INTRODUCTION TO

MANAGEMENT
Dr. Agyanim Boateng
 Introduction
The current economic environment, globalization and technological advancement pose many challenges to management
as well as how goods and services produced finally get to those who need them in a way that will be profitable to the
organization. Issues such as the changing growth rates, rapid technological changes, recession and the stiff
competition are forcing organizations to adapt and respond in order to survive and prosper in the various industries
that they find themselves. To survive and prosper means an organization needs to find ways of achieving maximum
effectiveness in the ways its resources are deployed in an attempt at meeting clients’ needs (Cannon, 2003). This
means that organization must consider every area of expenditure to ensure minimizing waste and maximising returns
to investment. It is in this light that the crucial role of marketing comes to the fore. Thus, marketing places a central
and crucial role in determining the health/prosperity/success of an organization. It is for this reason that Hammer and
Champ (1993) argued that the customers and their expectations have changed. They stated that:
 Sellers no longer have the upper hand; customers do.

 Customers now tell suppliers what they want, when they want it, and what they will pay.

 Customers and Co-operations alike-demand that products and services are designed for their unique and particular

needs. There is no longer any such notion as “the customer’’; there is only this customer
 Customers expect and demand more, because they know they can get more, customers don’t need to deal with

companies that don’t understand and appreciate this in the customer-buyer relationship.
Peters and Waterman (1982) seem to agree with Hammer and Champ (1993) when they pointed out that the 60 most
successful US organizations shared dedication to marketing as the key strategic discipline. These organizations were
dedicated to the most important marketing proposition that the key to success lies in ‘‘keeping close to the customer’’.
Put differently, Rodgers who was IBM’s marketing Vice-president stated that it is a shame that, in so many companies,
whenever you get good service it’s an exception. Not so at the excellent companies. Everyone gets into the act. Many
of the innovative companies got their best ideas from customers. That comes from listening intently and regularly.
 Introduction con’t
It must be noted that the drift into compliancy, the failure to recognize the ongoing challenges imposed on organizations by changes in the market-
place will mean losing ground mettle. The customer-driven company (Whitely, 1999) will constantly be on its mettle. The dawning of age of mass
customization (Price et al., 1993) makes this sensitivity to client or customer needs even more important. Hamel and Prah (1994) believe that there
are three kinds of organizations. These are:
Organizations that try to lead customers where they don’t want to go. These are organizations that find the idea of being customer led as an insult.

Organizations that listen to customers and then respond to their articulated needs. These needs might probably being satisfied by more foresightful

competitors, and
Organizations that lead customers where they want to go but don’t know yet.

In a modern business environment, the main objective of marketing is to make things by understanding the customer needs and building customer-

driven organization (Kay, 1995). Successful marketing personnel therefore re-think, review and re-develop their ideas constantly.
Like Peters and Waterman’s (1982) study, Saunders and Wong (1985) found that successful British companies kept close to their customers through a

mixture of regular and positive interactions. Thus, marketing helps organizations to gain competitive advantage. Porter believes that firms that gain
competitive advantage in an industry are often those that not only perceive a new market need or the potential of new technology but more early and
most aggressively to exploit it. Thus, marketing is the powerhouse for industrial growth and the prime mechanism for sustainable growth and goal
achievement for a better life, better clothing, better food for oneself and his or her family. Marketing spurs individual’s exertion and great production.
It must be noted that this beneficial view of marketing is not universally accepted. Some people believe that all that organizations need is to produce

good products and services and customers will be satisfied and the business will also be successful. Thus, just make a better mousetrap and the world
will beat a path to your door or like what Packed (1960) a said of Americans that the people of the United States are a sense becoming nations on a
tiger. They must learn to consume more and more, or they are warned, their magnificent economics machines will turn and devour them. Some
people have also argued that marketing can lead to conspicuous, even unnecessary consumption while others argue that the commercial benefit of
marketing are for less than it is claimed.
For example, Mant (1977) has suggested that many of the gains for marketing are less considerable than often suggested. However, it is argued that in

