PRINCIPLES OF MARKETING

PRODUCT

New Product Development Process

Product development is a process of improving the existing product or introducing a new

product in the market. The functions of product development are as follows:-

a) Creation of an entirely new product or upgrading an existing product,

b) Innovation of a new or an existing product to deliver better and enhanced

services,

c) Enhancing the utility and improving the features of an existing product,

d) Continuous improvement of a product to satisfy rapidly changing customer needs

and wants.

Following are the steps in the process of product development:

1) New Ideas Generation

i) Ideas can be generated by chance, or by systematic approach.
ii) Need a purposeful, focused effort to identify new ways to serve a market.
iii) New opportunities appear from the changes in the environment.
iv) Ideas can be generated through:
Continuous systematic search for new product opportunities
Marketing oriented sources--identify opportunities based on consumer
needs
Brain storming, incentives and rewards for ideas.
Analyzing existing products,
Reading trade publications.
2 Product Ideas Screening and Evaluation
i) New product check list
ii) List new product attributes considered most important and compare each with
these attributes. (General characteristics, Marketing Characteristics and
Production Characteristics)
iii) Ideas with the greatest potential are selected for further research. Based on
whether :
They match the organizations goals
Company has the ability to produce and market the product.

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 The nature and wants of the buyers and possible environmental
changes.
3 Concept Development and Testing
i. Sample of potential buyers is presented with the product idea
through a written or oral description to determine the attitudes and
initial buying intentions.
ii. Test will focus on whether the customer:
Would buy the product
Would replace their current brand with the new product
Would this product meet real needs
i). Business Analysis
i). Analyze potential contribution to sales, costs and profits to determine whether
The product fit into the current product mix?
internal resources are adequate
Cost and time are manageable
Financing is available
distribution channel are appropriate and adequate
the market potential sales can lead to profitability etc.
Patentability of the product idea can be done

ii). Product Development

i) Develop a prototype, working model, etc.
ii) Prototype need to contain the attributes that consumers have identified that they
want must be communicated through the design of the product.
iii). Test Marketing
i) Aim is to determine the reaction of probable buyers.
ii) Limited introduction in geographical areas chosen to represent intended market.
iii) Can observe actual consumer behavior
iv) Establish whether to go ahead, modify product, modify marketing plan or drop the
product.
iv). Commercialization
i) Corresponds to introduction stage of the Product Life Cycle
ii) Plans for full-scale marketing and manufacturing must be refined and settled.
iii) Need to analyze the results of the test market to determine any changes in the
marketing mix.
iv) Need to consider:
the speed of acceptance among consumers and channel members;
intensity of distribution,
production capabilities,
promotional capabilities,

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 prices,
competition,
Time period to profitability and commercialization costs.

New product Adoption Process

Refers to the mental process that every potential customer goes through from the
awareness of a product to its rejection or becoming loyal customers

1. Awareness Stage:

Individual consumer becomes aware of the innovation. He is exposed to innovation but

knows very little regarding the innovation. He has only limited information about it. He is
aware of either by discussion with friends, relatives, salesmen, or dealers. He gets idea
about a new product from various means of advertising like newspapers, magazines,
Internet, television, outdoor media, etc. At this stage, he doesn’t give much attention to
the new product.

2. Interest and Information Stage:

In this stage, the consumer becomes interested in innovation and tries to collect more
information. He collects information from advertising media, salesmen, dealers, current
users, or directly from company. He tries to know about qualities, features, functions,
risk, producers, brand, colour, shape, price, incentives, availability, services, and other
relevant aspects. Simply, he collects as much information as he can.

3. Evaluation Stage:

Now, accumulated information is used to evaluate the innovation. The consumer

considers all the significant aspects to judge the worth of innovation. He compares
different aspects of innovation like qualities, features, performance, price, after-sales
services, etc., with the existing products to arrive at the decision whether the innovation
should be tried out.

4. Trial Stage:

Consumer is ready to try or test the new product. He practically examines it. He tries out
the innovation in a small scale to get self-experience. He can buy the product, or can use
free samples. This is an important stage as it determines whether to buy it.

5. Adoption Stage:

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If trial produces satisfactory results, finally the consumer decides to adopt/buy the
innovation. He decides on quantity, type, model, dealer, payment, and other issues. He
purchases the product and consumes individually or jointly with other members.

6. Post Adoption Behaviour Stage:

This is the last stage of consumer adoption. If a consumer satisfies with a new product
and related services, he continues buying it frequently, and vice-versa. He becomes a
regular user of innovation and also talks favourable to others. This is a crucial step for a
marketer.

In every stage of consumer adoption, a marketer is required to facilitate consumers. He

must take all possible actions to make them try, buy, and repeat buy the innovation. Be
clear that every type of consumer (innovators, early adopters, early majority, late
majority, or laggards) follows all the stages of adoption process, but takes different
amount of time to adopt the innovation.

Diffusion of Innovations

Research shows that consumers differ in how quickly they decide to adopt (buy) a
product after they become aware of it. Under Rogers' Diffusion of Innovations theory, a
product will encounter five types of purchasers as it moves through its life cycle.

The diagram below explains the categories in Roger's Diffusion of Innovations Theory

a) Innovator Stage

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Innovators are the first to purchase a product and make up 2.5% of all purchases of the
product. Innovators purchase the product at the beginning of the life cycle.

They are not afraid of trying new products that suit their lifestyle and will also pay a
premium for that benefit. Sales to innovators are not usually an indication of future sales
as innovators simply buy because the product is new.

b) Early Adopters Stage

Early Adopters and they make up 13.5% of purchases. This group of purchasers adopt
early but unlike innovators, adoption is after careful thought.

Early Adopters are usually opinion leaders in their circle (of friends, family and
colleagues) so adoption by this group is crucial for the success of the product.

Early adopters help the product's journey in becoming "socially acceptable".

c) Early Majority Stage

The Early Majority are a cautious group of purchasers, making up 34% of purchases.

This group will not buy a product until it has become "socially acceptable".

Early majority purchases are needed for the product to achieve wide spread acceptance.

d) Late Majority Stage

Late Majority make up another 34% of sales and they usually purchase the product
during the late stages of the product's life cycle.

They are more cautious than the early majority and will only buy after the majority of
people have purchased the product.

e) Laggard Stage

The final group of people to purchase a product are called Laggards. Laggards make up
16% of total sales and purchase the product near the end of its life.

Some laggards will never purchase a product, whilst others will buy it because their
existing product is broken and it cannot be repaired or replaced with an identical product.

Laggards may wait to see if the product will get cheaper and by the time they purchase
the product a new version of the product is often on the market.

Summary

Innovators are venturesome; they are willing to try new ideas.

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 Early adopters are guided by respect; they are opinion leaders in their communities and
adopt new ideas early but carefully.

The early majorities are deliberate; they adopt new ideas before the average person.

The late majorities are skeptical; they adopt an innovation only after majorities have tried
it.

Laggards are tradition-bound; they are suspicious of change, mix with other tradition-
bound people, and adopt the innovation.

Factors that influence product adoption process

There are certain product and service characteristics that affect the diffusion process and
can influence consumer acceptance of new products and services;

a) Relative advantage:

The relative advantage of the innovative product/service offering over already existing
products/services, accelerates its rate of adoption by the target market.

The degree to which customers perceive a new product/service as superior to similar

existing products determines the relative advantage.

A product/service that provides advantage over other existing products is indicative of

being superior to existing alternatives, and thus higher in terms of “value”.

b) Compatibility:

The compatibility of the innovative product and service offering with the existing
backgrounds, behavior and lifestyle patterns of consumers also affects its adoption by the
consuming public.

The compatibility of a product/service measures how closely it relates to needs, value

systems and norms, lifestyles, culture etc.

