TOPIC 10 AND 11

TOPIC 10: MARKETING REQUIREMENTS

Marketing function and strategies
The marketing mix
Market segmentation
Market surveys

MARKETING FOR SMALL ENTEPRISES

1.0 What is marketing?
a) Various authors have defined marketing differently. Philip Kotler describes marketing as a social
and managerial process by which individuals and groups obtain what they need and want through
creating, offering and exchanging products of value with others.

According to this definition the key pillars of marketing are:

i. Needs and wants
ii. Products of value
iii. An exchange transaction
iv. Facilitating relationships and networks
v. Markets marketers and marketing prospects

This means that there must be points of demand and supply for a specific product of value and that
these two points must be facilitated to meet. For this relationship to be maintained, the benefits of
each of the two parties must be adequate and sustainable for the value exchanged. This can only
happen if the process of marketing is approached from a long-term view and strategies as well as
goals planned and followed through.

2.0 Marketing Gaps

These are the gaps between production and consumption and include:
Space gap – the geographical space between production and consumption e.g., bread is baked at a
bakery located in point A but is sold in point B, C, D etc – this is where logistics and mapping
come into play.
Time gap – time lapse between production and consumption e.g., agricultural commodities are
produced in seasons even though their demand is throughout
Information gap – consumer must be informed on what is available, what to buy, at what quantities
etc.
Ownership gap – a product changes ownership on payment and delivery of the product.
Value gap – value is the difference between the consumer ‘s expected gains from owning and using
a product and the cost of obtaining the product. Buyer and seller must agree on acceptable exchange
rate. The price should not be too high nor too low so that both are satisfied. This is mostly arrived
through a negotiation process

NB/ All marketing gaps must be filled for a business to make profits

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THE MARKETING MIX
It is a detailed strategy, tasks, operations policies programmes, techniques and activities to
which resources may be allocated to achieve marketing objectives. The term is used to describe
the combination of the four inputs which constitute a marketing system ( 4ps) i.e.
• o The product
• o The price
• o The placement/place
• o promotions
• Extended Ps
• People, physical evidence/ appearance, Processes

The Product
• The product element of the marketing mix involves the planning, designing and
developing the right type of the product or service to meet the customer
satisfaction.
• The main decisions involve-;
The product size, quality, design, the product range, the product volume, The
product packaging, The brand name and label, The product warranties and after
sale service.
• The product element of the marketing mix strives to establish:
i. A product policy
ii. The product strategies
iii. The product mix

The Price
Price determination must also include consideration of market characteristic and the firm‘s
current marketing strategy over and above the cost factor.
Pricing strategies that reflect additional consideration include:
i. Penetrating Pricing
This is a strategy that involves setting lower than normal prices to hasten market acceptance of
a product or service or to increase market share. This strategy can also discourage new entrants.
ii. Skimming Price Strategy
This strategy set prices for a product and services at high levels for a limited period of time
before reducing to lower, more competitive levels. This strategy assumes that certain customers
will pay a higher price because they view a product as a prestige item. Appropriate when there
is little threat of short-term competition.
iii. Follow – the leader Pricing Strategy
This strategy uses a particular competitor as a model of setting a price for a product or service.
The probable reaction of competitors is a critical factor in determining whether to cut prices
below the prevailing level.
iv. Variable Pricing Strategy
This is setting more than one price for a product or service in order to offer more price
concessions to certain customers‘knowledge strength.
v. Dynamic Pricing Strategy
This is charging more than the standard price when the customer ‘s profile suggests that the
higher price will be accepted.
vi. Pricing Lining Strategy

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A pricing lining strategy establishes distinct price categories at which similar items of retail
merchandise are offered for sale. The different lines depend on the income levels and buying
desires of the customers.
Placement/Place

• Also known as distribution of goods physically

• This component of the marketing mix is concerned with linking the seller and
the buyer.
• It involves the elements of
o The channels of distribution
o The transport means
The warehousing
o The routing of the product.