modern economic situation, the grass will grow high on the path to the better mousetrap factory if the new mousetrap is not properly marketed. Most
of the criticisms against marketing reflect exaggerated claims and expectations about marketing and failure to distinguish the appearance from the
reality of marketing. It should be noted that poor product design, quality problems, alienated staff and weak support systems are not resolved by
clever packaging. Both important parts of total business system aim at providing consumers with need-satisfying goods and services. Production and
marketing provides five kinds of economic utility to the customer. These are: form, task, time, place and possession utility that are needed to provide
consumer satisfaction. Utility here simply means the power to satisfy human needs.
 Introduction con’t
Form Utility: Is provided when someone produces something tangible-for instance a mobile phone.
 Task Utility: Is provided when someone performs a task for someone else-for instance when someone provides consultancy services
or a bank handles financial transactions.
 Time Utility: Means having a product or service available at when the customer needs it.
 Place Utility: Means having the product/service available where the customer wants it.
 Possession Utility: Means obtaining a good or service and having the right to use or consume it.
 It is noted that form and task utility alone do not provide customer satisfaction. For example, just producing a mobile phone or
consultancy service will not make a customer satisfied. The product or service must be something that the consumer wants or there is
the no need to be satisfied and no utility. The product or service after designed and produced must be marketed to create the
awareness and to place it in the hands of the consumer in a way that is profitable to the organisation. Marketing thinking therefore
guides the production side of the business and focuses on what customers want and should guide what is produced and offered. Thus,
marketing ensures that the organisation produces goods and services that are needed by the customers as it does not make economic
sense to try and sell goods and services which do not have demand when there are so many goods and services that consumers are
looking for. For example, a marketing research may show that some customers do not want any kind of mousetrap but want someone
else to kill the mice for them or may want to live where mice are not a problem.
 It is agued further that even when marketing and production combine to provide form and task that are in high demand, consumers
will not be satisfied if the goods or services are not provided at the right place and time with ability to utilize them. Research and
marketing has shown that the reality of marketing is rooted in research, production, human resources and financial policies of
enterprise. The strength of Japanese and German marketing lies in integrating these features into a powerful customer orientation.
This was highlighted in a study by Wong et al., 1998). They observed that “The finding.... confirm the Japanese astuteness in
marketing strategies were clearly defined, decisive and aggressive not losing sight of new opportunities in the market, they time their
entry well. Their products had significant advantages and their marketing efforts were more efficiently targeted at well defined
sectors of the market..... The British were woefully weak and defensive, driven much less by market opportunities but more survival
needs
Summary.
If could be concluded that:
 Many of the most successful firms are convinced that their commitment to
marketing is critical to their achievements.
 The transformation of the service sector by firms such as Mariot Hotels and
Florida Power owes much to recognition of the contribution that marketing can
mtake (Marcus, 1992) and the opportunities for genuine breakthroughs in customer
service.
 Much of the debate on the significant or beneficial view of marketing appears to be
based on very different understanding of the marketing concept.
 The reality of marketing is firmly rooted in the notion that the firm exists to meet
customers’ needs. All the firm’s efforts and the entire workforce are committed to
translating these needs into suitable products and services.
 Some firms however confuse the appearance of marketing– large advertising
budget, big sales forces, prestige sponsorship and other symbols– with the reality.
They would rather spend a fortune on an advertising campaign than try to
understand customer needs.
 Types of Utility and How They Are Provided

Provided By Production with Provided by Marketing

Guidance of Marketing
Time

Form Utility value that

comes from
satisfying human Possession
needs.

Place
Task

Information

Information Utility: It involves communicating with the customer. For example, sales people provide
information to customers by explaining the features and benefits of products. Displays
communicate to customers. Similarly; packaging and labelling inform customers about qualities and
uses of the product. For example, a labelling communicates issues such as the ingredients,
nutritional value, directions for preparation, use and safety precautions. Advertising informs
customers of products and tells them of where to buy them as well as how much they cost.
WHY STUDY MARKETING?
 The study of marketing as a subject has
significance to the individual who is studying it, the
people around him or her and the economy as a
whole. In other words, like general education, the
study of marketing has both internal and external
benefits.
 The importance of marketing to the individual.

 The individual studying marketing will have the opportunity to evaluate marketing as a potential career. The study of
marketing exposes the individual to some important skills (human relations) and knowledge that ensures one’s
success in school and the job. Marketing skills are useful in any career as they involve understanding business as well
as effectively relating to and communicating with others. The skills in marketing are the basic skills that employers
expect from their employees. For example, the same basic skills/principles that are used in the sale of consultancy
services or milk are needed to ‘sell’ ideas by politicians, doctors and engineers, conservation experts, museum
personnel as well as universities for the sale of their services to students and other clients.
 The study of marketing promotes understanding of the operations of businesses. In the current free enterprise system,
one needs to understand the operation of businesses in order to apply the requisite marketing principles.
 The study of marketing includes the study of subjects such as economics, business as well as the role of government
in the economy. The knowledge acquired in these related subjects enables one to advance in his/her career and
become a better educated citizen. It will lead to appreciation of how government decisions impact positively or
otherwise on one’s livelihood and this enables the individual to translate such information into intelligent voting
decisions. The knowledge about the workings of businesses and their day-to-day operation assists the individual to
develop the necessary attitudes and skills and be aware of the importance of co-operation, competition, ethics and
teamwork.
 Learning the techniques and principles of human relations improves the individual’s interpersonal skills which will
enable him/her to improve his/her ability to get along with others which will affect the individual’s dealings with
his/her supervisors, co-workers, customers and friends.
 The study of marketing also assists in the development of effective communication skills. Marketing is
communicating. It involves presenting ideas to employees, customers and others and this must be done effectively.
 The importance of marketing to the individual.
cont
 Another important reason for studying marketing is that marketing plays a big part in economic growth and innovation which leads to the
development and spread of new ideas, goods and services. As organisation devices new and better ways of satisfying consumer needs
through research and innovation, consumers are presented with a variety of choices among the various products and services. For example,
the introduction of private universities in Ghana has given tertiary students a variety of choices. Now some students decide to enrol as
evening students, day students or weekend students. This increase in competition among businesses leads to improved and cheaper ways
of producing items and therefore the consumer benefits from lower prices. For example, when video cassette recorders were introduced on
to the market for the first time, it was selling around $600. However, due to research, innovation and competition, now new versions such
as VCR are going below $100 which is about a fifth of the former inferior quality.
 Marketing helps in economic development by increasing demand for goods and services. As demand increases, organisations produce in
larger quantities which reduce the unit cost of items. This is because in production, there is fixed cost such as rent, which affects the cost
of goods produced and lowers as the quantity of goods produced increases. Thus, a company spends less on fixed cost as it increases the
quantity produced. For example, if a company has a fixed cost of GH¢ 20, 000, the unit cost will reduce as it increases productivity or
quantity produced.
 