The higher the level of compatibility, the quicker the diffusion; and the lower the
compatibility, the slower the diffusion.

A product will diffuse more quickly if it does not require consumers to change their
values, norms, lifestyles, cultures and day to day behaviors.

c) Complexity:

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 The level of complexity in a product purchase and usage also affects the diffusion
process.

An innovative offering would be easily diffused when there is ease of understanding,

purchase and use. The easier it is to understand and use a product, the more likely it is to
be accepted quickly, and vice versa.

Technological complexity acts as a barrier to diffusion. People resist adoption of new

products because of fear of complexity in purchase and usage. This is well understood by
high tech industries.

d) Trialability:

The ease with which the product or service can be tested and tried also determines the
rate of acceptance. The higher the degree of trialability, the greater would be the rate of
diffusion. This is because the prospects get an opportunity to try the product/service,
assess it and decide to accept/reject it.

Trialability can be encouraged by providing free samples, or providing smaller packs and
smaller-than-average sizes,

Trials leading to purchase can be encouraged through guaranty and warranty schemes.
Such trials encourage a product/service to be diffused easily.

f) Observability:

Observability refers to the ease with which the product can be observed.

Observability in an innovative product refers to the degree to which a product/service’s

benefits can be observed, imagined and perceived by a potential consumer.

The higher the degree of observability, the greater the chances of the innovative offering
being accepted by the prospects.

Those new product offerings that are: tangible, have social visibility, and whose benefits
are readily observed (without much time gap), are more readily diffused than those that
are intangible, or have no social visibility or whose benefits accumulate over long periods
of time.

Other factors that influence product adoption process

g) Usage:

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 “Usage” as a barrier to innovation diffusion and adoption is said to exist when the social
system (the target market) finds it incompatible to the existing usage and consumption
behaviors and thus, finds it difficult to accept and use; in other words, they .find it to be
incompatible with their existing behaviors.

The barrier is more psychological, based on deep rooted values, beliefs, attitudes and
perception, resultant in such behavior of non-acceptance and non-usage.

h) .Value:

Consumers could also resist acceptance of an innovation, as they may feel low about the
perceived value; consumers may perceive the new product/service offering to be the same
as existing offerings, and “nothing new” or “better in value.

The perceived lack of value may be:

The product/service does not provide much benefit over the existing
alternatives;

The product/service is costly, and doesn’t seem to be of worth the price.

Consumers’ perception of “high price” always takes over the perception over product
value or product benefit; in fact, values is always assessed in terms of price

i) Risk:

Risk also acts as a barrier to diffusion of innovation. Consumers show reluctance to use
an innovative product/service offering out of fear of taking risks.

There could be six types of risks that a consumer could face, viz., functional risk (would
the product perform as expected), physical risk (would the product usage and or
consumption pose a threat), social risk (would it cause risk of social embarrassment),
financial risk (would the product will be worth the cost), psychological risk (would the
innovation hurt consumers’ ego), and time risk (would it lead to wastage of time spent
while making the purchase).

The perceived risk barrier acts as a big barrier to the diffusion and adoption process;
consumers are fearful of purchase, usage and consumption of innovative offerings, and
thereby continue to patronize the existing alternatives, rather than adopt new ones (for
fear of making a wrong decision).

In order to overcome this problem, the marketers could make use of both marketing
communication (via audio-visual or print media, or company salespersons), as well as
interpersonal communication (opinion leadership, word-of-mouth communication). Trials
(free or discounted) as well as interpersonal communication with peers, colleagues and

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friends can also encourage personal experience by the consumer and help overcome this
risk.

j) Psychological factors:

Psychological factors also prevent a consumer from adopting a new product/service

offering.

These factors relate to a person’s background, attitude and belief, perception, values,
lifestyles, culture etc. They may find the innovation to be psychologically threatening.
The two common threats are

k) Tradition Barrier,

Tradition barrier relates to socio-culturally accepted norms of behavior that are regarded
as “right and appropriate,” by the consumer segment. Anything that is new and does not
support traditional patterns is regarded as psychologically threatening; this includes usage
and adoption of innovative products and services.

l) Image barrier.

Image barrier refers to the consumer’s attitude and feelings about the product/service
offering, the brand, or the dealer, or even the country of origin. It also relates to
personality and self-image (actual and ideal).

Consumers’ may resist adoption of new products/services if they are patriotic and
ethnocentric; or if they do not regard the innovation or the marketer/dealer to be of their
“class” in terms of socio-economic status or even quality.

Thus, marketers try to come up with variants in offerings, and have separate names for
separate variants depending upon the segment(s) for which they are aimed.

A. PRICING

Pricing can be defined as the process of determining an appropriate price for the product,
or it is an act of setting price for the product.

Pricing involves a number of decisions related to setting price of product. Pricing policies
are aimed at achieving various objectives

Pricing Objectives

Objectives of pricing can be classified in five groups.

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i) Profits-related Objectives:

Company’s pricing policies and strategies are aimed at following profits-related

objectives:

Maximum Current Profit:

One of the objectives of pricing is to maximize current profits. This objective is aimed at
making as much money as possible. Company tries to set its price in a way that more
current profits can be earned..

Return on Investment:

Most companies want to earn reasonable rate of return on investment.

Company sets its pricing policies and strategies in a way that sales revenue ultimately
yields average return on total investment.

ii) Sales-related Objectives:

The main sales-related objectives of pricing may include:

Sales Growth:

Company’s objective is to increase sales volume. It sets its price in such a way that more
and more sales can be achieved.

Target Market Share:

A company aims its pricing policies at achieving or maintaining the target market share.
Pricing decisions are taken in such a manner that enables the company to achieve targeted
market share.

Increase in Market Share:

Sometimes, price and pricing are taken as the tool to increase its market share. When
company assumes that its market share is below than expected, it can raise it by
appropriate pricing; pricing is aimed at improving market share.

iii) Competition-related Objectives:

Competition is a powerful factor affecting marketing performance. Every company tries

to react to the competitors by appropriate business strategies.

To Face Competition:

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Pricing is primarily concerns with facing competition. Today’s market is characterized by
the severe competition. Company sets and modifies its pricing policies so as to respond
the competitors strongly. Many companies use price as a powerful means to react to level
and intensity of competition.

To Keep Competitors Away:

To prevent the entry of competitors can be one of the main objectives of pricing. To
achieve the objective, a company keeps its price as low as possible to minimize profit
attractiveness of products.

To Achieve Quality Leadership by Pricing

Pricing is also aimed at achieving the quality leadership. The quality leadership is the
image in mind of buyers that high price is related to high quality product. In order to
create a positive image that company’s product is standard or superior than offered by the
close competitors; the company designs its pricing policies accordingly.

To Remove Competitors from the Market:

The pricing policies and practices are directed to remove the competitors away from the
market. This can be done by forgoing the current profits – by keeping price as low as
possible – in order to maximize the future profits by charging a high price after removing
competitors from the market.

iv) Customer-related Objectives:

To Win Confidence of Customers:

Company sets and practices its pricing policies to win the confidence of the target
market. Company, by appropriate pricing policies, can establish, maintain or even
strengthen the confidence of customers that price charged for the product is reasonable
one. Customers are made feel that they are not being cheated.

To Satisfy Customers:

Company sets, adjusts, and readjusts its pricing to satisfy its target customers. A company
design pricing in such a way that result into maximum consumer satisfaction.

v) Other Objectives:

They are as:

Market Penetration:

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This objective concerns with entering the deep into the market to attract maximum
number of customers. This objective calls for charging the lowest possible price to win
price-sensitive buyers.

Promoting a New Product:

To promote a new product successfully, the company sets low price for its products in the
initial stage to encourage for trial and repeat buying. The sound pricing can help the
company introduce a new product successfully.