Promotion
• A product promotion is the act of providing information about a product to its
prospective users in order to persuade them to buy , enjoy or choose the product
• Any product promotional message usually includes information which
shows;
• That the product exists
• That the product has ability to satisfy a particular want
• The physical location where the product can be obtained or enjoyed
The qualities that the product can be obtained or enjoyed

Factors that influence Choice of a promotion method

1. The nature of the market. Where competition prevails, producers strive to make their
products sale as opposed to less competitiveness.
2. The nature of the consumers
The level of information the consumers are accessible to creates awareness.
Any gaps left are filled with product promotion

Importance of promotion

• To inform potential customers about the existence qualities and other important
details regarding a product.
• 2. To convince or persuade existing customers to continue buying the product
and potential customers to choose it.
• 3. To establish a business image or goodwill among the existing and prospective
customers
4. To facilitate more sales revenue

Methods used in promotion

There are five main ways of promoting products namely

• Advertising
• Personal selling
• Sales promotion

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 • Publicity
• Public relations.

3.0 Marketing Orientation

The nature of the above marketing activities are influenced by each firm‘s orientation towards
marketing. We can have four major categorizations of market orientation:
i. Production orientation
ii. Sales orientation
iii. Pure marketing orientation
iv. Societal orientation

Production Orientation – the firm focuses on the its internal capabilities rather than the needs of
the market place e.g., it assess its resources and ask questions such as what is easy to produce, most
convenient business, where do our talents lie. Most startups based on hobbies face this challenge.

Sales orientation- based on the premise that people will buy more if aggressive sales techniques
are used and that high sales results in high profits. Firms that adopt such an orientation have sales
people all over; keep sending advertising emails and other forms of adverts. Again, in this case
there is also a limitation of failure to understand what the customers need.

Pure marketing orientation – this is the foundation of contemporary marketing. It is based on the
understanding that a sale depends not on the aggressiveness of the sales force but rather on a
customer‘s decision to purchase a product. The question is ―does the product meet customer
needs/expectations?
The perceived value on the customer is important and so is building long term relationships with
customers.

Therefore, a pure marketing orientation is based on 3 key principles namely:

1. Long term maximization of profitability – don‘t look forward to making a quick kill, look
at how many goods you can sell to the customer over time.
2. Consumer focus – involve the consumer in the design and production of the product and
take into consideration consumer‘s needs i.e. make the consumer feel and be part of the
product.
3. Process integration focus – integrate all business activities into one smooth process directed
at profitability and satisfaction of consumer needs, demands and preferences.

Societal orientation – this evolved from pure marketing orientation and it is whereby a firm
determines the needs and wants of the customer in the target market and at the same time is able to
deliver superior value to customers in a way that improves the consumer‘s and society‘s well
being.(The challenge is to balance the three aspects). It therefore, goes beyond the pure marketing
concept and asks if the later, as it stands, is adequate in age of environmental problems, rapid
population growth, increasing unemployment, diminishing natural resources etc. It brings in
corporate social responsibility.

4.0 Market Segmentation

The total market for most products is heterogeneous and cannot be considered as one homogeneous
market. It does not have a single uniform entity. It has sub-markets which are significantly different
from one another. It is easily broken down into sections known as segments. To achieve maximum

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customer satisfaction, marketers divide the heterogeneous market into fairly homogeneous subject
of customers. This process is refers to as market segmentation.
Each segment of the market is assumed to have similar needs, and will respond in a similar way to
the market offering strategy.
The business then decides which market segment(s) it can best satisfy. The process of deciding
which segments(s) to pursue is referred to as market targeting.
After selecting the market segments(s) the organization must decide how to compete effectively
in this target market. A decision has to be made concerning advantage to be achieved.
Merits and Limitation of Market Segmentation
Benefits
1. It compels marketers to focus more accurately on customer needs.
2. Segmentation leads to the identification of excellent new marketing opportunities if research
reveals an unexplored segment. Without proper segmentation such a market may remain untapped
for years.
3. Market segmentation provides guidelines for the development of separate market offering and
marketing strategies for the various market segmentations.
4. Segmentation can help guide the proper allocation of marketing resources.