 Quantity Produced Fixed Cost per Unit
 10,000 GH¢ 2,000
 200,000 GH¢ .10
 The increase in competition as well as research and innovation lead to the presence of new and improved products and services on the
market. For example, when computers were first invented, they were bulkier than they are today. Research, innovation and competition
have led to smaller, faster and high quality brands of computers on the market. Besides being of high quality and more powerful, the price
of computers is now lower than before. The market of computers continues to grow as more and more people become computer literate.
 Marketing also adds value to products and makes them more useful. In economics, the value that marketing adds to products and services
is termed utility. Marketing provides five economic utilities with all products and services. These are form, place, time, possession and
information utilities. All these utilities but form are directly related to marketing.
Exercises
 What is meant by the economic concept of utility?

 Besides adding value, what are the economic and other reasons

for the study of marketing?

 List the basic skills needed for success in a marketing career.

 Photocopy page 12

Application Project
 With 2 – 3 classmates, write a short story about a new

consultancy service that you believe will be popular with

teenagers. Assume you developed this new product and want to
start selling it.
WHAT IS MARKETING?
 There are many alternative definitions for the term
marketing. In most cases, the definition of the term is
influenced by the pre-occupations of the individual defining
the term. However, there are some basic features that cut
across the various definitions especially the notion of
looking at the organisation from the point of view of the
customer or striving to ensure mutual profitability from the
marketing exchange. The term has changed and evolved over
a period of time, today marketing is based around providing
continued benefits to the customer, these benefits will be
provided and a transactional exchange will take place.
Examples of definition
Chartered Institute of Marketing (UK)
 The Charter defines marketing as “the management process responsible

for identifying, anticipating and satisfying customer requirements

profitability”. This means that marketing is a management responsibility
and should not be left solely to junior staff. Marketing requires co-
ordination, planning, implementation of campaigns and a competent
manger(s) with the appropriate skills to ensure success. Marketing
objectives, goals and targets have to be monitored, and met, competitors’
strategies analysed, anticipated and exceeded. Through the effective use of
market and marketing research , an organisation should be able to identify
the needs and wants of the customer and try to deliver benefits that will
enhance or add value to the customers’ lifestyle, while at the same time
ensuring that the satisfaction of these needs results in a healthy turnover
for the organisation.
 Examples of definition
The American Marketing Association believes that;
 Marketing is the intelligent analysis, planning and control of product, price, promotion and
distribution, to create exchanges and satisfy customer and organisational needs. This gives the
notion of perspective on marketing. These definitions shows that marketing is a process of moving
goods from concept to consumption in the most effective ways (from both the customer’s and the
supplier’s point of view). Thus, marketing is the performance of business activities that direct the
flow of goods and services from producers to consumers (Runyon, 1982). Marketing is also seen as
a human activity directed at satisfying needs and wants through exchange processes (Kotler, 1982).
 This definition of marketing affects many forms of non-commercial transaction, including
education, community activities and most social and political processes. Thus, marketing is used in
practice in three different contexts: a process; a concept, and an orientation.
 The marketing process: Enacted via the marketing channel connecting the producing company to
the market.
 The marketing concept: Is the idea that marketing is a social exchange process involving willing
customers and producers.
 The marketing orientation: Presents to some extent or degree in both the customers and producers,
the phenomenon which makes the concept and the process possible.
 Examples of definition
The American Marketing Association believes that; cont