Maintaining Image and Reputation in the Market:

Company, by charging reasonable price, stabilizing price, or keeping fixed price can
create a good image and reputation in the mind of the target customers.

To skimming maximum profit from the Market:

This objective concerns with skimming maximum profit in initial stage of product life
cycle. Because a product is new, offering new and superior advantages, the company can
charge relatively high price. Some segments will buy product even at a premium price.

Price Stability:

Company formulates pricing policies and strategies to eliminate seasonal and cyclical
fluctuations. Stability in price has a good impression on the buyers. Frequent changes in
pricing affect adversely the prestige of company.

Survival and Growth:

Pricing is aimed at survival and growth of company’s business activities and operations.
It is a fundamental pricing objective. Pricing policies are set in a way that company’s
existence is not threatened

Pricing policies and Methods

Pricing policy refers to how a company sets the prices of its products and services based
on costs, value, demand and competition. The organization can use any of the dimensions
or combination of dimensions to set the price of a product.

i) Cost-based Pricing:

Cost-based pricing refers to a pricing method in which some percentage of desired profit
margins is added to the cost of the product to obtain the final price. In other words, cost-

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based pricing can be defined as a pricing method in which a certain percentage of the
total cost of production is added to the cost of the product to determine its selling price.

Cost-based pricing can be of two types, namely, cost-plus pricing and markup pricing.

Cost-plus Pricing:

In cost-plus pricing method, a fixed percentage, also called mark-up percentage, of the
total cost (as a profit) is added to the total cost to set the price. Cost-plus pricing is also
known as average cost pricing.

Markup Pricing:

Refers to a pricing method in which the fixed amount or the percentage of cost of the
product is added to product’s price to get the selling price of the product. Markup pricing
is more common in retailing in which a retailer sells the product to earn profit.

ii) Demand-based Pricing:

Demand-based pricing refers to a pricing method in which the price of a product is

finalized according to its demand. If the demand of a product is more, an organization
prefers to set high prices for products to gain profit; whereas, if the demand of a product
is less, the low prices are charged to attract the customers.

iii) Competition-based Pricing:

Competition-based pricing refers to a method in which an organization considers the

prices of competitors’ products to set the prices of its own products. The organization
may charge higher, lower, or equal prices as compared to the prices of its competitors.

iv) Other Pricing Methods:

Value Pricing:

Implies a method in which an organization tries to win loyal customers by charging low
prices for their high- quality products. The organization delivers high- quality products at
low prices

Target Return Pricing:

Helps in achieving the required rate of return on investment done for a product, in other
words, the price of a product is fixed on the basis of expected profit.

Going Rate Pricing (Market Rate )

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Implies a method in which an organization sets the price of a product according to the
prevailing price trends in the market. Thus, the pricing strategy adopted by the
organization can be same or similar to other organizations.

B. DISTRIBUTION

Distribution is the process of making a product or service available for the consumer or
business user that needs it.

a) Functions of a Distribution Channel

i. Bridging the gap between production and consumption.

ii. Promoting the product. Awareness regarding products and other
offers should be created among the consumers.
iii. Creating contacts or prospective buyers and maintaining liaison
with existing ones.
iv. Understanding the customer's needs and adjust the company offer
accordingly.
v. Negotiating price and other offers related to the product as per the
customer demand.
vi. Storage and distribution of goods
vii. Catering to the financial requirements for the smooth working of
the distribution chain
viii. Risk taking for example by stock holding

b) Levels of the Distribution Channel

Every marketing intermediary that is helpful in distributing the products or services to the
final customers is known as channel level. Channel level reflects the specialty of the
distribution channel.

i) Manufacturer customer

In level there are no intermediaries involved, the manufacturer is selling directly to the
customer. This is called the direct-marketing' channel.

Examples of direct marketing channel can be seen at factory outlet stores. Various hotels
prefer direct-marketing, they market their services directly to their customers without
taking the help of any retail intermediary.

ii) Manufacturer Retailer Customer

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 This channel involves the use of one middleman i.e. retailer who in turn sells
goods/services directly to the end users.

Retailer buys products from manufacturers or wholesalers. It is usually adopted for

speciality goods.

For example Tata sells its cars through company approved retailers.

iii) Manufacturer Wholesaler consumer

In this level a wholesaler sells goods/services directly to the end users. Wholesalers buy
products from manufacturers.

iv) Manufacturer Wholesaler Retailers Consumers

In this level a wholesaler buys and stores products in bulk from manufacturers. He sells
these products in smaller quantities to retailers. Wholesaler and retailer act as a link
between the manufacturer and the customer.

This is the most commonly used channel for distributing goods like soap, rice, wheat,
clothes etc.

v) Manufacturer → Agent → Wholesaler → Retailer → Consumer

This level comprises of three middlemen i.e. agent, wholesaler and the retailer. The
manufacturers supply the goods to their agents who in turn supply them to wholesalers
and retailers. This level is usually used when a manufacturer deal in limited products and
yet wants to cover a wide market.

c) Distribution Channel and its Participants

Manufacturers can only produce the goods but it is the intermediary who supplies these
goods to the people who are in need of it.

To reach end consumers effectively, businesses need a well knitted distribution network.
The network includes manufacturers, retailers, wholesalers, agents and brokers
commonly known as channel participants.

These participants play a vital role in success and failure of any business. They actually
bridge the gap between suppliers and end consumers thus framing the outline for a
company in end users mindset.

i) Retailers:

Retailers are the gate keepers to the market for all other members of the sales distribution
process.

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Retailers are the persons who ultimately sell the goods to its end consumers.

ii) Wholesalers:

Wholesaling is all activities involved in selling products to those buying for resale or
business use.

Wholesaling intermediaries are firms that handle the flow of products from the
manufacturer to the retailer or business user.

Wholesalers are intermediaries or middlemen who buy products from manufacturers and
resell them to the retailers.

They take the same types of financial risks as retailers, since they purchase the products,
keep them in inventory until they are resold to retailers, and may arrange for transport to
retailers.

Wholesaling intermediaries perform one or more of the following channel functions:

i) Selling and Promoting

ii) Buying and Assortment Building
iii) Bulk-Breaking
iv) Warehousing
v) Transportation
vi) Financing
vii) Risk Bearing
viii) Market Information – giving information to suppliers and customers about
competitors, new products, and price developments
ix) Management Services and Advice: helping retailers train their sales clerks,
improving store layouts and displays, and setting up accounting and inventory
control systems.
iii) Agents and Brokers:

Agents (occasionally called brokers) are also intermediaries who work between suppliers
and retailers, but their agreements are different, in that they do not take ownership of the
products they sell.

They are independent sales representatives who typically work on commission based on
sales volume, and they can sell to wholesalers as well as retailers.

d) Motivation of Distribution Channel Members

Motivating distributors and retailers is an important strategy for influencing channel

members’ behavior

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 This can be done by offering:

a) Non financial Incentives

i) Offering training programs or marketing support to members adds value to the
relationship between supplier and channel by helping them to improve their
performance and grow their own business.
ii) Offering comprehensive knowledge about the unique selling points of the firm
products could also help the channel partner score more sales for the product
iii) Offering more intensive point of purchase advertising may be a good motivational
strategy.

b) Financial Incentives.

Financial incentives are an important source of motivation to channel members so that

the channel partners find it more lucrative to stock and sell firms’ products as compared
to those of your competitors.

i) By offering discounts on purchases above an agreed level

ii) Rewarding sales above target with bonuses.
iii) Offering a higher quantum of the commission on the sales of a firm product or
more intensive point of purchase advertising may be a good motivational
strategy.
c) Structured Channel Program

By setting up a structured channel program that offers different non financial and
financial benefits at each level.

