumers something about quality. Customers of a
particular brand expect the same features, benefits and quality
each time they buy.
(iii) It enhances a sale of a new product(iv) It also enables profitable pricing from time to time
Significance of Branding to Sellers
(i) The brand name provides a basis of selling special qualities.
(ii) Legal protection of brands from copying by competition
(iii) Helps sellers segment markets e.g Toyota Lexus for the
actualizes, Toyota Prado for the achievers, Toyota Corolla for the
strivers.
Characteristics of a “good” brand name
(i) Easy to pronounce, recognise and to remember
(ii) Short
(iii) Distinctive, unique
(iv) Describes the product and product use
(v) Describes product benefits
(vi) Has a positive connotation
(vii) Reinforces the product image
(viii) Legally protectable locally and internationally
E) PRODUCT PACKAGING
- Packaging is the activity of designing and producing the
container or wrapper for a product. Traditionally, the primary
function of the package was to contain and protect the product.
Today packaging performs numerous functions including
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attracting, attention, describing the products and making the
sale.
- A good package is one which is in line with the packaging
concept (should offer protection, introduce a new dispensing
method, or suggest product qualities. A good package further
addresses issues such as size, shape, materials, colour, text and
brand mark.
There are Three Levels of Packaging
1. Primary package - This is the product’s immediate container i.e. the
tube containing the after shave or tooth paste.
2. Secondary package - This is the material that covers or protects the
primary package and is discarded when the product is just about to
be used.
3. The shipping package - This is the packaging necessary for storage,
identification and transportation.
PRODUCT LABELING
- Labels may range from simple tags attached to product to
complex graphics that are part of the package.
- Labeling performs the following functions:
(i) Identifies the product or brand
(ii) States the price
(iii) Promotes the product – Attractive graphics
(iv) Describes the product – Manufacturer, where made, when made,
content, direction of use, safety etc.
PRODUCT WARRANTIES
Product warranty protect the buyer and gives essential product information
Expressed warrantees are written guarantees Implied Warranty is an unwritten guarantee that an item is fit for its
purpose
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UNIVERSAL PRODUCT CODES
Abbreviated as UPCs and was introduced in 1974 They are numeral codes appearing as thick and thin vertical lines They are used in high volume outlets and supermarkets to ease
identification of goods Lines are computerised to match codes with brand name, size and
price
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PRICING PRODUCTS AND PRICING DECISIONS
Price is the amount of money charged for a product or service by the
seller. Price is the only element of the marketing mix that produces
revenue, all the other elements are cost factors.
Throughout most history, prices were set by negotiation between
buyers and sellers. This is also called dynamic pricing – charging
different prices to different customers. Today most prices are fixed
prices i.e. one price is set for all buyers.
Price goes by many names a few of which include:
a) Rent for apartmentb) Fees for tuitionc) Fare for taxid) Rates for utilitiese) Interest for money borrowedf) Toll for use of drivewayg) Salaries for white collar jobsh) Wages for blue collar jobsi) Commission for sales persons services
PRICING STRATEGIES
The price strategies often change as a product passes through different stages in the PLC. For new products, companies normally face an uphill task while coming up with the price for the first time. Two of the commonly adopted strategies include:
i) Market skimming strategiesii) Market penetration strategies
Market Skimming Strategies
Market skimming pricing is the setting of a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay a high price. The company gets few customers but more profitable
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sales. An example companies that practice market skimming strategies are: Nokia and Sony.
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Market skimming strategies are workable only if the following conditions hold:
i) The product quality and image must support its higher price.ii) Enough buyers must want the product at that price.iii) The cost of producing the few units must not exceed the target
revenue iv) Competitors should not be able to enter the market easily and
undercut the high price
Market Penetration Strategies
Market penetration pricing is the setting of a low price for a new
product in order to attract a large number of buyers and a large
market share. Example of firms that have ever practiced market
penetration include Coca-Cola and Dell.
The low price is geared at penetrating the market quickly and deeply.
The high sales volume results in falling costs allowing the company to
cut its price even further.
Several conditions must be met for this strategy to work including the
following:
i) The market must be highly price sensitive so that a low price
generates more market growth
ii) The production and distribution costs must fall as sales volume
increases
iii) The low price must help keep away competition.