 A critical look at the various definitions reveals that they all share some characteristics which are the major elements of modern
marketing;
 i) Marketing is operational: Managers must take an action to achieve results. Benefits will not emerge from passive attitude to the
exchange.
 ii) Marketing is customer-oriented: It makes the organisation considers its external environment, focusing on the needs and
requirements of customers. Its effectiveness lies in finding solutions to the challenges posed by customers’ demands.
 iii) Marketing emphasizes mutuality of benefits. The exchanges work and persist because it is in the best interest of both parties to
continue. Through this, both prosper as needs are satisfied by goods and services which suppliers will continue to supply because the
profit and which are bought because customers’ benefits exceed costs.
 iv) Marketing is value driven. The culture of the company, the values espoused by its leaders and communicated to all those involved
in the firm are based on a desire to build the business through meeting needs and responding to the market.
 The above shows that marketing exists in order to identify and establish, maintain an enhanced relationships with customers and other
shareholders at a profit, so that the objectives of the partners involved are met; and that this is achieved by a mutual exchange and
fulfilment of promises.
 This fits in well with Kotler’s definition of marketing which says marketing is the process of satisfying needs and wants through an
exchange process. Within the exchange transaction, customers will only exchange what they value (money) if they feel that their needs
are being fully satisfied, clearly the greater the benefit provided the higher transactional value an organisation can charge.
 Marketing therefore is not about providing products or service; it is essentially about providing changing benefits to the changing
needs and demands of customers. Thus, marketing is a four step process that begins with analyzing and identifying a qualifies universe
of the intended buyers. After this first phase in the marketing process, a time marketing effort succeeds in capturing the attention of the
intended buyers within the targeted universe. Third, systematic effort must be put into getting the prospects to accept the concepts or
proposition being offered via the marketing effort. Finally, with all three of the previous steps achieved, the marketer must convert the
prospective buyers into an actual buyers by getting them to take the desired action (purchase, rent, call, download, subscribe, refer,
sell, follow the law, become a member etc.): Marketing methods are informed by many of the social sciences, particularly psychology,
sociology and economics. Marketing research underpins these activities. Through advertising, it is also related to many of the creative
arts.
THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE
 Marketing management is defined as the conscious efforts made by an organisation to
achieve desired exchange outcomes with target markets. However, there are a number of
philosophies and interests that guide a company’s marketing efforts. Organisations
normally do not give the same weightings to the interests for the organisations, their
customers and the society and sometimes these interests do conflict. It is for this reason
that it is said that marketing activities should be carried out under a well-thought-out
philosophy of efficiency, effectiveness, and social responsibility.
 Organisations normally conduct their marketing activities under six competing concepts.
These are normally referred to as the marketing concepts and consist of the product
concept, the production concept, the selling concept, and the social marketing concept.
 These concepts are the kinds of philosophy that guide an organisation’s marketing
activities. The analysis of these concepts or orientations show that the concept of
marketing has changed and evolved over time. Whilst in today’s business world, the
customer is at the centre not all businesses in the past followed/had this orientation.
 Their thinking, orientation, ideology in philosophy put other factors rather than the
customer first.
THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS
THE MARKET PLACE. cont
a) The Production Concept: This is one of the oldest concepts in business and it holds the view that
customers will prefer products that are available and inexpensive. The focus of business therefore is on
reducing cost through mass production and not on the needs of customers. The company attempts to reduce
cost by reaching economies of scale and maximise profit. Managers of production orientation/concept
business therefore concentrate on achieving high production efficiency, low costs, and mass distribution. Their
assumption is that customers are primarily interested in product availability and low prices. This orientation
makes sense in developing countries where consumers are more interested in obtaining the products than in its
features. The philosophy can also be used by an organisation that intends to expand its markets
 
 b) The Product Concept: This concept holds the view that consumers will favour those products that offer
the most quality, performance, or innovative features. Companies that use this philosophy for their marketing
activities believe that they have a superior product, based on quality and features and therefore their customers
will like their products or services. Managers in these organisations therefore focus on making superior
products or service and improving them over time. This is based on their belief that customers admire well-
made products and can evaluate quality and performance. Managers of these organisations in today marketing
environment are likely to commit the better mousetrap fallacy. They trust the ability of their engineers to
design and develop exceptional products with little or no customer input, and very often fail to examine
competitor’s products. They think that the customer cannot know the kind of products they want until they see
them. The product orientation can lead to “marketing myopia” (Levitt, 1960) and looking into mirror instead
of looking out of the window (Kotler, 2003)
THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
c)The Selling Concept: This concept holds that customers and businesses, if left alone, will ordinarily not buy enough of organisation’s
products. Organisation must therefore undertake an aggressive selling and promotion effort. This concept assumes that consumers
typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of
effective selling and promotion tools to stimulate more buying. Companies that have selling orientation focus on providing goods or
services and then try to aggressively and persuasively sell them to target customers. Thus, to these companies, the purpose of marketing
is to sell more stuff to more customers often for more money in order to make more profit (Newman, 1999).
 The selling concept or orientation is practised mostly by companies that provide unsought for goods that buyers normally do not think

of buying such as insurance or non-profit goods and services such as fund-raising, college and University admission offices and
political parties. For example, political parties sell their candidates to voters through moving from one electoral area to another, shaking
hands, kissing babies, meeting donors and aggressively making speeches. After the elections, the newly elected officials continue to
pursue selling orientation. There is little research into what the public wants rather they behave as experts, develop policies and begin to
sell them to the public to accept what the politicians and the party want (Abbrecat & Zemke, 1985). 
d) The Marketing Concept: The marketing concept emerged in the mid–1950’s and challenged the production, product and selling
concepts. Instead of being product centred or make-and-sell philosophy, the marketing concept is customer centred or sense-and-
respond philosophy. The marketing concept or orientation puts the customer at the heart of the business. The organisation tries to
understand the needs and wants of the customers by using appropriate research methods. Appropriate processes are developed to make
sure that information from customers is fed back into the heart of the organisation. In essence, all activities in the organisation are based
around the customer. In other words, the customer is king. Thus, instead of producing the products and finding the right the right
customers for it, the marketing concept holds that the key to achieving organisational goals consists of the organisation being more
effective than its competitors in creating, delivering and communicating superior values to its chosen markets or customers.
 Thus, the marketing concept means an organisation uses all its efforts in an attempt to satisfy its customers at a profit. The philosophy

means trying to offer customers what they need and want. There are three (some authors believe they are four) basic ideas included in
the definition of marketing concept.
 THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
These are Customer Satisfaction, Total Company Effort, Profitability and Target Market.
 
 i) Target Market: Organisations do very well when they choose their target market(s) carefully and prepare tailored

marketing programmes to meet the needs and aspirations of the chosen market(s). For example, producing items for
only men in a particular market segment such that even though similar items would be produced for similar targets of
a different market segment, the items would not be the same as stated by one Terra Lycos Company executive “our
Brazilian products do have anything to do with our Mexican products other than it’s under the same brand. Our US
product is not targeted to Latin America–it’s targeted to the US”. This is normally true with companies that produce
for both developed and developing countries.
 
 ii) Customer Satisfaction: In pursuing marketing oriented philosophy, the issue of customer satisfaction guides the

operations of the whole organisation. The main concern of the organisation is ‘give the customers what they need’.
Achieving customer satisfaction is so important because if a company succeeds in defining its target market but fails
to correctly understand the needs of the customers in that targeted market segment, it will fail to sell its products. For
example, if an estate company targets University campuses and design executive mansions for such a market, it will
fail to sell the houses. On the other hand, if a catering service provider decides to provide specialised meals for
university campuses where students are expected to cook their own meals, such a company will, all things being
equal, be very successful.