The program might take the form of a tiered structure, with tier 3 members receiving
basic benefits and tier 1 members receiving a wide range of benefits that help them grow
their business. The benefits might include different bonus or discount levels, marketing
and training support, joint promotions and exclusive products.

C. PROMOTION MIX

This refers to market communication the communication process and tools used by the
organization to promote their products . All promotional tools (promotional mix): must
blend harmoniously into an effective communication strategy, to meet the promotional
objectives.

i. Promotional Mix Objectives

Some possible objectives of promotion for any company may include:

a) Building Brand Awareness

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 b) Creating Customer Interest or Persuading Consumers
c) Providing Information
d) Stimulate Product Demand
e) Differentiate product
f) Reinforce the Brand
g) To Promote a New Product:
h) To Face Competition:
i) To promote brand Image and Reputation: Brand Positioning
j) To change customer attitude
k) To induce trial
l) To increase sales volume
m) To retain current customers and attract potential customers

ii. Elements of the Promotional Mix

1. Advertising:

Paid form of non personal communication about an organization or its products that is
transmitted to a target audience through a mass/broadcast medium such as television,
radio or newspapers and magazines is most often the carrier of these messages. Apart
from these, billboards, posters, web pages, brochures and direct mail also fall in the same
category.

Advantages

i) Flexibility allows you to focus on a small, precisely defined segment or a mass market
ii) Cost efficient-reach a large number at a low cost per person, allows the message to be
repeated, and can improve public image.
iii) Allows for repeating the message-lets the buyer receive and compare the messages of
various competitors.
iv) Very expressive, allows for dramatization.
v) Also used to build a long term image of a product.
vi) Trigger quick sales, Sears advertising a weekend sale.

Disadvantages

i) Absolute cost outlay very high,

ii) Rarely provides quick feedback, or necessarily any feedback
iii) Less persuasive than personal selling
iv) Audience does not have to pay attention
v) Indirect feedback (without interactivity)

2. Public Relations/Publicity:

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Public relations is, a broad set of communication activities used to create and maintain favorable
relations between the organization and its publics: customers, employees, stockholders,
government officials and society in general

PR or publicity tries to increase positive mention of the product or brand in influential media
outlets. These could include newspapers, magazines, talk shows and new media such as social
networks and blogs. It involves news story about an organization or its products or both, through
mass medium at no charge, Sponsor does not pay (generally), may be expected/required to run
advertisements in the media.

Advantages

i) Publicity is primarily informative

ii) Publicity is more subdued
iii) Publicity does not identify the sponsor
iv) Publicity is free
v) Publicity is part of a program or print story and appears more objective
vi) Publicity is not subject to repetition
vii) Publicity is more credible
viii) Little control over publicity

Disadvantages

i) Media must judge publicity to be news worthy, timely, interesting and accurate.
ii) Cannot control the content or timing
iii) May delete the most important part.

3. Personal Selling:

Personal selling includes all person-to-person contact with customers with the purpose of
introducing the product to the customer, convincing him or her of the product's value, and
closing the sale. It occurs through personal communication in an exchange situation.

The role of personal selling varies from organization to organization, depending on the
nature and size of the company, the industry, and the products or services it is marketing.

Advantages

i) Personal selling is the most effective way to make a sale because of the
interpersonal communication between the salesperson and the prospect.
ii) Messages can be tailored to particular situations,
iii) Immediate feedback can be processed, and message strategies can be changed to
accommodate the feedback.
iv) Connects company representatives with the consumer and this personal contact
create a personal relationship between the customer and the brand or product.
v) Effective at building buyers preferences, convictions and actions.

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 vi) It has greater impact on consumers
vii) Provides immediate feedback
viii) Allows marketers to adjust message quickly to improve communication

Disadvantages

i). Cost per person is high, most expensive promotional tool.

ii). Long term commitment is needed to develop a sales force.

D. Sales Promotion

It’s the process of utilizing materials that act as a direct inducement, offering added
value, or incentive for the product, to resellers, sales persons or consumers to purchase
the product. It is designed for immediate (short term) increase in product sales.

Sales promotions may be targeted at consumers, industrial buyers, channel intermediaries

(e.g. traders, wholesalers or retailers) or the organisation's own sales force.

Advantages of sales promotion

i) Quick returns are possible for short term profits

ii) more consumers are looking for promotions before purchase
iii) Increase in sales by providing extra incentive to purchase. May focus on resellers (push),
consumers (pull) or both.
iv) Attract customer traffic and maintain brand/company loyalty.
v) Impulse purchases increased by displays
vi) Contests generate excitement esp. with high payoffs.

Disadvantages of Sales Promotion

i) Consumers may just wait for the incentives

ii)May diminish image of the firm, represent decline in the product quality.
iii)
Reduces profit margins, customers may stock up during the promotion.
iv)Shift focus away from the product itself to secondary factors, therefore no product
differential advantage.
v) May create customer fatigue and weariness

E. Sales Promotion Methods

These are usually short term strategic activities which aim to encourage a surge in sales. These
could be ‘buy one get one free’ options, seasonal discounts, contests, samples or even special
coupons with expiration dates.

i) Coupons:

Usually reduce the purchase price or offered as cash and users only redeem coupons

DR. KIPROP KIBOS

ii) Demonstrations:

Excellent attention getters however labor costs are usually high.

iii) Frequent User Incentives:

Helps foster customer loyalty to a specific company.

iv) Point of Purchase Display

Outside signs, window displays, counter pieces, display racks are essential for product
introductions.

v) Free Samples:
Stimulate trial of product.
Increase sales volume at the early stage of the product life cycle and obtain desirable
distribution.
However it is the most expensive sales promotion technique and is not appropriate for
mature products and slow turnover products.

vi) Money Refunds/Rebates

Submit proof of purchase and mail specific refund, usually need multiple purchase for
refund.
Helps promote trial use, due to the complexity of the refund, it has little impact.
Customers have a poor perception of rebate offered products.
vii) Premium Items
Customers are offered free products or at minimum cost as a bonus.
Used to attract competitors customers,

viii) Cents-off Offer:

Strong incentive for trying a product-very similar to coupons, but are a part of the package

ix) Consumer Contests and Sweepstakes

Consumers compete based on their analytical or creative skills.

F. Direct Marketing

Direct marketing, is the process of communicating directly with target customers to

encourage response

It enables companies to reach out directly to consumers without intermediary channels

such as those required for advertising.

This channel targets specific influential potential users through telemarketing, customized
letters, emails and text messages.

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Direct marketing has become an important part of many marketing communication
programs because:

i) The number of two-income households has increased dramatically.

ii) More shoppers now rely on credit cards for payment of goods and services. These
cashless transactions make products easier and faster to purchase.
iii) Technological advances in telecommunications and computers allow consumers
to make purchases from their homes via telephone, television, or computer
with ease and safety.

Component of Direct Marketing

i) direct mail,
ii) catalogs,
iii) coupons and inserts,
iv) telemarketing,
v) online marketing
vi) television infomercials.

Advantages of Direct Marketing

i) Direct Marketing is effective in the long run

ii) Allows for a targeted marketing approach to specific consumers to create
valuable lasting relationships.
iii) Enables companies to interact with a relatively large number of customers and
encourage a "call to action" or "most wanted response" which is usually a
purchase.
iv) Allows a company to target more precisely a segment of customers and prospects
with a sales message tailored to their specific needs and characteristics.
v) Offers accountability by providing tangible results.
vi) Gathers more information about customers and prospects which enables firms to
effectively and profitably, serve them
vii) Can reach individual consumers and develop a relationship with each of them.
viii) Direct connection with carefully targeted consumers enable organizations to
gain immediate response & long term relationships

Disadvantages of Direct Marketing

i) Consumers can build resistance to the persuasive nature of direct marketing

efforts.
ii) Direct marketing is less sales oriented and more relationship oriented.

