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Marketing Notes-2023
Marketing Notes-2023
MARKETING NOTES
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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.”
From these definitions it is clear, that marketing is not just about creating awareness,
conviction or selling. Its about identifying needs and engaging in activities [exchanges] to
satisfy these needs in such a way that everyone is better off.
DISTINCTIONS BETWEEN MARKETING AND SELLING
Some distinctions between marketing and selling are as below:
Selling Marketing
Emphasis is on the product Emphasis is on customer needs and wants
The company first makes the product and The company first determines the customer
figures how to sell it. wants and figures out how to make and
deliver a product to satisfy those wants.
The management is sales volume oriented Management is customer oriented in
to make profit. making profit.
Planning is short run oriented in terms of Planning is long term oriented in terms of
today’s products and market. new products.
The needs of the seller are stressed. Tomorrow’s market and future growth are
stressed.
The needs of the customer are emphasized
For you to appreciate marketing further there is need to understand the following
concepts.
Core Marketing Concepts
12 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.
13 Wants –Wants are the form of human needs take as they are shaped by culture
and individual personality for example urbanites want Television sets.
14 Demand –When a want is backed by buying power it becomes demand.
15 Product – Is anything that can be offered to satisfy needs or wants. It can be
tangible or intangible.
16 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.
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A market also refers to an institutional arrangement that brings together buyers
and sellers to transact.
17 Marketing offer – Is a combination of products or service presented to the
market to satisfy a need or a want.
18 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.
19 Exchange – Is the act of obtaining a desired object from someone by offering
something of value in return.
20 Transaction – An exchange of values between two or more parties, where either
party gains.
21 Marketing Management – Is the art and science of choosing target markets and
building relationships with them.
1.5 THE MARKETING MIX
The marketing mix is a combination of controllable, tactical marketing tools that a firm
blend 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
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1.6 THE EVOLUTION OF MARKETING
The field of marketing has developed through 5 stages as shown in the diagram below:
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- The idea that consumers will not buy enough of the organizations products
unless the organization 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
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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, Airtel, KCB, Equity.
CRM is defined as the overall process of building and maintaining profitable ties between
organizations and customers by delivering superior customer values and satisfaction.
CRM therefore involves attracting, retaining and growing customers.
Overtime, relationship marketing has grown and replaced transactional marketing as
summarized in the table below.
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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
Hence for companies to retain their customers for a longer period, they must aim
high in satisfying their needs and wants.
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(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.
1.8 Activities
This assignment requires you to undertake the process of analyzing your own
company {a company of your choice if not employed} and its operating
environments from a Marketing perspective. You will provide an overview of
your organization, as well as detail the type of orientation towards marketing it
takes.
Here, you are not just reporting what your organization is doing now and what
‘orientation’
1.9 Summary it displays in its marketing strategies, but also assessing whether its
orientation towards marketing is likely to (or perhaps should) change in the future.
In this lecture you have learnt that:
You are also required to identify how your organizations blend the 7 elements of
the marketingismix
Marketing theformanagement
its Key Products. e.g How
process doesidentifies,
which it price. anticipates, and
supplies customer needs efficiently and profitably.”
Marketing has evolved through FIVE stages popularly referred to as marketing
orientations or philosophies
Traditional marketing mix had it 4ps, which was later extended to 7ps
Customer relationship marketing involves, attracting , retaining and growing the
share of customers.
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LECTURE TWO: MARKETING ENVIRONMENT
2.1 Introduction
Welcome to the Second lecture on the marketing environment. We shall begin the study
of this unit by defining the term ‘Marketing Environment’ and highlighting the two broad
classification of Marketing Environment. That is the Micro marketing Environment and
the Macro marketing Environment. We shall then analyze the forces and factors of both
the micro and macro marketing environment.
2.3.3 Macro marketing Environment; Its factors and sub-factors. Reflection questions,
activity, exercises/quizzes.
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 into
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.