 It is admitted that it is not an easy task to identify customers’ needs and wants. This is because some customers have
needs of which they are not fully aware or they cannot articulate or use words that require some interpretation. For
example, a customer who states that he/she wants an inexpensive car or a powerful lawnmower.
 THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
The literature identifies five types of customer needs and these are:
 i) Stated needs (a customer who wants a restful hotel).

 ii) Real needs (the customer wants a car whose operating cost, not initial price is low).

 iii) Unstated needs (the customer expects good service from the manufacturer).

 iv) Delight needs (the customer would like the dealer to include an onboard navigation system).

 v) Secret needs (the customer wants to be seen by friends as a savvy customer).

 Attempting to satisfy all these needs and wants of customers demands that the marketer must be

responsive, anticipative and creative.

 A responsive marketer finds a stated need and fills it. An anticipative marketer looks ahead into

what needs customers may have in the near future and produce to meet such needs wilst a creative
marketer discovers and provides solutions customers did not ask for but to which they
enthusiastically respond.
 This means that in order to be successful in meeting customer needs holistically, the marketer must

not adapt only one philosophy. For example responding to customers’ stated needs (Responsive
Marketing) may short-change the customer. A customer who asks for a sealant to seal glass window
panes may not be stating his or her need but rather he/she is stating a solution. A marketer should be
creative in discovering the customers’ needs and suggest solutions such as a ‘tape’ which the
customer will enthusiastically respond favourably.
 THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
 Further, since some customers may not know what they may need or would not be able to articulate them clearly and to use the words of Hamel and
Prahalad (1994), since some customers are notoriously lacking in foresight, organisations should not only give customers what they want (Responsive
Marketing) but must learn what their wants and needs may be (Anticipative Marketing) and create and produce solutions for those needs and wants they
(organisations) discover (Creative Marketing). For example, the introduction of mobile phones was not the outcome of a response to customers’ needs and
wants. Customers had not thought of the item, anticipative and creative marketers introduced them on to the market and created the need and want
through selling orientation philosophy.
 To be successful, the marketer must also be a market-driving marketer and not just a market-driven marketer. In other words, an organisation would be

very successful if it is both a market-driving and market-driven organisation. Thus, the firm must not only serve the market, it must also create markets
(Marita, 1986). An example of a firm that creates markets for its products is Sony (Walkman, VCRs, Video cameras, etc). In the 1970s, the engineers of
Sony advise against the introduction of Walkman which was a pet project of Ahio Monita, the founder of Sony with the excuse that there was little
demand for the product. However, by the twentieth anniversary of Walkman, Sony had sold over 250 million nearly 100 different models (Glancey, 1999)
 It is important to satisfy customers’ especially existing customers’ needs because companies sales come from two sources: existing customers and new

customers. It is estimated that attracting a new customer can cost five times as much as pleasing an existing customer (Sellers, 1989). In addition, it costs
16 times as much to bring the new customer to the same level of profitability as the lost customer. Thus, customer retention is more important than
customer attraction. This does not mean that organizations must not attempt to win new customers. They should make efforts to learn from its non
customers in the target markets why they like the competitors’ products or services and how they are perceived by the non–customers and others.
 

 iii) Integrated Marketing: In pursuing the marketing concept, all the organization’s departments must work together to serve the customer’s interest. In

other words, all the managers should work as a team in order to directly or indirectly impact on customer’s satisfaction. All managers must think globally
and act locally to achieve customer satisfaction. Thus, even though there will be specialization among the departments, the total system effort must be
guided by what customers need and want instead of what each department what it wants to do.
 Integrated marketing takes place on two levels. One, the various marketing functions–sales force, advertising, customer service,
product management, marketing research–must work together and be coordinated from the customers’ point of view. Second,
marketing must be embraced by the other departments, they must also “think customer”. Thus, marketing should be far too
important to be left only to the marketing department (Kotler, 2003). In other words, marketing should not be a department but a
company orientation.
 THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
 To achieve teamwork, among all the departments, the organization should carry out both
internal and external marketing. External marketing is marketing directed towards people
outside the company while internal marketing is the task of hiring, training, and motivating
able employees who want to serve customers well. It is stated that internal marketing must
precede external marketing as it does not make sense to promise good and excellent service
before the company’s staff is ready to provide it.
 The organizational chart of a company pursuing market orientation which considers the

customer as the organization’s only true “profit centre” is the opposite of the traditional
organizational chart. They rather have the customer at the top as the most important people
to the company’s profitability. This is followed by the front-line managers who meet, serve
and satisfy the customers’ needs and wants, who are followed by the middle management,
whose job is to support the front-line managers to serve the customers well; and at the base
is top management whose job is to hire and support middle managers. This kind of
organizational chart has customers at both sides which mean that all the organization’s
managers must be personally involved in knowing, meeting, and serving customers. Thus,
the marketing concept must provide a guiding focus that all departments adopt, a
philosophy of the whole organization and not just an idea that applies to the marketing
department.
Traditional Organisational
Chart
Top
Management