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 iii) Consumers can grow weary of with the direct marketing efforts.
iv) Consumers are bombarded with mail, infomercials, and telemarketing pitches
daily.
v) Direct marketers must also overcome consumer mistrust of direct marketing
efforts due to incidents of illegal behavior by companies and individuals using
direct marketing
vi) Direct Marketing is usually unsolicited and seen as a nuisance by the general
public.
vii) Telemarketing, e-mail spamming and junk mail are universally despised and so
Direct Marketing tools should be used with thought and caution

4. SERVICE MARKETING

A service is an intangible product involving a deed, performance, or an effort that cannot

be physically possessed..

a) Characteristics of a Service

i) Intangibility

Services are intangible and do not have a physical existence hence services cannot be
touched, held, tasted or smelt.

ii) Heterogeneity/Variability

Given the very nature of services, each service offering is unique and cannot be exactly
repeated even by the same service provider. While products can be mass produced and be
homogenous the same is not true of services.

iii) Perishability

Services cannot be stored, saved, returned or resold once they have been used. Once
rendered to a customer the service is completely consumed and cannot be delivered to
another customer.

iv) Inseparability/Simultaneity of production and consumption

It is very difficult to separate a service from the service provider eg: the waiter is
necessarily a part of the service of serving food that he/she is delivering to the customer.

In addition services are generated and consumed within the same time frame.

v) Changing demand

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The demand for services has wide fluctuations and may be seasonal. Demand for hotel
services is seasonal, other services such as demand for public transport, have fluctuations
in demand.

b) The 9 P's of Marketing

i) Product

Product is a tangible object or an intangible one for sale. Examples of tangible objects are
pens, cars etc. Intangible products are service-based like transportation, hotel
accommodations or insurance.

ii) Price

Price is the amount that a product is asking in the market. It is determined by a number of
factors including market positioning, market share, competition, cost, product identity
and the customer's perceived value. A business may increase or decrease the price of
product if the product is in demand or in competition.

iii) Place

Refers to the location where a product can be purchased or the target market of the
product. It also refers to the channel where the product is available for sale. Therefore, it
is often referred to as the distribution channel.

iv) Promotion

Promotion is all the communications that a marketer may use in the marketplace. It has
five distinct elements: personal selling, advertising, sales promotion, direct marketing,
and public relations.

v) People

People refer to the transactional interface between an organization and the consumers. It
involves the interaction of customers with people who are supposed to be knowledgeable
on product or service attributes, have the highest and right competencies, are motivated
and have the right attitude

vi) Process

Process is the procedure, mechanism and flow of activities to produce a product or to

provide services or products to consumers. Firms must ensure that organization process
can meet the needs of customers.

vii) Physical Evidence

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Physical evidence is the tangible element that allows the consumers to make judgments
about the organization. Examples are:

i) Premises
ii) Websites
iii) Paperwork (such as tickets)
iv) Brochures
v) Signage (such as those on aircraft and vehicles)
vi) Uniforms
vii) Business cards
viii) Packaging

Packaging is the process of enclosing or protecting products for distribution, storage,

sale, and use, it also refers to the process of design, evaluation, and production of
packages and the image of the organization.

ix) Payment

Payment is the consideration for the delivery of products and services. It can be in
different formats: cash, cheque, credit and even barters or loyalty program points. Terms
of payment affect the ease of transaction which may also affect the buying behaviour of
the consumers.

5. MARKETING INFORMATION SYSTEM

A Marketing Information System can also be defined as 'a system in which marketing
data is formally gathered continuously from sources inside and outside an organization
sources, stored, analyzed and distributed to managers in accordance with their
informational needs on a regular basis

Marketing information provides basis for decisions such as product development or

improvement, pricing, packaging, distribution, media selection, and promotion.

a) Components of Marketing Information System (MIS)

The information needed by marketing managers comes from various sources which
include: - internal company records, marketing intelligence and marketing research. The
information analysis system then processes this information to make it more useful for
managers.
The four main components of Marketing Information System (MIS) are:

i) Internal Records,
ii) Marketing Intelligence,
iii) Marketing Research (MR), and

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 iv) Marketing Decision Support System.

i) Internal Records

Marketing managers use internal records and reports regularly, especially for making
day-to-day planning, implementation and control decisions.

Internal records information consists of information gathered from sources within the
company to evaluate marketing performance and to detect marketing problems and
opportunities.

Information from internal records is usually quicker and cheaper to get than information
from other sources, but it also presents some problems. Because internal information was
for other purposes, it may be incomplete or in the wrong form for making marketing
decisions.

ii) Marketing Intelligence

The marketing intelligence system is a set of procedures and sources used by the
managers to obtain everyday information about marketing environment which can be
then used by the marketing manager for taking decisions and making policies about
marketing.

Marketing intelligence comes from many sources:

a) Company's Personnel

b) Sales force:
c) Distributors, retailers and other intermediaries
d) External Networking
e) Published Data
f) Customer Feedback
g) Competitors

iii) Marketing Research

Marketing research is conducted to solve specific marketing problems of the company. It

collects data about the problem. It is a proactive search for information. In many cases,
data is collected tabulate, analyze and conclusions are drawn. Then the recommendations
are given for solving the problem.

The other form of marketing research centers not on a specific marketing problem but is
an attempt to continuously monitor the marketing environment. These monitoring or
tracking exercises are continuous marketing research studies, often involving panels of

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farmers, consumers or distributors from which the same data is collected at regular
intervals. Whilst the ad hoc study and continuous marketing research differs in the
orientation, yet they are both proactive.

iv) Marketing decision support systems

These are the tools which help the marketing managers to analyze data and to take better
marketing decisions. It is a system supported by software and hardware to gather
information from business and environment. Computer helps the marketing manager to
analyze the marketing information. It also helps them to take better decisions. There are
many software programs, which help the marketing manager to do market segmentation,
price fixing, advertising budgets, etc

A growing number of organizations are using marketing decision support system to help
the managers in taking better decisions.

Advantages of Marketing Information System

a) Organized data collection.

b) A broad perspective.
c) The storage of important data.
d) An avoidance of crises.
e) Coordinated marketing plans.
f) Speed in obtaining sufficient information to make decisions.
g) Data amassed and kept over several time periods.
h) The ability to do a cost-benefit analysis

Disadvantages of a Marketing information system

The disadvantages of a Marketing information system are :

a) high initial time and labor costs

b) The complexity of setting up an information system.

Marketing Research

Marketing research refers to the systematic and objective identification, collection,

analysis, and dissemination of information for the purpose of assisting management in
decision making related to the identification and solution of problems (and opportunities)
in marketing.

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a) Steps of the Research Process

Step 1: Identify the Problem

The first step in the process is to identify a marketing problem or develop a research
question. The research problem may be something the agency identifies as a problem,
some knowledge or information that is needed by the agency, or the desire to identify a
recreation trend nationally.

Step 2: Review the Literature

The researcher must review the literature related to the research problem. This step
provides foundational knowledge about the problem and also educates the researcher
about what studies have been conducted in the past, how these studies were conducted,
and the conclusions in the problem area.

Step 3: Clarify the Problem

The researcher clarifies the problem and narrows the scope of the study. This can only be
done after the literature has been reviewed. The knowledge gained through the review of
literature guides the researcher in clarifying and narrowing the research project

Step 4: Clearly Define Terms and Concepts

Terms and concepts are words or phrases used in the purpose statement of the study or
the description of the study. These items need to be specifically defined as they apply to
the study.

Step 5: Determine Research Design

A research design is a master plan specifying the methods and procedures for collecting
and analyzing the needed information. There are three classifications of research design
to consider: exploratory research, descriptive research and causal research

Step 6: Define the Population

Research focuses on a specific group of people, employee institutions from whom the
study information will be obtained

Step 7: Sampling Plan

The sample, which is a smaller group selected from the population specified for the
study. The study cannot possibly include every person in the population, so a smaller
group is used to represent the population. The group of participants is called There are
essentiality two types of sampling: probability and non-probability sampling.