Disadvantages
1. The development and marketing of separate models and market offering is very expensive.
2. Only limited market coverage is achieved since marketing strategies would be directed at specific
market segment only.
3. Excessive differentiation on the basis product may eventually lead to proliferation of models and
variations, and finally to cannibalization among the models/variations. This happens when one
product takes away market share from another product of the same firm.

Prerequisites for Market Segmentation

For making segmentation to be effective, it must meet the following criteria:-

i. It must be measurable
ii. It must be large enough
A market segment that is too small is not profitable due to lack of economies of scale. A segment
must be the largest homogeneous group of people worth exploiting with a tailored market offering
and marketing strategy.

iii. It must be accessible

The marketer must be able to reach the market segment with his or her market offering and
marketing strategy. Rural people who cannot read, write or listen to the radio would be an
inaccessible market.

iv. It must be actionable

It must be possible to develop separate marketing offering for different market segments.
Businesses are often unable to undertake different market offerings or strategies when and if they
realize that there are distinct difference between various segments
v. It must be differentiable

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Different market segments must exhibit heterogeneous needs, people in different segment must
have different needs, demands and desires, while people in the same segment must exhibit
similar/homogeneous characteristic and needs. The marketer should also be able to distinguish
segment from each other without too much difficult.

Bases of Segmentation Consumer Markets

The variables/bases utilized when segmenting the markets are geographic, demographic,
psychological and behavioural variables.
Geographic
The marketer divides the total market into different geographical areas. Variation such as the
town/city size and population density may also be appropriate bases. If customers‘needs and
differences can be addressed at the local level, geographical segmentation is appropriate.
Demographic variables
These include income, education, occupation, age, gender etc. Culture and religion also remain
powerful segmentation basis primarily because the different cultures and religions have different
traditions, beliefs, taboos and preferences to be accommodated. Differences include the languages
they speak, the food they eat, the clothes they wear, and sport they watch or participate in just to
mention a few.
Psychographic Segmentation
Psychographic segmentation involves the breaking up of the market in terms of attributes such as
social class, lifestyle or personality. Rarely used, but can form a powerful base of market
segmentation.
Behavioral Segmentation
Consumer can also be segmented on the basis of their buying behavior.
i. Purchases Occasion

Some buyers may use a product very regularly, while other may use it only on special occasions
e.g. electricity in urban and rural environments.
ii. Benefits sought

Some market segment may be very specific in the benefits they seek when buying a specific
product. Some may seek economy, while other may prefer convenience or prestige.
iii. User Status

iv. Usage rate

Marketers can make provision for different segment based on how frequently buyers buy their
products.
Loyalty status
Consumers vary in their loyalty towards the firms or its brand names. Marketers make different
market task spending on the standard of the loyalty of the consumers.
vi. Business Readiness stage

Different marketing approaches have to be followed depending on the consumers ‘readiness to buy.
vii. Attitude towards the product

By segmentation consumers according to their attitudes toward the product, a firm can increase its
marketing productivity.

5.0 Product Positioning

This refers to the way consumers perceive a product in terms of characteristics and advantages
and its competitive position.

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It therefore involves the creation, in the minds of the target buyers, of a distinctive position with
regards to the firm‘s product relative to those of competing firms. For effective positioning it is
important that the marketer understand customer buying criteria and recognize the performance of
each competitor on each of the evaluative criteria.