Six Step Procedure for Price Setting
1) Selecting price objective
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2) Determining demand3) Estimating costs4) Analyzing competitors price5) Selecting price method6) Selecting the final price
FACTORS TO CONSIDER WHEN SETTING PRICES
There are two factors to consider in pricing:
(i) Internal factors
(ii) External factors
INTERNAL FACTORS
Internal factors include company’s marketing objectives, marketing
mix strategy, costs and organizational consideration.
1. Marketing Objectives
The company’s marketing goal could be survival, current profit
maximization (Maximize market skimming), market share
leadership, or product quality leadership.
Companies set survival as their objective if they are troubled by
too heavy competition, and changing consumer needs to keep a
plant going in this case, the company sets low prices hoping to
increase demand.
A company with current profit maximization as is objective, will
choose a high price that maximizes current profits, cash flow or
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return on investment. It uses skimming strategies in every new
market segment that it opens up.
To obtain market share leadership, firms set prices as low as
possible e.g Coca-Cola. Such firms employ rapid penetration
strategies to optimize on there representation in the market.
To attain product quality leadership, a firm charges high prices to
cover the high performance quality and high cost of research and
development. The firm differentiates its product clearly
exemplifying the unique qualities of their product. They position
their products as superior products relative to competition e.g.
Safari Park Hotel
2. Marketing Mix Strategy
Companies often position their products on price and then tailor
other marketing mix decisions to the prices they want to charge.
There are five product mix pricing situations including:
a) Product Line Pricing - Is the setting of price steps
between various product lines. The basis of product line
pricing could be the difference in cost, customer evaluation
of different features and competitors prices e.g. EABL sets
the price of Alvaro as different from price of Guinness and
Pilsner based on consumer evaluation.
b) Optional Product Pricing – Many companies offer to sell
optional or accessory products along with their main
product. They therefore price the optional products with
the main product. e.g. a motor vehicle seller might offer to
sell the car with alloy rims and CD changer as optional
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products. The seller set optional prices for the rims and CD
changer
c) Captive Product Pricing – Companies may decide to
make a separate product that must be used along with the
main product e.g. razor blade and cartridge, printer and
cartridge film and camera etc. HP for instance is said to
make very low margins with its printers but very high
margins with its cartridges.
d) By Product Pricing - Is the setting of a price for by
products in order to make the main product’s price more
competitive. For example by producing meat, petroleum
and agricultural products, there are often by products.
Using by product pricing the manufacturer will seek a
market for these by products and should accept any price
that covers more than the cost of storing and delivering
them.
e) Product Bundle Pricing – Is the combination of several
products into a bundle and offering them at a reduced
price e.g. fast food restaurants may bundle chips, chicken
and Soda at one reduced price.
3. Costs
Companies always want to charge a price that covers all costs of
producing, distributing, selling and delivering the product at a
fair rate of return. The following types of costs must be
remembered:
(a) Fixed cost (overheads) – are costs that do not change
with production or sales levels e.g. rent, interest,
salaries etc.
(b) Variable cost – are costs that vary directly with the
level of production e.g. wages, raw materials cost
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etc.
(c) Total cost - Is the sum of the fixed cost and the
variable costs
Marketers make considerations for all the costs (total costs) of
making a product after which a mark up could be used to arrive
at the final selling price. Costs must be minimized for a firm to be
competitive in its pricing.
4. Organizational Consideration
- Management must decide who sets the price in the
company.
- In smaller companies, top management sets the price
rather than marketing and sales departments.
- In larger companies, prices are set by product or brand
managers and approved by top management.
- In industrial markets, sales people are allowed to negotiate
with customers within certain price range. Even so,
management sets the pricing objectives and policies.
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EXTERNAL FACTORS
These are factors often out of control of the company and may include;
Estimated demand, type of competitive markets and other
environmental elements.
1. Estimated Demand
Demand is the quantity of commodity that consumers are willing and
able to buy at a given price over a given time period.
Price elasticity of demand refers to how responsive demand is to a
change in price. Some products are price elastic others are price
inelastic.
In markets with elastic demand the marketer must be aware that a
slight increase in price is followed by a big drop in quantity demanded.
While in markets with inelastic demand, the marketer charges high
prices to optimize profitability.
2. Type of Market
Sellers pricing freedom varies with the type of markets as follows:
(a) Pure competition – under this structure, the price is given
by the market forces of demand and supply and sellers
take it as the market decides. Marketers efforts of sales
promotion, prices change and advertising play no role in
influencing demand, they only create awareness.
(b) Monopolist – The firm in this market is the largest single
seller. The firm sets the price and is in full control of its
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demand curve. It can set a high price to maximize profits
or set a low price to maximize on sales revenue.