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The marketing environment has two broad dimensions:
(a) Micro environment
(b) Macro environment
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(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.
(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 organization’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, environmental issues, 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 force to strive hard to attain the set goals and this spills over to
external publics.
5. Marketing Intermediaries
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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 (Naivash, Quickmatt).
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 (TIFA, Ipsos),
advertising agencies, (Adopt A Light, Eagles Outdoor, Monier Outdoor,
The Scan Group), media houses (Nation, KTN, Standard, Royal Media,
KBC) and marketing consultants. Such firms help the company to
promote and target its products to the right markets. The marketer must
consider price, service, quality, target market etc. before choosing a
marketing agency.
2.4.2 MACRO MARKETING ENVIRONMENT
Macro marketing environmental are factors that are outside the company’s control and
often pose threats or provide opportunities to the company. The forces are often
discussed under the PESTEL frame work as follows:
1. Political
2. Economic
3. Social
4. Technology
5. Environment
6. Legal
1. Political and Legal factors
These comprises of laws, regulations, government agencies and social pressure groups
that include and limit various organizational marketing effort.
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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.
-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/social 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.
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(ii) Monopolist
- A large single seller in the market.
- Produces products with no close substitute
- Has control over the prices that they charge in the market.
- Firms limit quantity supplied and charge high prices to maximize profits.
(iii) 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 are price setters, but are weary of competitor’s moves.
Example includes Airtel, Safaricom and Telcos.
(iv) 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.
Firms often enter a cartel arrangement to push prices upwards as they operate like a
monopolist, For example; Shell, Rubis, 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: rivalry within the industry, threat of new
entrants, threat of substitute products, bargaining power of suppliers and bargaining
power of buyers. .( See Porter’s Five Forces of Competitiveness Model).
2.5 ACTIVITY
You are required to examine and analyze the marketing philosophy and environments
in which your organization operates. {Company of your choice} i.e its industry and
the macro-environmental forces impacting on the industry, as well as how the micro-
environmental forces impacting its offering.
2.6 SUMMARY
Marketing environment refers to forces and factors that affect our efforts as
marketers.
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The Marketing environment is divided into two major classes, i.e the Micro –
marketing environment, and the Macro- marketing environment.
Micro-marketing environment are the forces and factors so close to the company
that the company can influence considerably.
Macro-marketing environment consists of forces and factors that the company has
little or no influence over.
2. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
3. Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-
Hill, Irwin.
3.1Introduction
Welcome to the third lecture on the marketing segmentation, targeting and positioning.
These three activities sometimes referred to as the STP process are undertaken one after
the other beginning with Segmentation, then Targeting and Finally Positioning. We shall
begin the study of this unit by discussing Market segmentation and proceed on to Market
targeting then Product Positioning.
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5.2.2 Bases of segmenting markets, reflection questions, exercises/quizzes
5.3
3.4.1 MARKET SEGMENTATION
Market segmentation means dividing a market into distinct groups with distinct needs,
characteristics or behavior who might require separate products or market mixes.
Market segmentation is the process of dividing the market into specific groups of
consumers who share common needs.
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.
Many companies in Kenya segment the country into five regions, Nairobi, Mountain, Rift
Valley, Nyanza and Coastal, North Eastern.
Companies do localize their products, advertising, promotion and sales efforts to fit the
needs of individual regions e.g. Daily National Nairobi edition.
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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.
Divides buyers into groups based on their knowledge, attitudes, uses or response
to a product. The segments that emerge include:
(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
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benefits sought e.g. The product gives benefits like cleaning, fabric
softening, strengthening and fresh smell.
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.
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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 urbanite are less price sensitive.
5. Actionable – Effective programs can be designed for attracting and serving the segments.
6. Profitable- must be capable of achieving the desired objectives, this may not be in
financial terms, eg segments can be identified and used as a means of entering a
market even though they produce little or no profit.
7. Reliable-the chosen segment must demonstrate a history and a future –reason to
get started.