6.0 Market Research/Survey

Marketing research may be defined as the gathering, processing, reporting and interpreting of
marketing information to aid in marketing decision making.
Alternatively we may say that marketing research is the scientific process of gathering data using
various tools, analyzing the data and grouping that data in a systematic way in order to make
decisions that could enhance the company‘s sales and profitability.
The above definitions emphasize on the following:
o That marketing research is a planned and well-organized process
o That the information obtained by the process is not biased
o The information gathered is used for decision making

A small business conducts less marketing research than a large one. Nevertheless, there is need for
research in both types of enterprises. Prior to embarking on a research, an organization should
compare the expected costs of the market research with its expected benefits. This is particularly
so because a large amount expenditure on research will constitute a large portion of investment.
An organization should ask itself the following questions:
Is the research really necessary?
Will data obtained justify expense?
Can I do the research myself?

6.1 Importance of Market Research

The main role of marketing research is to provide information that facilitates marketing decisions
a) Identifies and defines marketing opportunities and
b) Helps to monitor performance –This requires feedback and marketing research provides this
feedback.
c) It helps in improving the marketing process – some marketing research is conducted to expand
knowledge in marketing as a management field (basic research). Such study is may be meant to
confirm existing theories or to add on to the theories.

6.2Marketing Research Process

Step 1: identification and definition of the problem –what is the difference between the present and
the ideal situation? For example if he is making Kshs 10,000 per week but he feels he can make
Kshs. 100,000 per week then why is that not happening?

Step 2: Analysis of the situation – this involves gauging the possible reason that might be credited
for the problem. The research plan will include: objectives, research questions, hypotheses, and
identifying characteristics or factors that can influence the research design.

Step 3: Collecting problem‘s specific data- this involves gathering as much primary and secondary
information as possible. It can include: personal interviewing (in-home, mall intercept, or
computer-assisted personal interviewing), from an office by telephone (telephone or computer-
assisted telephone interviewing), or through mail (traditional mail and mail panel surveys with pre-
recruited households). Proper selection, training, supervision, and evaluation of the field force help
minimize data-collection errors.

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Step 4: Data analysis and interpretation –Data preparation includes the editing, coding,
transcription, and verification of data. Each questionnaire or observation form is inspected, or
edited, and, if necessary, corrected.
Step 5: Presentation of findings for decision making – once crucial information has been
gathered and analysed, there is need to package it in a research report for use by the
organization (in case the research was conducted by another party) and also for record and
future reference. Such a report should be clear and to the point and should not overwhelm the
user with a lot of statistics and unnecessary information. In addition, an oral presentation should
be made to management (or the organization) using tables, figures, and graphs to enhance
clarity and impact.

6.3 Marketing Research Tools

These are data collection tools specifically:
1. Observation – this is research born out of the process of observing the happenings within the
market. Uses observation record sheet
2. Focus groups – this is research developed out of a small sample of 6-12 people who are
deemed to be representative of the entire market. They are brought about together and guided
by a moderator through an unstructured spontaneous discussion on the topic. The moderator
does not let the group move off from the point into irrelevant issues.
3. Survey research – market research based on all elements within the sampling population.
The entire market is subjected to research. It may use telephone, questionnaires (structured and
unstructured), face-to-face interviews
4. Experimental research – it involves trying out various marketing models within the target
market and trying to gauge which of these experiments is best suited for that particular market.

TOPIC 11: ORGANIZATIONAL FORMS

TYPES OF ORGANIZATIONS

Static Organizations
Fixed practices, fixed size. Like static equations, these organizations have no variables -- time
doesn't change them significantly. They persist until some new organization occupies their
niche.
Dynamic Organizations
Fixed practices, variable size. Like dynamic equations, these organizations vary in size over
time, even though their underlying practices don't change much. They go through a single life
cycle, each growing rapidly as it occupies its niche, then declining as its competitors implement
better practices that steal away its clients.
Adaptive Organizations
Variable practices, variable size. Like complex adaptive systems, these organizations vary their
practices, seeking the constant improvement that launches life cycle after life cycle, creating
new products, services, and processes that hold on to clients generation after generation. .