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Step 8: Design & Preparation of Research Instrument

In this step of the market research process, it’s time to design your research tool. If a
focus group is the instrument of choice, researcher will start preparing questions and
materials for the moderator. The instrument should be tested with a small group prior to
broad deployment.

Step 9: Collection of Data

This involves the procedure of administering survey, running focus groups, conducting
interviews, implementing field test, etc. The answers, choices, and observations are all
being collected and recorded.

Step 10: Analyzing Research Data

Data collection has drawn to a close and the researcher has heap of raw data. The data
may be analysed using descriptive statistics which describes the collected data and
includes frequencies, Percentages, Means, Standard Deviations, Variance. Inferential
statistics are also used to measure the relationship between variables and includes
statistical tools such regression, correlation, Chi square, factor analysis and structural
equation modeling

Step 11: Visualizing Data and Communicating the Results

A great way to present the data is to start with the research objectives and marketing s
problem that was identified in step 1. Restate those marketing questions, and then
present study findings and recommendations based on the data, to address those issues
using tables, charts and graphs

Stage 12: The Research Report

The culmination of the research process is the research report. It includes a clear,
accurate, and honest description of everything that has been done and the results,
conclusions, and whenever possible recommendations for courses of action. Two critical
attributes of the report are that it provides all the information readers need using language
they understand (completeness) and that it contains selective information chosen by the
researcher (conciseness).

Step 12: Drawing conclusions and making recommendations

The end products of marketing research are conclusions and recommendations. With
respect to the marketing planning function, marketing research helps to identify potential
threats and opportunities, generates alternative courses of action, provides information to
enable marketing managers to evaluate those alternatives and advises on the
implementation of the alternatives.

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b) Types of Research

Business research can be classified into two types based on the purpose into pure and
applied research.

i) Basic or Pure Research

It is an inquiry undertaken to expand the limits of knowledge and it involves collecting

information that might be used by a variety of managers.. The findings of basic research
contribute to knowledge and can be useful to more than one industry or service category.

ii) Applied Research

It is conducted when a decision must be made about a specific real-life problem. Applied
research starts with a problem-solving focus. When a particular management decision is
to be made, applied research involves collecting information specific to that manager’s
decision.

Role of Marketing Research

(1) Preparation of marketing plans

It facilitates the preparation of marketing plans and their implementation

(2) Implementation of the plans, strategies and programs

It enhances the development and implementations of marketing policies, procedures and

programmes are planned in the prevailing market conditions and then these plans and
programmes are translated into action.

(3) Reduction of cost,

Various costs are involved in marketing and marketing objectives include their reduction.
Sales promotion cost, selling cost, distribution cost are all taken into scrutiny and ways
and means are devised to secure economy as far as possible without affecting the volume
of sales.

(4) Making the product acceptable and profitable,

Products which are put to market after careful research are likely to stand the competition
and yet retain the legitimate profit with full acceptability of the product to the satisfaction
of consumers.

(5) Ensuring of business prosperity

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Sales activities are fully covered by Marketing Research. Right product, proper pricing,
satisfactory quality, timely placement of products on the market are the objectives of
marketing research.

(6) Ensuring functioning of marketing activities.

The ultimate object of Marketing Research is to increase the efficiently of marketing

activities. Thus it contributes to the prosperity of the enterprise at the micro as well as on
the macro level. The whole business world comprising of producers, distributors and
advertisers derives benefits from Marketing Research.

6. BUYER BEHAVIOUR AND MARKET SEGMENTATION

A Consumer

Refers to any individual who purchases goods and services from the market for his/her
end-use is called a consumer.

a) Consumer Behaviour

Consumer behaviour is the study of individuals, groups, or organizations and the

processes they use to select, secure, use, and dispose of products, services, experiences,
or ideas to satisfy their needs and wants.

The study of consumer behaviour explains as to:

a) Why and why not a consumer buys a product?

b) When a consumer buys a product?
c) How a consumer buys a product?

Importance of analyzing consumer behaviour

A firm needs to analyze buying behavior for:

Buyer’s reactions to a firms marketing strategy has a great impact on the firms
success.
The marketing concept stresses that a firm should create a Marketing Mix (MM)
that satisfies (gives utility to) customers, therefore need to analyze the what,
where, when and how consumers buy.
why consumers make the purchases that they make?

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 what factors influence consumer purchases?
the changing factors in our society.
Marketers can better predict how consumers will respond to marketing strategies
market segmentation and targeting.Product
Planning and development : It includes the activities of product research,
marketing research, market segmentation, product development, determination of
the attributes, quantity and quality of the products.
Branding: Branding of products is adopted by many reputed enterprises to make
their products popular among their customer and for many other benefits.
Marketing manager has to take decision regarding the branding policy, procedures
and implementation programs.
Packaging- Packaging is to provide a container or wrapper to the product for
safety, attraction and ease of use and transportation of the product
Channels of Distribution: Decision regarding selection of most appropriate
channel of distribution like wholesaling, distribution and retailing is taken by the
marketing manager and sales manager.
Pricing Policies: Marketer has to determine pricing policies for their products.
Pricing policies differs form product to product. It depends on the level of
competition, product life cycle, marketing goals and objectives, etc.
Sales Management: Selling is a part of marketing. Marketing is concerned about
all the selling activities like customer identification, finding customer needs,
persuading customer to buy products, customer service, etc.
Promotion: Promotion includes personal selling, sales promotion, and advertising.
Right promotion mix is crucial in accomplishment of marketing goals.
Finance: Marketing is also concerned about the finance, as for every marketing
activity be it packaging, advertising, sales force budget is fixed and all the
activities have to be completed with in the limit of that budget.
After Sales services: Marketing covers after sales services given to customers,
maintaining good relationships with customers, attending their queries and
solving their problems

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Consumer Decision-Making Process (Consumer Buying Process)

Consumer buying process consists of sequential steps the consumer follows to arrive at
the final buying decisions. Mostly, consumers follow a typical buying process..

1. Problem Identification:

This involves recognizing unmet need. The need is a source or force of buying behaviour.
Buying problem arises only when there is unmet need or problem is recognized.

Need or problem impels an individual to act or to buy the product as the buyer senses a
difference between his actual state (physical and mental) and a desired state.

The need can be triggered by internal or external stimuli. Internal stimuli include basic or
normal needs – hunger, thirst, sex, or comfort; while external stimuli include external
forces, for instance, when an individual watch a new brand car, he desires to buy it.

2. Information Search:

Interested consumer will then seek information from the following sources of
information:

a) Personal Sources:

They may include family members, friends, package, colleagues, and relatives.

b) Commercial Sources:

Advertising, salesmen, dealers, package, trade show, display, and exhibition are dominant
commercial sources.

c) Public Sources:

Mass media (radio, TV, newspapers, magazines, cinema, etc.), consumer- rating
agencies, etc., are main public sources.

d) Experimental Sources:

They include handling, examining, testing, or using the product.

Selection of sources depends upon:

a) Personal characteristics,
b) Types of products,
c) Capacity and reliability of sources

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 By gathering information from relevant sources, the consumer can learn about different
products and brands available in the market.

Consumer scrutinizes all the brands based on the following sequence.

a) Total (brands) set to awareness

b) Set to affordable set,
c) Set to choice set.
3. Evaluation of Alternatives:

In this stage, the consumer has collected information about certain brands. Now, he
undergoes evaluation of brands to selects the best one that offers maximum satisfaction.