8. Identifiable-display some common characteristics which sets it apart from the
overall market, eg distinctive needs, psychological traits.
9. Recognizable-members should recognize themselves as being
“different/recognizable by others.
NB. The main benefit of market segmentation is in the understanding
gained of customers. Greater understanding allows marketers to
appreciate why people buy-begins to know how to serve the customers
and how to position the company or its products.
Targeting refers to selection of the ultimate sectors which a marketer chooses as being the
most likely to be successful in achieving the corporate/marketing objective.
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.
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TARGET SELECTION
Market attractiveness may be measured by such criteria as:
-price sensitivity of segment/pricing trends
-potential loyalty
-growth potential
-size of the market
-profitability of the market
-Intensity of competition
-distribution structure.
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:
(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.
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The main advantage of this strategy is that may yield financial success with economies of
scale in production and marketing.
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.
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.
3.4.3 POSITIONING
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”
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Positioning refers to the place that a product or service holds in the mind of the target
audience(s).
-how a customer “sees” or “perceives” an offering and marketers must make every effort
to ensure that what they are offering is what the customer wants. Eg high price and high
quality.
-positioning is the act of designing the company’s offer and image so that the target
market understands and appreciates what the company stands for in relation to its
competitors.
Toyota 110 is positioned as an economical car, Volvo and Mercedes as luxuriuos cars,
Hummer positioned on a very high performance with a price tag to match.
Examples of positioning slogans:
(a) Safaricom: The better option
(b) Nation newspaper: The Truth
(c) Mash : We lead the leaders
(d) Kenya Airways: The pride of Africa
(e) Lexus: The passionate pursuit of excellence
(f) Mercedes: In a perfect world, everyone would drive a Mercedes
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Positioning must be built around a differentiation gimmick
Marketing mix is used to facilitate positioning
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Challenges of Positioning
(a) Over positioning
(b) Under positioning
(c) Confused positioning
(d) Doubtful positioning: Buyers cannot believe
5.4 ACTIVITY
Describe the Segmentation, Targeting and Positioning strategy that your organization
adopts with respect to its products. In other words, identify the target segments, as well as
how the organization wants its product(s) to be viewed by the targeted segments.
Note: If your organization produces many goods and/or services, you may want to pick a
particular one and provide more depth on that particular one, rather than being very
general about the entire organization.
5.5 SUMMARY
Marketing Segmentation refers to divided the target market into smaller sub-
markets [segments], each that has similar response to your offering.
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Four commonly used market targeting strategies are; Undifferentiated Marketing,
Differentiated Marketing, Focus/Niche Marketing & Micro marketing.
Product positioning refers to the place the product takes in the mind of the target
customer, on certain attributes relative to competing products.
5. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
6. Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-
Hill, Irwin.
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LECTURE FOUR: CONSUMER BEHAVIOR
4.1 Introduction
Welcome to the fourth lecture on consumer behavior. The field of consumer behavior
holds great interest for us as consumers, as marketers or even as scholars. We shall begin
the study of this unit by highlighting meaning of consumer behavior. We shall also
discuss the consumer buying decision process and various buyer behaviors.
Consumer buyer behaviour is the behaviour exhibited by the final users – Individuals and
households who buy goods and services for personal consumption. Consumer behavior
studies how individuals, groups and organizations, select, Buy, use and dispose of, goods,
services, ideas or experiences so as to satisfy their needs and wants.
The Organizational consumer buys products in order to run their operations. This
encompasses; Profit making businesses, Non-Profit making concerns as well as
institutions life schools and hospitals.
Buyer Response
Marketing and other Stimuli
Product Choice
Marketing Other
Buyers Black Box Brand Choice
Product Economy
Dealer Choice
Price Technology Buyer Buyer
Characteristics Purchase Choice
Place Political Decisio
n Purchase amount
Promotion Cultural
Process
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.
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.