(c) Monopolistic competition – The firms in this market are the
price setters; however each firm is keen to watch the
competitors prices and set theirs as close as possible to
that of competitors. Aggressive marketing campaigns i.e.
advertising and strong branding reduces the impact of any
price difference between firms.
(d) Oligopolistic competition – Each seller is free to set prices
on the similar but differentiated products. A price increase
by one firm is not necessarily followed by a rival firm.
3. Other External Factors
a) Competitors Costs, Prices and Offers
Firms must benchmark their products, costs and prices with
those of competitors in order to know if they are operating at a
cost advantage or disadvantage. A firm then decides what price
to offer to counter competition.
b) Economic Conditions
Economic trends such as recession and boom would affect the
price charged. Economic variables like interest rate would
equally impact on prices.
Pricing Approaches/Methods
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1. Cost based pricing – Adding a standard mark up to the cost of
the product to get the final selling price. Also called mark up
pricing.
Mark up pricing = Unit cost
(1-Desired % return on sales)
2. Perceived value pricing – Also called positioning above
competition. Price based on the perceived value of the product
by the customer and company. Mostly used in product
positioning e.g. for upper markets, marketers charge higher
prices and for low markets lower prices.
3. Competition based pricing – Also called positioning below
competition Setting prices based on the prices that competitors
charge for similar products.
4. Breakeven analysis pricing – Setting price to break-even on the
costs of marketing the product.
Break even point in units = Total fixed Cost
(Selling Price-Average variable cost)
5. Sealed bidding price: Based on customers proposals.
6. Target return pricing - This is a price that would help yield a
target return on Investment. Formulation for getting this is given
as
TRP = unit costs + Desired returns % capital
invested
Unit sales
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OTHER FACTORS CONSIDERED BEFORE ADOPTING A PRICE
There are a number of considerations to be made when charging
customers after determining the base price of a product.
1) Price discounting
i) Cash discount
ii) Quantity discount
iii) Functional discount/trade
iv) Seasonal discount
2) Promotional pricing
i) Loss leader pricing
ii) Cash rebates
iii) Low interest financing for purchase of products
3) Discriminatory pricing
i) Resident or non-resident
ii) Geographical location of customer
iii) Age or gender
iv) Time pricing i.e. day or night rate
v) Product image pricing
4) Psychological pricing strategy
i) Quality and brand value consideration
ii) Impact of price or other parties i.e. dealers and distributors, sales
people, suppliers
iii) Competitor’s price
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DISTRIBUTION CHANNELS
A marketing channel or distribution channel refers to the path followed
in the process of moving a product or service from the producer to the
final consumer or to business users.
Major Distribution Channels
There are four major channels of distributions as shown below:
Channel 1 is also called a direct marketing channel as no intermediary
levels are involved. The company sells directly to consumers’ e.g
Safaricom, Celtel, Bata Shoes, etc.
The remaining channels 2, 3, 4 are indirect marketing channels
containing one or more intermediaries. A company may choose one
channel of distribution or use a combination of distribution channels
e.g Unilever, EABL, Coca-Cola etc.
A channel level is a layer of intermediaries that performs some work in
bringing the product and its ownership closer to the final buyer.
Examples of Intermediaries
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Channel 1
Channel 2
Channel 3
Channel 4
Producer
Producer
Producer
Producer Distributor/Agent
Wholesaler
Wholesaler Retailer
Retailer
Retailer
Final Consumer
Final Consumer
Final Consumer
Final Consumer
a) Merchant Middlemen - These include Retailers and Wholesalers
b) Agent Middlemen - These include Brokers, Company
Representatives, and sales agents.
c) Facilitators - These include Banks, Advertising agencies,
Distributors, Transport Companies, and Independent
warehouses.
Retailers
These are merchants who sell goods and services directly to
consumers for personal
or non business use. There are two types of retailers
a) Stores Retailers: Like Boutiques, Fast Foods, Discount Stores etc
b) Non Store Retailers: Like Direct Marketing and selling by
producer, Automatic vending, Buying services (Arranging special
purchase arrangement for individuals in companies or specific
location.
Wholesalers
These are merchants who sell goods and services to customers who
buy for resale or
for business use.
Types of Wholesalers
Wholesalers can be classified into four broad categories.
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1. Brokers and Agents - Those who do not take title of the goods
and perform only a few functions.