Middle
Management

Front-Line
People

Customers

Customers

Front-Line
people

Middle
management

Top
Management
 THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
iv) Profitability
 The ultimate purpose of the marketing concept is to help organizations meet their objectives– long time profitability

in the case of private or profit making organizations and survival and ability to attract enough funds to perform useful
works in the case of non profit and public organization. Thus, in satisfying the needs and wants of the customer, the
firm must be conscious of its survival. The firm must therefore achieve profit as a consequence of creating superior
customer value. Thus, organizations must make profit by satisfying customer needs better than their competitors.
Research has shown that most successful firms are those which have embraced the marketing concept. In such
organizations, all the departments accept that the customer is the king. Thus, organizations that practice reactive and
pro-active marketing orientations implement total market orientation and are most likely to be successful.
 
v) The Customer Concept
 A lot of companies now have moved away from the marketing concept to customer concept where they shape

separate offers, services and messages to individual customers. Such companies collect information on each
customer’s past transactions, demographics, psychographics, and media as well as distribution preferences. The
objective of the customer concept orientation is to achieve profitable growth through capturing a larger share of each
customer’s expenditure by building high customer loyalty and focusing on customer lifetime value.
 The collection of such detailed information on individual customers is made possible as a result of advances in

factory customization, computers, the internet and database marketing software. This approach rather requires high
investment in information collection, hardware and software that may exceed the payout. The approach rather works
well for companies that normally collect a great deal of individual customer information, carry a lot of products that
can be cross–sold, carry products that need periodic replacement or upgrading, and sell products of high value.
THE MARKETING CONCEPTS OR
COMPANIES’ ORIENTATION TOWARDS THE
MARKET PLACE. cont
vi) The Societal Marketing Concept
 The Societal marketing concept calls for responsibility in achieving profitability and meeting
customer needs and wants. The concept holds the view that the organization’s task is to
determine the wants, needs and interests of target customers or markets and to deliver the
desired satisfactions more effectively and efficiently than competitors in a way that preserves
or enhances the consumer’s and the society’s well being. In other words, companies should
build social and ethical considerations into their marketing practices. Thus, they must balance
and juggle the often conflicting criteria of company profits, customer want satisfaction and
public interest.

Marketing Concepts

Production Product Selling Marketing Customer Societal

Concept Concept Concept Concept Concept Concept
 In today’s competitive world putting the customer at the heart of the operation is strategically
important. Whilst some organizations in certain industries may follow anything other than the
marketing orientation concept, those that follow the market orientation concept have a great chance of
being successful especially in the long run if not in the short run since; alternatively it is the customer
who decides whether to buy or not to buy a company’s products. It is this crucial role of the customer,
the buyer, which is the essence of the marketing concept.
 While our present economic systems for most businesses even many of those in the public sector, profit
is the measure of their success, for those in the private sector, profit is indeed essential for long term
survival. Since profit comes from only winning sufficient revenue at a sufficient margin ever-cost,
profit ultimately depends on support from customers. Thus the whole organisation’s future success and
even continuation of the business, depends on offering customers what they want at a price they will
pay and at the place where they want the item using the appropriate promotional tools (the right
marketing mix). This is the essence of the reasons why the marketing concept is so vital to a business.
 It is becoming increasingly recognised that the marketing concept is just as applicable in non-
commercial situations where profit is not of the objectives as in commercial. The term “Social
Marketing” is often used in this context. Government departments, the police, trade unions,
environmental groups, and churches can be said in a sense to have ‘customers’ and to be offering
“products and services”.
CUSTOMERS AND THEIR NEEDS