4.4.6 TYPES OF BUYING-DECISION BEHAVIOUR {what type of buying decision
behavior is exhibited}
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.
product is expensive, risky, purchased infrequently and it is highly self expressive. They
can do this by availing a catalogue or describing the brands benefits using print media.
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.
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 brand familiarity. Television ads are more
effective in such promotions.
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.
4.4.7 THE BUYER DECISION PROCESS {what steps are followed in the buying
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.
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.
4. Purchase Decisions
5. Post-purchase Behaviour
- At this stage, the consumers take further action after purchasing the
product based on their satisfaction or dissatisfaction.
- Marketers must at all times strive to satisfy the consumer in order to retain
the existing customers and get new customers.
4.5 ACTIVITY
State the cause of satisfaction and dissatisfaction among consumers, then differentiate
between the probable behavioral reactions of a satisfied consumer and a dissatisfied
consumer.
A market survey on customers of Bidu Stores reveals that they exhibit Dissonance
reducing and Complex buying behaviors. Comment on the goods sold at Bidu Stores.
4.6 SUMMARY
Consumer behavior studies how individuals, groups and organizations, select, Buy, use
and dispose of, goods, services, ideas or experiences so as to satisfy their needs and
wants.
Four main types of consumer behavior include; habitual, variety seeking, dissonance
reducing and complex buying behavior
Consumer buying decision process goes through FIVE stages; Problem Recognition,
Information Search, Evaluation of alternatives; Purchase and Post-purchase Behavior
Consumers have been seen to perform various buying roles; initiator, influencer, decider,
buyer and User.
5.1 Introduction
(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.
(a) Motivation
A motive (drive) is a need that is sufficiently pressing to direct the person
to seek satisfaction.
(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
(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.
(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
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.
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.
(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
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 groupings as shown below:
34%
34% Late
Early Majority
Majority
14% 16%
Early Laggards
3%
Adopters
Innovators
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 innovators and early adopters and should direct
marketing efforts towards them.
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 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.
5.7 ACTIVITY
Identify the different individuals/departments that play specific buying roles for the
products procured in the organization you work for.
Discuss the stages in the family life cycle as an influence on consumer behavior.
Differentiate between industrial markets and consumer markets.
5.8 SUMMARY
Our behavior as consumer is influenced by numerous factors that can be classified into
four Broad categories. Cultural, Social, Personal and Psychological.
Adoption is the mental process through which an individual passes from first hearing
about an innovation to final acceptance of the product.
Adopters of new products have been observed to pass through five stages; Awareness,
interest, Evaluation, Trial and Adoption.
2. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
3. Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-
Hill, Irwin.
LECTURE 6: MARKETING INFORMATION SYSTEM
6.1 Introduction
Welcome to the Sixth lecture on marketing information system. We shall begin the study
of this unit by highlighting meaning of marketing information system. We shall also
discuss the components of the marketing information system.
(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 MkIS is a system that is carefully designed to process and
avail pertinent and timely information to marketing-decision makers.
6.4.2 The Components of MkIS
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 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 MkIS 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 MkIS which gathers
information by means of deliberate planned focused studies on specific marketing
problems facing the organization. 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.
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
6.4.3 The Role of MkIS
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.
6.4.4 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 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 organization.
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 variety of variables (pricing, distribution, advertising, etc) that can affect
the marketing of goods and services.
(b) Marketing Research System Versus Marketing Information System (MkIS)
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 MkIS handles both internal and external information.
Marketing research is concerned with solving problems while MkIS is
concerned with preventing as well as solving problems.
Marketing research tends to operate on an ad hoc and project-to project
basis while MkIS is a continuous process especially in connection to the
monitoring of the external environment.
Marketing research tends to concentrate on past information while MkIS
tends to be future oriented.
MkIS, is often computer-based while a marketing research system is not
necessarily computerized.
A marketing research system is just one component of MkIS while MkIS
consists of other components (i.e. internal records, marketing intelligence
and marketing decision support systems) besides marketing research.