2. Manufacturers’ and Retailers’ branches and Offices - These
are large branches and company offices set up to facilitate good
inventory control
3. Merchant Wholesalers - These are independently owned
businesses that take title of the goods. There are two types:
a) Full Service Wholesalers - These are wholesalers and Distributors
for Industrial products who sell primarily to retailers or
manufacturers respectively. They provide full range of retail
services
b) Limited Service Wholesalers - These provide only a few services
to their suppliers and customers e.g. Truck Wholesalers, Cash
and Carry wholesalers, and Mail Order wholesalers.
4. Miscellaneous Wholesalers - These are found in the specialised
sectors of the economy like Agricultural assemblers, Petroleum Bulk
plant and terminals
IMPORTANCE OF CHANNEL MEMBERS
The members of a marketing channel perform many key functions
including:
1. Information – They gather and distribute marketing research and
intelligence information about actors and forces in the marketing
environment needed for planning and decision making.
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2. Promotion – They develop and spread persuasive communication
about an offer i.e. by hanging posters on their vehicles, business
premises of price cuts, volume discounts, branding view with the
product etc.
3. Contact establishment – They find and communicate face to face
with the prospective buyer.
4. Physical distribution – They transport and store goods on behalf
of manufacturers.
5. Financing – They acquire and use funds to cover the costs of
channel work.
6. Risk taking – They cover risks associated with distribution e.g
pilferage of goods in storage, theft of goods on transit, lose of
goods resulting from accidents on transit etc.
7. Negotiation – They discuss price reductions on behalf of the
manufacturer with final buyers to make a sale.
Note: Today many companies outsource the distribution function to
other firms and concentrate in their key function of production.
CHANNEL DESIGN DECISIONS
For a company to be effective in its distribution effort, channel analysis
and decision making must be purposeful. The following decisions must
be considered when designing a channel:
1. Analysis of consumer needs
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2. Channel objectives
3. Channel alternatives
4. Evaluation of channel alternatives.
1. Analysing consumer needs
Designing the market channel starts with finding out what target
consumers want from the channel e.g do consumers want to buy
from nearby locations or are they willing to travel more distance,
do consumers want to buy in person or over the phone, through
mail or internet? Do they want add-on services (delivery, credit,
repairs, installation etc).
Providing the fastest delivery, a wide assortment, and all add-on
services may not be possible because the channel members may
not have the resources or skills needed. The company must
therefore balance between consumer needs and the costs of
meeting these needs. Consumers will often accept lower service
levels in exchange for lower prices.
2. Channel objectives
The company should decide which market segments to serve
and the best channels to use in each case.
The company’s channel objectives are also influenced by the
nature of the
company, its products, its competitors, and the environment.
3. Major channel alternatives
A firm must identify the types of channel members available to
carry out its channel work in terms of types of intermediaries,
number of intermediaries and responsibility of each.
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There are three major types of intermediaries:
(i) Company sales-force – The company can use its
sales force to target the final consumer by enlarging
the sales-force and involving them in direct
marketing.
(ii) Manufacturer’s agency – A manufacturer can hire
agents or independent firms to sale its products.
(iii) Industrial distributors – Find distributors in different
market segment/regions.
In terms of the number of marketing intermediaries, a company
can decide between:
(i) Intensive distribution – Stocking the product in as
many outlets as possible.
(ii) Exclusive distribution – Giving a limited number of
dealers the exclusive right to distribute the
company’s products in a given territory.
(iii) Selective distribution – The use of more than one but
few intermediaries to stock company products.
In terms of responsibility, producers and intermediaries should
agree on price policies, condition of sale, territorial rights and
specific service to be performed by each party.
4. Evaluating the Major Alternatives
After identifying the channels, the company must evaluate them
against economic, control and adaptive criteria.
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Using economic criteria, a company compares the likely sales,
costs and profitability of each alternative.
Control issues means giving some control of the marketing of a
product to the intermediary. The company must retain as much
control as possible.
Channels often involve long-term commitment; hence companies
must consider the ability of a channel to adapt to environmental
changes.
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PRODUCT PROMOTION
After companies have developed a product, they must inform the customers and prospects about the product. The process of passing on product information to product users is referred to as product promotion.
Designing and Managing an Integrated Marketing Communication
Integrated Marketing Communication refers to the various ways in which a firm communicates a marketing idea to induce influence on the target market and develop effective demand to their benefit and the benefits of the organisation. IMC is the basic engine for driving PROMOTION as a tool of the marketing mix.