 Because marketing is concerned with satisfying needs, we must understand what those
needs are and the way in which people go about getting them satisfied. Any individual has a
whole range of needs that he must or would like to satisfy; from the purely physical
necessity of food and drink, through the emotional wish to be loved and appreciated to the
desire to develop his personality through education and leisure activities or fulfilling
occupation. Individuals vary widely in their needs that presently pre-occupy them. Some
will be mainly concerned with acquiring the bare necessities (it would fail to interest them
in fancy furnishing or with a T. V. or a luxury). Whereas others would be seeking exciting
leisure pursuits. Before telling them to buy their first suit–they already have four).
 An American psychologist, Maslow has expressed these varying levels of needs in a way
that is needful in the marketing context. He has written of the hierarchy of needs in the
following five stages of progressions:
 Basic Physiological needs (food, shelter, temperature, clothing)
 Safety needs ( protection from danger)
 The need for recognition (love and belongingness)
 Ego-needs (self esteem, respect from others)
 Self-fulfilment (realisation of one’s total being (self actuality), creativity)
THE MARKETING PROCESS AND
TECHNIQUES
 We can view marketing as a constant series of actions and reactions between the
customers and the market and the marketing organisations trying to satisfy their needs.
The customers make their needs known; the firms make it their business to receive the
information and use their resources (money, materials, and skills, ingenuity) to develop
ways of satisfying the needs of the customers. Once solutions have been found, firms
must then communicate the existence of the ‘solutions’ back to the customer whose
needs create progress. This is diagrammatically illustrated thus:
COMPANYCUSTOMER
Resources SATISFACTION Needs
Solution Problem
 It suffices to know that it is in providing the necessary information that marketing
research is all important. Satisfactions are provided by offering the correct marketing
mix. That is the right product, the right price, available in the right places and promoted
in the right way. The provision of satisfactions by developing the correct marketing mix
depends on the full exploitation of all the possibilities of developing differential
advantages through product pricing policies, distribution and promotion.
SUMMARY
 ) Marketing is the term used to describe the following:
 i) A part of a company or a particular job in the company such as marketing department or
the marketing director.
 ii) A series of activities such as sales, advertising or marketing research which are more
particularly concerned with the company’s customers.
 iii) A business philosophy–the marketing concept.
 b) The marketing concept puts consumers at the centre of the company’s activities.
 c) The marketing approach is of value not only in the commercial situations but in any
transaction (exchange of values between two parties including social marketing services)
example barber, etc.
 d) The marketing process starts with a customer’s need for which he seeks a satisfaction.
The search leads ultimately to a decision but the marketer is also concerned with the
customer’s past purchase feelings as to whether his needs have been satisfied or not.
 e) Marketing is a dynamic activity which must consistently respond to changes in the whole
series of variables, including the economic situation, customer’s needs, competition and the
development of technology, political situation etc.
MARKETING RESEARCH
 DEFNITION AND FUNCTION
 Marketing research is the disciplined collection of array and evaluating of facts related to
the marketing process. Its primary purpose is to solve or forestall marketing problems and
thus to increase the efficiency and lower the cost of marketing through development,
selection and improvement of the best products and marketing methods.
 Any company selling a product or service needs information about its market, its
customers, prospective customers of its product to determine what it should produce, to
whom it should offer what it produces and the way in which it should offer what it
produces. To achieve such objectives, it is necessary to gather information at various
sources for the future. Such information can be gathered through interviews conducted by
personal visits to the homes, industries and work places; by mail, on the streets, in stores,
on farms, by telephones or in public groups. Service may be made to the neighbourhood, a
city, a region or a nation and may cover the public as a whole or be limited to specific
types of people. The principal functions of marketing research are describing, evaluating,
explaining, predicting and assisting in making decisions. The range of activities covered
by marketing research is enormous. Some of the main ones are information on:
 DEFNITION AND FUNCTION
1.Markets
 a) What are the market shares of us and our competitors and what about these changes?
 b) What is the size of the market (in terms of volume or quantity or valued assets and is it increasing or decreasing)?
 c) How is the size and trend of the market influenced by various factors (economic, social, and seasonal?)
 d) What is the composition of the market in terms of age groups, income groups, size of company or geographical area?
 e) What are the main distribution channels and how do they function?
2. Competitors
 a) What competitors are there and how do their product ranges, prices etc compared?
 b) How is their product distributed, advertised and packaged?
 c) How does their sales force operate?
3. Products
 a) Which product do consumers prefer and why?
 b) Is our proposed new product acceptable?
 c) Do consumers have complaints about products presently on the market which could indicate a possible new product
opportunity?
4. Advertising
 a) Who reads the publications, who watches or listens to which T.V./Radio channels?
 b) Is our existing or proposed advertising communicating effectively?
 c) What are the motivations that activate consumers and is our advertising correctly interpreting them?
 Companies or firms may establish their own marketing research departments or use the services of many individuals and
SOURCES OF MARKETING RESEARCH
DATA

 Sources of marketing research data may be either primary or secondary.

Primary data are a set of information collected by means of a research
programme carried out for a specific purpose. Secondary data are a
set of information that already exist because they were collected as part
of a previous research operation for some different purpose. Secondary
data may be obtained inside the company itself i.e.–sales records as well
as from external sources like government departments, trade associations,
professional bodies, the press, specialised research agencies etc.
 If the information required for a particular marketing research project
does not already exist as secondary data, we have to determine the best
way of collecting it. There are three fundamental approaches to the
collection of primary data. These are: By observation, by experiment and
by survey
Observation
 It is sometimes better to watch what people do than to ask
them what they do. This has the advantage that it
eliminates any problem of interview bias and avoids the
difficulty that people do not always remember their
actions–especially trivial ones–very clearly. For example;
a hidden camera may be the best way of establishing how
customers move to the shop and a tape recorder, the best
way of establishing the sales approach used by salesmen.
Similarly, a physical count is normally used to establish
the volume of traffic on key roads and the volume of
different branches showed by important retail outlet.
Experiment
 Simulation of real situation may often be a better way of
assessing likely future behaviour than asking people questions.
If for example we want to know of which of the two possible
packages, houses wives will prefer, we can put them side by
side in a real or dummy shop, leave a group of housewives a
shopping list and money to spend and see which pack they
choose. Similarly, a way of assessing children’s
preference of one toy as against another is to give a group of
children a selection of toys to play with and see what happens
(the way in which they play can also yield valuable insights).
Test marketing is of course an example of experiment as a
means of obtaining market research data.
Survey
If it is necessary to obtain primary data by survey, three methods are available. These are: Personal
Interviews; telephone Interviews, and questionnaires whether sent by post, pasted on the internet
or physically distributed. In general, the cost decreases as we go down. However, there is the
need to consider the reliability and the extent of information to be obtained with the use of the
various options.