Decentralized Organizations
Some organizations, especially large multi-nationals, decentralize most of their activities and
retain only a skeleton HQ’s staff to deal with financial control matters, strategic planning, legal
issues and occasionally personnel matters – but only those to do with senior management or an
across the group basis (recruitment, development and remuneration).
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Flexible Organizations
These are capable of adapting quickly to new demands and operate fluidly. They may be
organized as;

a) “ Shamrock” with core workers carrying out the fundamental and continuing activities of
the organizations and contract workers and temporary staff being employed as required.
This is called a core-periphery organization.

b) An organization may adopt a policy of numerical flexibility; the number of employees

can be quickly increased or decreased in line with changes in activity levels.
Process-based organization
This is one in which the focus is on horizontal processes that cut across organizational
boundaries. In such an organization, there is still need to have designated functions
manufacturing, distribution, and sales. But the emphasis is on how these areas work together
on multi-functional projects. Team will jointly consider how to deal with customer
requirements. Quality & improvement will become a common responsibility shared between
managers and staff.

STAGES OF ORGANIZTIONAL GROWTH

Creativity / Leadership

This stage is dominated by the founders of the organization, and the emphasis is on creating
both a product and a market. These "founders are usually technically or entrepreneurially
oriented. But as the organization grows, management problems occur that cannot be handled
through informal communication and dedication.

Direction / Autonomy

During this phase the new manager and key staff "take most of the responsibility for instituting
direction, while lower level supervisors are treated more as functional specialists than
autonomous decision-making managers." As lower level managers demand more autonomy,
this eventually leads to the next revolutionary period-the crisis of autonomy. The solution to
this crisis is usually greater delegation.

Delegation / Control

When an organization gets to the growth stage of delegation, it usually begins to develop a
decentralized organization structure, which heightens motivation at the lower levels. The crisis
of control often results in a return to centralization, which is now inappropriate and creates
resentment and hostility among those who had been given freedom.

Coordination

A more effective solution tends to initiate the next evolutionary period—the coordination stage.
This period is characterized by the use of formal systems for achieving greater coordination
with top management as the "watch dog."

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Collaboration

While the coordination phase was managed through formal systems and procedures, the
collaboration phase "emphasizes greater spontaneity in management action through teams and
the skillful confrontation of interpersonal differences. Social control and self-discipline take
over from formal control."

ORGANIZATION STRUCTURE

An organizational structure is a mainly hierarchical concept of subordination of entities that

collaborate and contribute to serve one common aim.

Organizations are a variant of clustered entities. An organization can be structured in many

different ways and styles, depending on their objectives and ambiance. The structure of an
organization will determine the modes in which it operates and performs.

Organizational structure allows the expressed allocation of responsibilities for different

functions and processes to different entities such as the branch, department, workgroup and
individual.

Organizational Chart
Structures are usually described in the form of an organizational chart. This places individuals
in boxes that show their job & position in the hierarchy and traces the direct lines of authority
(command and control) through the management hierarchies. Charts, due to their vertical
nature, do not give the horizontal & diagonal relationship that exists in an organization between
people in different units or departments.

Characteristics of Organizational Structure.

1. Span of control - the range of employees who to report to a managerial position.

Appropriate span is influenced by:

• The skills and abilities of the manager and employees

• Similarity and complexity of tasks
• Physical proximity of subordinates
• Availability of standardized procedures
• Sophistication of organization’s information system

2. Authority - the formally-granted influence of a position to make decisions, pursue goals

and get resources to pursue the goals; authority in a managerial role may exist only to
the extent that subordinates agree to grant this authority or follow the orders from that
position.

3. Responsibility - the duty to carry out an assignment or conduct a certain activity.

4. Delegation - process of assigning a task to a subordinate along with the commensurate

responsibility and authority to carry out the task.

5. Chain of command - the lines of authority in an organization, who reports to whom.

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6. Accountability - responsibility for the outcome of the process.

7. Line authority - the type of authority where managers have formal authority over their
subordinates' activities (the subordinates are depicted under the manager on a solid line in
the organization chart); departments directly involved in producing services or products are
sometimes called line departments.