Basic Purpose Promotion
1) To inform2) To persuade3) To remind4) To induce inquiry
Steps in Developing effective integrated marketing communication (IMC)
1) Identify the target audience2) Determine the communication objectives3) Design communication item4) Select communication channel5) Establish communication budget6) Decide on the communication media mix7) Measure communication results8) Manage integrated IMC
KEY PROMOTIONAL STRATEGIES
1. Advertising2. Sales promotion3. Events and Experiences
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4. Public relations5. Direct marketing6. Personal selling
1. ADVERTISINGAdvertising is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.
General Objectives of Advertising1) To announce product existence2) Highlight specific feature: Unique Selling Proposals (USP)3) Develop favorable corporate or brand image4) Remind and enforce brand loyalty5) Encourage greater use6) Encourage no users to use the product7) Correct any false information8) Demonstrate how the product works9) Provide a reassurance that a customer has made a good decision
Media and Methods of Advertising1) Television2) Newspaper3) Magazines and Trade
Journals4) Commercial Radios5) Transport Media6) Cinema /Motion pictures7) Packaging
8) Brochures and booklets9) Posters and leaflets10) Directories11) Billboards12) Internet13) Display signs14) Point of purchase displays
ADVERTISING DECISIONS
Markets must consider four important decisions when developing an advertising program: setting advertising objectives, setting advertising budgets, developing advertising strategies and evaluating advertising campaigns.
1. Advertising objectives- The main advertising objectives are:
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(a) Information advertising – Tells the market about a new product, suggests new uses for a product or informs the market about a price change e.g Jik, Omo, Alvaro etc.
(b) Persuasive advertising – Involves building brand preference by persuading consumers to always buy your brand or to switch to your brand e.g super loaf adverts, Nissan shift expectation ad.
(c) Reminder advertising- Involves reminding consumers that they will need the
product in the near future especially during off seasons.
- Also involves keeping consumers thinking about the product e.g Coca-Cola adverts.
2. Setting Advertising Budget- A brands advertising budget often depends on its stage in
the product life cycle.- A new product typically needs large advertising budgets to
build awareness and persuade consumers to try it.- A mature product needs lower budgets of advertising as a
ratio to sales.- Also brands in a market with many competitors require
aggressive advertising e.g. beer, soft drinks, pharmaceuticals, insurance etc.
3. Developing Advertising Strategy- There are two factors to consider in developing advertising
strategy i.e. creating advertising message and selecting advertising media.
- The advertising message must be appealing, believable and distinctive for consumers to think about it or react to the product. Advertisers take several approaches when developing their messages. The more common appeals are: testimonials (messages which are presented and endorsed by someone who is seen as an expert, trustworthy and believable to consumers), humorous advertising (with jokes about the product), sex appeal (Use of sexuality to appeal to a certain gender that
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constitutes a target market) and slice of life advertising (portraying the consumer in a realistic situation)
- A good advertising media is one that reaches more consumers, exposes the product, the target market frequently, impacts the qualitative values of a message on the consumer. Major media types include newspapers, T.V, Radio, direct mail, magazines, bill boards and internet.
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4. Evaluating Advertising- Advertisements effectiveness can be evaluated by copy
testing or sales effects.- Copy testing can be done before or after an advert is
printed or broadcast. Before an advert is placed, the advertiser can show it to consumers, ask them how they like it and measure recall or attitude changes resulting from it. The same can be done after an advert is run.
- One way of measuring sales effects is to compare past sales before an advert was placed to sales level after an advert is placed.
- Other methods of measuring the effectiveness of an advert include:1) Measure awareness and impact using recall/recognition
test2) Measure increase in revenue 3) Maintenance and improvement in market share4) Use marketing research to measure attitude change 5) Measure profit overtime6) Measure number of inquiries.
2. SALES PROMOTION
- Sales promotion is short term incentives to encourage the purchase or sale of a product or service.
- The marketer must set sales promotion objectives before deciding on the sales promotion tool to use.
General Objectives of Sales Promotion
1) Facilitates customer trials: Free samples2) Cements a long term relationship with middlemen3) To attract brand switchers: low prices4) To encourage sales force and middlemen to support a new
product5) To attract users to buy more
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SALES PROMOTION DECISIONS
The primary concerns of marketers when making sales promotion decisions include choosing the target market objective and choosing a sales promotion tool.