(c) Importance of Marketing Research
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.
6.5 ACTIVITY
Identify the various ways in which your organization collects internal data. Also identify
the external databases to your organization.
MIS is 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”
MIS consists of FOUR components. Internal records system, Market Research, Market
intelligence and Market decision support system.
Suggestion for further reading
1. Kotler P. and Armstrong G.,(2008), Principles of Marketing, 12th Edition, Prentice
Hall.
2. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
3. Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-
Hill, Irwin.
7.1 Introduction
Welcome to the Seventh lecture on marketing research system. While the marketing
research is a component of the Marketing Information System which we learnt in our
previous lecture, the area of marketing research is very critical to Marketers and we shall
take time to discuss this in depth. We shall begin the study of this unit by highlighting the
stages of the Marketing research process. We shall then discuss activities undertaken at
each stage in depth.
Data Sources
To meet the manager's information needs the research plan can call for gathering
secondary data, primary data, or both.
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; questionnaires and observation.
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.
7.5 ACTIVITY
Identify any Marketing problem that your organization is currently facing and design a
market research to resolve the problem.
7.6 SUMMARY
There are six main stages in the research process are as follows:
1. Defining the problem
2. Defining the research objectives
3. Developing the research design
4. Collecting the data
5. Analysing the data and
6. Presenting the findings
7.7 Suggestion for further reading
8.1 Introduction
Welcome to the Eighth lecture on Product Decisions. We shall begin the study of this
unit by defining the term ‘Product’ and highlighting the two broad classification of
Marketing Environment. That is the Micro marketing Environment and the Macro
marketing Environment. We shall then analyze the forces and factors of both the micro
and macro marketing environment.
8.2 Specific objectives:
At the end of the lecture you should be able:
1) Define the term ‘ Product’
2) Explain various approaches to product classification
3) Define Product line
4) Explain product line decisions
5) Explain product mix decisions.
6) Discuss Product branding
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, Stoney, Krest
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 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.
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- Refers to the number of different product lines a company carries
Product mix length- Refers to the total number of items in the product mix
Product mix depth- Refers to the average number of items in the product line
Product mix consistency- Refers to how closely related various product lines are.
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.
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.
Brand equity: Monetary value of a brand. High brand loyalty builds higher brand
Equity: Coca Cola has brand equity of US$ 36 billion
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.
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
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.
F 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 it was made, when it was made, use
by date, contents, 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
8.5 ACTIVITY
8.6 SUMMARY
9.1 Introduction
Welcome to the Ninth lecture on Product Life cycle. Like humans, products also have a
life cycle. We shall begin by identifying the stages of the Product life cycle, then discuss
in depth the behavior of sales at the various stages and the most appropriate marketing
strategies to adopt at the different stages.
9.2 Specific objectives:
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.
- 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.
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.
- To estimate sales, the company might study the sales history of similar
products and conduct surveys of market opinion.
6. Product Development
7. Test Marketing
- This is a stage in which the product and marketing program are tested in a
more realistic market setting.
- 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.
8. Commercialization
Profits curve
Time
Product
Development Growth Maturity Decline
Introduction
stage
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.
1. INTRODUCTION STAGE
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.
Strategies at the Introductory Stage
There are four possible strategies at this stage and these are displayed in the table below.
LOW
HIGH PROMOTION
RAPID SKIMMING SLOW SKIMMING
HIGH
High Profile Strategy Selective Penetration Strategy
PRICE
RAPID PENETRATION SLOW PENETRATION
LOW Pre-emptive Penetration Strategy Low Profile Strategy
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.
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.
- 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.
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 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.
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
8.7 ACTIVITY
Elucidate the stages of the product life cycle citing the marketing strategies you may
adopt at each stage.
Explain the slow growth in sales at the introduction phase of the product life cycle.