Evaluation calls for evaluating various alternatives based on the following criteria:

a) Benefits offered by the brands

b) Qualities, features or attributes, and performance
c) Price changed by various brands
d) History of brands
e) Popularity, image or reputation of brands
f) Product-related services offered by the brands, such as after-sales services,
warrantee, and free installation
g) Availability of brands and dealer rating.

The brand that meets most of the above conditions reasonably is more likely to be
preferred.

4. Purchase Decision:

The brand that offers maximum benefits or satisfaction is selected by comparing one
brand with others.

Consumer’s buying decision will also involve five decisions:

a) Brand Decision:
b) Vender Decision
c) Quantity Decision:
d) Timing Decision:
e) Payment Decision:

However, the consumer’ decision to avoid, modify, or postpone a purchase decision at

this stage is influenced by some factors.

a) Attitudes of others.

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The impact of other persons’ attitudes depends on degree of their negative attitudes
toward the consumer’s preferred brand, and consumer’s degree of compliance with other
persons’ wishes.

b) Unanticipated situational factors.

Purchase intension may change due to certain unanticipated situational factors like price
hike, loss of job, family income, major medical expenses, non-availability of the
preferred brand, or such similar factors.

c) Consumer’s perceived risk.

Degree of risk depends on price, attribute uncertainty, entry of a new superior product,
and his self-confidence.

5. Post-purchase Decisions:

Consumer buys the product with certain expectations; however there is always possibility
of variation between the expected level of satisfaction and the actual satisfaction.

Hence the subsequent behaviour is influenced by degree of satisfaction/dissatisfaction.

Obviously, level of the consumer’s satisfaction with the product affects his subsequent
behaviour/action. If he is satisfied reasonably, he purchases the product again, and talks
favourably to family members, friends, relatives, and co-workers.

Quite opposite to it, dissatisfied consumer responds differently. He may abandon

product, complain to the company for compensation, resort to the court and warn other
organisations, friends, relatives and co-workers to avoid product.

b) Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:

a) Level of Involvement in purchase decision

i) Importance and intensity of interest in a product in a particular situation

The higher the risk the higher the involvement

Types of risk:

i) Personal risk
ii) Social risk
iii) Economic risk

Buyers’ level of involvement determines why he/she is motivated to seek information about a
certain products and brands but virtually ignores others.

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1. Routine response:

Low involvement or Routine buying behavior involve buying frequently purchased low
cost items; which need very little search and decision effort; purchased almost
automatically. Examples include soft drinks, snack foods, milk etc. In these situations,
products are essentially purchased without any significant thought.

2. Limited decision making:

Limited Decision Making is exhibited in incidences where buyers buy product

occasionally. When a buyer needs to obtain information about unfamiliar brand in a
familiar product category, he or she will require a moderate amount of time for
information gathering for examples include clothes

3. Extensive decision making:

Extensive decision making or high involvement purchases involve high priced goods that
are visible to others carry higher risk,

Buying a house is a big investment and such a decision comes with evident economic and
social risks. Extensive decision making requires the most research.

Infrequently bought products and services such as cars, homes, computers and education
carries high degree of economic/performance/psychological risk. Thus buyers spend a lot
of time seeking information from companies friends and relatives, dealer/agents etc
before deciding. They go through all six stages of the buying process.

4. Impulsive buying

Consumers who buy something impulsively wake up that day without knowing they’re
going to spend money on a particular item. But all of a sudden, they are inspired for
whatever reason and make the purchase. Impulsive buying requires no conscious
planning.

b) Types of Market

Market means a place where buyer and seller meets together in order to carry on
transactions of goods and service

i). Consumer Markets

Consumer market involves marketing of consumer goods such as Television,

Refrigerator, Air conditioners etc. Consumer market is characterized by the presence of
high competition, penetration pricing, dynamics of channel management and finally a
high expense on manufacturing and distribution.

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ii). Business Markets

Business buyer is also characterized by increased competition hence a business buyer

will think 4–5 times before purchasing a product because of the cost involved. Because of
the cost involved, Organizational buyers make it a point to be much more knowledgeable
than any average customer. Organizational buyers have a group of dedicated people who
form the “Purchase department”. These people are responsible for buying at the lowest
possible price they can.

The other characteristic of business markets is the time taken to close the deal. Business
takes time to be analysed and to fix up a price as they consider the cost of inflation while
the business is in progress. Thus they need proper planning else the cost of the business
would take a hit on the profits for the company.

iii). Global Markets

The changes in the cost of transportation, government policies and the overall need for
expansion have given an impetus to globalization. Companies may be global on the basis
of both – business to business as well as business to consumers. The challenges faced by
global companies are much more than those faced by local companies..

iv). Government or Non profit Market

The government market mainly involves Government offices, ordnance

factories, army, navy and other government departments. The non profits on the other
hand may involve groups based on different beliefs. Both of these entities have a limited
purchasing budget and hence the price of products is important. Accordingly the
purchase process is organized.

c) Market Segmentation

Market segmentation is a marketing concept which divides the complete market set up
into smaller subsets comprising of consumers with a similar taste, demand and preference
and respond in a similar way to the market happenings. One market segment is totally
distinct from the other segment.

i). Requirements for Effective Market Segmentation:

For a market segment to justify attention the variables that are selected must be relevant
and the market must satisfy these conditions:

i) Measurable

Consumer markets are relatively easier to measure than the industrial and technical goods
market. This is largely due to the relative lack of specific published data.

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Some form of data should be available to measure the size of the market segment.
Measurements are very important to be able to evaluate the overall attractiveness of each
segment

ii) Accessible

The market segment should be reachable, particularly in terms of distribution and

communication. Each segment needs to be able to be reached and communicated with on
an efficient basis

iii) Appropriate:

It should be appropriate to the organisation’s objectives and resources.

Not all profitable segments are positively exploited as the in-house expertise and finance
must permit the organisation in this case.

iv) Stable:

This would ensure that its behaviour in the future can be predicted with a sufficient
degree of confidence.

v) Homogeneous

The consumers in each segment are similar in terms of needs and/or characteristics

vi) Heterogeneous

Each segment of consumers should be relatively unique, as compared to the other

segments that have been constructed.

This demonstrates that the consumers in the overall market have been effectively divided
into sets of differing needs

vii) Substantial

The market segment should be large enough, in terms of sales and profitability, to
warrant the firm’s possible attention. Each firm will have minimum requirements for the
financial return from their investment in a market, so it is necessary to only consider
segments that are substantial enough to be of interest

viii) Actionable/practical

The firm needs to be able to implement a distinctive marketing mix for each market
segment. The range of segments identified generally need to be defined for the

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capabilities and resources of the organization, so very specialized segments may not be
appropriate

ix) Responsive

Each market segment should respond better to a distinct marketing mix, rather than a
generic offering. The key outcome of the STP process is to develop a unique marketing
mix for a specified target market, if the segment will not be more responsive to a distinct
offering, then the segment can probably be combined with another similar segment

ii) Bases of Consumers Market Segmentation

a) Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals..

i) Brand Preferences
ii) Price Sensitivity
iii) Conservative/Liberal
iv) Enviro-Friendly
v) Hobbies
vi) Lifestyle
vii) Information Sources
viii) Service Preferences
ix) Buy Based on Trends
x) Spontaneity
xi) Influenced by Peers
xii) Relationship Importance
xiii) Interests
xiv) Opinions
xv) Personality
xvi) Self Image
xvii) Activities
xviii) Values
xix) Attitudes

b) Demographic Segmentation

In demographic segmentation, market is divided into small segments based on

demographic variables like:

i) Age

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 ii) Gender
iii) Income
iv) Occupation
v) Education
vi) Social Class
vii) Generation
viii) Family size
ix) Family life cycle
x) Home Ownership
xi) Religion
xii) Ethnic group/Race
xiii) Nationality

Demographic factors are most important factors for segmenting the customers groups.
Consumer needs, wants, usage rate these all depend upon demographic variables. So,
considering demographic factors, while defining marketing strategy, is crucial.

c) Behavioural Segmentation

In this segmentation market is divided into segments based on consumer knowledge,

attitude, use or response to product.