1. Target Market Objective
(i) Consumer promotions – Used to increase short term sales or help build long-term market share.
(ii) Trade promotions – Includes getting retailers to carry new items and more inventories, getting them to advertise the product and to give it more shelf space.
(iii) Sales force or business promotions – Are used to generate business leads, stimulate purchases, reward customers, and motivate salespeople.
2. Sales Promotion Tools
Depending on the sales promotion objective decided and the target market, the following tools can be used:
(i) Consumer promotion tools(a) Samples – A small amount of product offered to
consumers for trial.(b) Coupons – Certificate that gives buyers a saving
when they purchase a specified product.(c) Cash refunds – Offer to refund part of the purchase
price of a product to consumers who send a proof of purchase to the manufacturer.
(d) Price pack – Reduced price that is marked by (cents offs) the producer directly on the label or package.
(e) Premium – Are goods offered either free or at a low price as an incentive to buy a product e.g Colgate and toothbrush.
(f) Advertising specialties – Are useful articles imprinted with an advertiser’s name that are given as gifts to consumers e.g pens, calendars, key holders, shopping bags, T-shirts, caps, nail files, umbrella, tea mugs etc.
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(g) Patronage rewards – Cash or other award for the regular use of a certain company’s products or service.
(h) Point of purchase (POP) promotions – Include display and demonstrations that take place at the point of purchase or sale.
(i) Contests, sweepstakes and games, giving consumers a chance to win something e.g cash, trips, goods by luck.
(ii) Trade promotion tools
The consumer promotion tools identified above can also be used as trade promotions.
In addition, the manufacturer may offer:
(a) Discount off the list price. This is also called price off, off invoice or off list. A straight discount is a straight reduction in price on purchase during a stated period of time.
(b) An allowance. This is promotional money paid by manufacturers to retailers in return for agreeing to feature the manufacturer’s products in some way e.g an advertising allowance compensates retailers for advertising the product, a display allowance compensates them for using special displays.
(c) Conventions and trade shows – Organised by manufacturer to promote their products. Are often costly undertakings.
(iii) Sales Force ToolA sales contest – Organised for salespeople or dealers to motivate them t increase their sales performance over a given period. The winner gets a prize.
3. EVENTS AND EXPERIENCES
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Company sponsored activities and programmes designed to create daily brand related interactions including the following:
Sports Entertainment Festivals Factory tours
Company Museums Street activities Road shows
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4. PUBLIC RELATIONS
Public relations means building good relations with the company’s
various publics.
Publicity - This is the total effort by an organisation to create,
improve and maintain a favourable image of the company and its
publics. It is popularised as Public Relations, and the title for this role
and responsibility within the organisation may the Public Relations
Manager or Publicity Manager.
Public relations department perform the following functions:
1) Press relations – Creating and placing newsworthy information in
the news media to attract attention to a person, product or device.
2) Product publicity – Publicising specific products.
3) Public affairs – Getting involved in corporate social responsibility e.g
building schools, roads, and social amenities to a local community.
4) Investor relations – Maintaining relationships with shareholders and
others in the financial community.
5) Lobbying – Building and maintaining relations with members of
parliament and government officials to influence legislations and
regulations in favour of an organisation or industry.
Major Public Relations Tools
1) News – PR professional create favourable news about the company and its products.
2) Speeches – Company executives field questions from the media or the MD’s charismatic talk before a large audience
3) Special events – Include conferences, press tours, grand openings of branches, organizing marathons etc.
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4) Corporate identity materials – e.g. logos, stationery brochures, signs, business cards, buildings, uniforms, T-shirts, company cars and trucks.
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DIRECT MARKETING
The use of mail, telephone, fax, email or internet to communicate directly with or solicit response or dialogue from specific customers or prospects.
Other tools used in direct marketing include: Catalogues Telemarketing Electronic shopping
TV shopping Fax mail Voice mail
PERSONAL SELLING
Personal selling is the face to face interaction between a company’s salesperson and a customer or prospect. Personal selling optimizes the buyer seller dyad often resulting in an actual purchase of the product.
Functions and Roles Information gathering regarding sales needs Identifying sales leads Prospecting: finding and cultivating new customers Communicating: Illustrating product and service idea Selling: salesmanship Servicing: Technical after sales service
Personal selling is about looking for potential buyers (prospecting), presenting the product and getting an order from the customer. It is therefore the climax of the entire marketing effort. A good salesperson is one who closes a sale successfully.
THE END
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