8.8 SUMMARY
The PLC, explains the behavior of sales at various time points in a products life. It is
made of 4 Stages;
1. Product Development
2. Introduction
3. Growth
4. Maturity
5. Decline
. Suggestions for Further Readings
1. Kotler P. and Armstrong G.,(2008), Principles of Marketing, 12th Edition, Prentice
Hall.
2. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
3. Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-
Hill, Irwin.
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.
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:
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 sales. Companies that practice market
skimming strategies are: Sony, Samsung, Apple.
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 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.
10.4.2 Six Step Procedure for Price Setting
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 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.
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.
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 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.
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.
6. Target return pricing - This is a price that would help yield a target return on
Investment. Formulation for getting this is given as
1) Price discounting
i) Cash discount
ii) Quantity discount
iii) Functional discount/trade
iv) Seasonal discount
2) Promotional pricing
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
10.5 ACTIVITY
A manufacturer of metal containers has the following costs and sales expectations
10.6 SUMMARY
We have learned about the six step procedure in setting the price of a product.
2. Kotler, P & Keller, K.L., (2006), Marketing Management. 12th ed. Upper Saddle
River, NJ: Pearson – Prentice Hall
Etzel, M.J., Walker, B.J. and Stanton, W.J., (2007), Marketing, 14TH edn. McGraw-Hill,
Irwin.
11.3.1 Definition of ‘Marketing Distribution’ and ‘ Market Channel’ their similarity and
differences. Reflection questions, activity, exercises/quizzes
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.
The first channel 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 others 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
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
Wholesalers
These are merchants who sell goods and services to customers who buy for resale or
Types of Wholesalers
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.
3. Contact establishment – They find and communicate face to face with the
prospective buyer.
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.
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:
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.
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.
11.5 ACTIVITY
Think of a start-up business. Give a detailed background of the business then design a
channel structure for it.
11.6 SUMMARY
1. Coughlan, Anne T. (et al); Marketing Channels. – 6th edition – New Delhi;
Prentice Hall, 2002.
2. Turban Etraim; Electronic Commerce; A managerial perspective- Delhi;
Pearson Education, 2000.
3. Levy, M and Weitz, B.A: Retailing Management – 5th ed. – New Delhi: Tata
McGraw-Hill, 2003.
12.1 Introduction
Welcome to the eleventh lecture on marketing distribution. Distribution (Place) is one the
the 4p’s of the marketing mix. We shall thereafter look at various channel levels,
channel design decisions and types of intermediaries.
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.
1) To inform
2) To persuade
3) To remind
4) To induce inquiry
1. Advertising
2. Sales promotion
3. Events and Experiences
4. Public relations
5. Direct marketing
6. Personal selling
1. ADVERTISING
Advertising is any paid form of non-personal presentation and promotion of ideas, goods
or services by an identified sponsor.
ADVERTISING DECISIONS
(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.
- 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.
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.
2. SALES PROMOTION
The primary concerns of marketers when making sales promotion decisions include
choosing the target market objective and choosing a sales promotion tool.
(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.
Depending on the sales promotion objective decided and the target market, the
following tools can be used:
The consumer promotion tools identified above can also be used as trade
promotions.
(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.
Company sponsored activities and programmes designed to create daily brand related
interactions including the following:
Sports Company Museums
Entertainment Street activities
Festivals Road shows
Factory tours
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
favorable 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.
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.
1) News Release – PR professional create favourable news about the company and its
products.
2) Press Conferences – 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.
4) Corporate identity materials – e.g. logos, stationery brochures, signs, business cards,
buildings, uniforms, T-shirts, company cars and trucks.
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.
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.
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.
12.5 ACTIVITY
Suppose sales people from Unilever are having trouble getting supermarkets in Kenya to
purchase enough of their brands. How can sales promotion be used to help them increase
supermarket orders of the brands?
12.6 SUMMARY
We have learned about five key promotional tools that marketers use to communicate
about their organizations offerings. i.e. Advertising, Sales promotion, Personal selling,
Public relations, Direct Marketing.