Behavioral variables include:

i) Usage Rate
ii) Product benefits
iii) Brand Loyalty
iv) Price Consciousness
v) Occasions (holidays, New Year and Eid)
vi) User Status (First Time, Regular or Potential)
vii) Purchase History
viii) Where They Shop
ix) Type of Store Preferences
x) Association Memberships
xi) Internet Usage
xii) Impulsiveness
xiii) Rate of usage
xiv) Frequency of usage
xv) Benefits sought

Behavioral segmentation is considered most favorable segmentation tool as it uses those

variables that are closely related to the product itself.

DR. KIPROP KIBOS

 d) Geographic Segmentation

Geographic segmentation refers to the classification of market into various geographical

areas. In geographical segmentation, market is divided into different geographical units
like:

i) Regions (by country, nation, state, neighborhood)

ii) Population Density (Urban, suburban, rural)
iii) City size (Size of area, population size and growth rate)
iv) Climate (Regions having similar climate pattern)

A company, either serving a few or all geographic segments, needs to put attention on
variability of geographic needs and wants. After segmenting consumer market on
geographic bases, companies localize their marketing efforts (product, advertising,
promotion and sales efforts).

iii) Bases for Business Market Segmentation

Business market can be segmented on the bases consumer market variables but because
of many inherent differences like

i) Bulk purchasing
ii) Evaluation depth
iii) Joint decisions making

Business market might be segmented on the bases of following variables:

a) Company Size:

What company sizes should we serve?

b) Industry:

Which industry to serve? Purchasing approaches: Purchasing-function organization,

Nature of existing relationships, purchase policies and criteria.

c) Product usage

Situational factors: seasonal trend, urgency: should serve companies needing quick order
deliver, Order: focus on large orders or small.

d) Geographic

Regional industrial growth rate, Customer concentration, and international

macroeconomic factors

DR. KIPROP KIBOS

7. CONTEMPORARY ISSUES IN MARKETING

m) Ethics in marketing

Ethics is a difficult subject because everyone has subjective judgments about what is
“right” and what is “wrong.”Hence ethical marketing is not a hard and fast list of rules,
but a general set of guidelines to assist companies as they evaluate new marketing
strategies

Ethical marketing is less of a marketing strategy and more of a philosophy that informs
all marketing efforts. It seeks to promote honesty, fairness, and responsibility in all
marketing activities. Thus it promotes the belief that :

1. All marketing communications share the common standard of truth.

2. Marketing professionals abide by the highest standard of personal ethics.

3. Advertising is clearly distinguished from news and entertainment content.

4. Marketers should be transparent about who they pay to endorse their products.

5. Consumers should be treated fairly based on the nature of the product and the nature
of the consumer (e.g. marketing to children).

6. The privacy of the consumer should never be compromised.

7. Marketers must comply with regulations and standards established by governmental

and professional organizations.

n) Political marketing

Political marketing is the process by which political candidates promote themselves and
their platforms to voters through masterly-crafted communications aimed at gaining
public support. The modern political marketing landscape provides myriad opportunities
to connect with potential voters and shape public opinion, including cold calls, email
campaigns, direct mail leaflets, radio spots, social media outreach, and television news
and talk show appearances.

The importance of political marketing is how effective it is at spreading messaging and

informing the public. Campaign messages and ideas are very easily and quickly
consumed and shared, and this facilitates a better more organic way of raising awareness
and generating a call them to action, whether that action is to join a campaign, lobby for a
bill, or cast a vote at the poll.

DR. KIPROP KIBOS

o) Corporate social responsibility

Corporate social responsibility (CSR) refers to business practices involving initiatives

that benefit society. A business's CSR can encompass a wide variety of tactics, from
giving away a portion of a company's proceeds to charity, to implementing "greener"
business operations. CSR is becoming more mainstream as forward-thinking companies
embed sustainability into the core of their business operations to create shared value for
business and society. "Sustainability isn't just important for people and the planet, but
also is vital for business success. More practically, CSR often represents the policies,
practices and initiatives a company commits to in order to govern themselves with
honesty and transparency and have a positive impact on social and environmental
wellbeing. "The next generation of employees is seeking out employers that are focused
on the triple bottom line: people, planet and revenue,"

There are a few broad categories of social responsibility that many of today's businesses
are practicing:

1. Environmental efforts:

One primary focus of corporate social responsibility is the environment. Businesses

regardless of size have a large carbon footprint. Any steps they can take to reduce those
footprints are considered both good for the company and society as a whole.

2. Philanthropy:

Businesses also practice social responsibility by donating to national and local charities.
Businesses have a lot of resources that can benefit charities and local community
programs.

3. Ethical labor practices:

By treating employees fairly and ethically, companies can also demonstrate their
corporate social responsibility. This is especially true of businesses that operate in
international locations with labor laws that differ from those in the United States.

4. Volunteering:

Attending volunteer events says a lot about a company's sincerity. By doing good deeds
without expecting anything in return, companies are able to express their concern for
specific issues and support for certain organizations.

p) Concept of Agricultural Marketing:

Agricultural marketing system is an efficient way by which the farmers can dispose their
surplus produce at a fair and reasonable price. Improvement in the condition of farmers

DR. KIPROP KIBOS

and their agriculture depends to a large extent on the elaborate arrangements of
agricultural marketing.

The term agricultural marketing include all those activities which are mostly related to
the procurement, grading, storing, transporting and selling of the agricultural produce.
Agricultural marketing comprises all operations involved in the movement of farm
produce from the producer to the ultimate consumer. Thus, agricultural marketing
includes the operations like collecting, grading, processing, preserving, transportation and
financing

q) Consumerism

Consumerism is a social as well as economic order which encourages the buying of

goods and services in ever-greater amounts. Consumerism also refers to the consumerists
movement, consumer activism or consumer protection which seeks to defend and inform
consumers by having required these practices as honest advertising and packaging,
product guarantees, and enhanced standards of safety. In this regard it is a movement or
an array of policies having a mission of regulating the products, methods, services, and
standards of sellers, manufacturers and advertisers in the buyers’ interests. As per
economics, consumerism means economic policies laying emphasis on consumption. In a
sense, it is believed that the consumers are free to make choice and should dictate the
society’s economic structure.

r) Green Marketing

Green marketing is the marketing of products that are presumed to be environmentally

safe. Green Marketing incorporates broad range of activities including product
modification, changes to the production process, packaging changes, and modifying
advertising. Green marketing focuses on satisfaction of customer needs and wants with
no or minimum harm to the natural environment

It is well known that increasing production and business activities are polluting the
natural environment. Damages to people, crops, and wildlife are reported in different
parts of the world. As resources are limited and human wants are unlimited, it is
necessary for marketers to use resources efficiently, so that organisational objectives are
achieved without waste of resources. So green marketing is inevitable. There is growing
interest among people around the world regarding protection of natural environment.
People are getting more concerned for environment and changing their behaviour for the
protection of environment.

DR. KIPROP KIBOS

s) Global Marketing

Global marketing is more than simply selling a product internationally. Rather, it includes
the whole process of planning, producing, placing, and promoting a company’s products
in a worldwide market. Large businesses often have offices in the foreign countries they
market to; but with the expansion of the Internet, even small companies can reach
customers throughout the world.

Even if a company chooses not to expand globally, it may well face domestic competition
from foreign companies that are. This competition has made it nearly a necessity for most
businesses to establish an international presence. Global marketing is particularly
important for products that have universal demand, such as food and automobiles

DR. KIPROP KIBOS