8. Staff authority - the type of authority where managers influence line managers through
staff's specialized advice; departments that support or advise line departments are called
staff departments and include, e.g., human resources, legal, finance, etc.

Factors affecting the nature and size of Structure.

1. Strategy
An organization’s structure should facilitate the achievement of goals. Structure should
follow strategy. Strategy-structure framework focuses on:
• Innovation
• Cost minimization
• Imitation

2. Size
Size significantly affects an organization’s structure.

3. Technology
The effectiveness of an organization is related to the ‘fit’ between technology and structure

4. Environmental uncertainty and structure

Environment has a major influence on structure. One way to reduce environmental
uncertainty is to adjust the organizational structure.
• Mechanistic organizations are most effective in stable environments
• Organic organizations are best matched with dynamic and uncertain environments

5. Human Resources.
The final factor affecting organizational structure.
• Higher skilled workers who need to work in teams usually need a more flexible
structure.
• Higher skilled workers often have professional norms (CPA’s, physicians).

Managers must take into account all five factors (environment, strategic plan, technology,
human resources and culture) when designing the structure of the organization.

DESIGNING AN ORGANIZATIONAL SRUCTURE

Organizational design is the process through which an organization is structured. The main
objective is to develop an organizational design that can achieve the objectives of the
organization

Organizational design aims at structuring the activities of the organization as a whole. Some of
the functions of organization design comprise of;

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 1. Establishing a hierarchy of organizational objectives which is the basis of structuring
organizational activities in terms of means-ends chain
2. Applying the division of labor concept: to actual situation which in turn provides the
basis for organizational grouping.
3. Applying a system of co-ordination and control:

Division of labor- activities are divided into various groups. This allows some degree of
specialization. The importance of division of labor is;

1. It allows the worker to perform manageable number of activities.

2. The employee becomes proficient in performing these activities
3. Expertise is gained and this increase proficiency as well as production

Division of labor can be divided into 3 groups.

1. By specialization e.g. production, marketing etc

2. By subject; people associated with a particular project are grouped together
3. Matrix structure- people are assigned both functional and project groups

A system of co-ordination

The activities can be coordinated in one of the following ways

1. Through organizational hierarchy; where a manger supervises specialized units.

2. Through rules and procedures; concerned parties refer to these rules when a problem
arises
3. Through coordinating agent; this helps mediate any problems that arise
4. Through self coordinated project groups- people from different functional groups can
be brought together to carry out assigned projects.

ORGANIZATIONAL STRUCTURE TYPES (Do a self-study on the types)

1. Pre-bureaucratic structures

2. Bureaucratic structures

3. Post-bureaucratic-

4. Functional structure

5. Divisional structure

6. Matrix structure

8. Team

9. Network

10. Boundary less structure

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11. Virtual

12. Line and Staff

13. Divisionalised organizations

ORGANIZATION DESIGN

Organisation design is a process for improving the probability that an organization will be
successful.

More specifically, Organization Design is a formal, guided process for integrating the people,
information and technology of an organization. It is used to match the form of the organization
as closely as possible to the purpose(s) the organization seeks to achieve.

Typically, design is approached as an internal change under the guidance of an external

facilitator. Managers and members work together to define the needs of the organization then
create systems to meet those needs most effectively. The facilitator assures that a systematic
process is followed and encourages creative thinking.

Organizational design is structuring an organization, division or department to optimize how it

supplies products and services to its clients and customers.

Organizational design is part of a process that enables the creation and variation of a staffing
structure - known as the establishment - that facilitates the achievement of organizational
outcomes. This approach enables the organization to:

• Summarize what activities must be performed and how these should be grouped;
• Arrange the levels and patterns of delegation held by positions;
• Assess the requirements for management control;
• Minimize the complexity of the structure of the Department;
• Determine supervision and reporting requirements;
• Avoid excessive levels of supervision; and
Avoid the duplication or overlapping of any activities

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