 i) Personal Interviews
Personal interview is the most versatile and can fairly readily be carried out on the basis of
properly selected examples. A large number of detailed questions can be asked and answers can
be supplemented by the interviewer’s personal observation. But the cost per interview is high and
the degree of planning and supervision required adds further proportion to the cost.

 ii)Telephone Interviewing
Telephone interviewing enables many people to be reached quickly over a wide geographical
area. Its major drawbacks are that, generally speaking, only short interviews of an impersonal
nature can be carried out, and since telephones in the homes are by no means universal, an
inevitable bias is likely to be introduced where most marketing situations are concerned.
Questionnaires
 Questionnaires are very cheap. However, the response to it (as a number of people who return
properly completed questionnaires) is usually few.
 Further survey methods include the use of panel groups; the use of discussion groups and the
use of motivational research.
 Panel Group: When continuing research is required, the panel method is often used. This
differs from the ad hoc enquiry in that the same groups of panel information are used to
provide a series of process over a period of time.
 Discussion Group: A small and carefully selected group of people are brought together to
discuss a particular topic. The interviewer does not normally quote specific question but only
ensures that the discussions state in subject and that all important aspects are discussed. The
technique is particularly valuable in obtaining information rapidly and inexpensively.
Discussion groups could be used as aid to constructing personnel for pilot service.
 Motivational Research: This was popular some years ago. It uses a method adapted from
chemical physiology in an attempt to establish motives for behaviour and opinion. Some of
the methods used include word association, sentence completing tests etc. While in theory
such methods can give insight into human activities, in practice much doubt has been cast on
the validity of the results. Certainly, to carry out such tests thoroughly is very expensive and
requires highly trained human resource since interviews must be individually conducted and
each can last several hours.
 HOW MARKETING RESEARCH IS
CONDUCTED
 In order not to waste time and money, marketing research should be conducted in a carefully planned manner as follows:
 A) Identify the Product
 It is vital at the on-set to be quite clear what information is needed and for what purpose. Usually, it will be required to provide a
basis for the management decision. The nature of that decision and the precise way in which the additional information will help in
taking it will dictate the kind of information required. Without such definition, marketing research is liable to use together with a vast
quantity of information at great cost with low utility.
 B) Agree on Terms of Reference
 In setting the terms of reference, answers to questions such as: At what time is the information needed? How much is it worth
spending to obtain it? Precisely what areas are to be studied and what is the relative importance.
 B) Plan the Survey
 Factors to be decided upon at this stage include the following:
 i) To find market in which we shall be interested. This is the universe and it consists of the total number of people from whom the
sample would be selected.
 ii) Decide on the sampling techniques.
 iii) Decide on the survey method to be used.
 iv) Group the questionnaire.
 Planning the survey will also include working out detailed timetable and allocating human resource and such other resources as
computers. Once the planning has been completed, there is the need to execute the survey analyse the results and report to
management. Thus, the results must be presented, interpreted recommendations made for management considerations. That is,
ultimately, the results of the marketing research must be translated into management decisions.
LIMITATIONS OF MARKETING RESEARCH

 Marketing research has a number of limitations.

These include being very costly. This can mean that
obtaining the information on which to base a better
decision would absorb any profit the decision
might produce. In addition, marketing research can
be time consuming, time is often all important in
marketing decisions. A good guess at the right time
may be better than precise knowledge two months
too late.
MARKETING AS A DYNAMIC PROCESS AND
MARKETING RESEARCH

 The business manger will be dealing with a continuing situation. He

cannot stop events at a particular point while he considers all the
relevant facts and makes his decision. Even while the decision process is
going on, the facts will be changing – new competitors enters the
market, and existing ones change prices or introduces a new product, the
pattern of distribution alters, or a new advertising medium becomes
available. In one part of the company’s global markets the economic
situation may change for the better or the worse, even the manager’s
decisions change the situation in which he is operating. Marketing
research ideally needs to be built into the total activities of the business
as a continuing operation, providing a steady flow of facts. Gathering
facts on markets, competitors, products, advertising, etc in order to
improve the decision in what marketing research is all about.
AD HOC AND CONTINUOUS RESEARCH

 A great deal of research is carried out on

continuous basis and it is called CONTINUOUS
RESEARCH. On the other hand, this is costly and
not every aspect of every market justifies the
expenses. Many marketing researches are therefore
carried out on irregular, insufficient or even one-
for-all basis. The term usually applied to such cases
is called ADHOC RESEARCH.
RETAIL AUDITS OR RETAIL
PANEL
 Here, panels are confined to individual members of
the public or the household. The retail audit
technique uses panels of shops to establish brand
stocks and volumes of sales from retail outlets to
customers which because of changing stock levels
may be quite different from the volume of
deliberations of the factory to retailers.
SYNDICATED RESEARCH
 The results of retail audit, consumer panels and
many types of research are available to anyone who
wishes to buy them. This cost sharing approach is
known as SYNDICATED RESEARCH. It enables
very extensive research to be carried out in any
way that would be uneconomic, if each client had
to commission it separately.
QUALITATIVE RESEARCH
 Marketing research is not only based on statistical analysis of the responses of
large numbers of people (quantitative research) sometimes despairingly referred
to as “Head Counting”. Often it is valuable and frequently more cost effective to
have information which although having little or no statistical validity that gives
important insight. Motivational research or group discussions are two of the
techniques used in qualitative research. Here, the aim is to explore in some
depth the actions, opinions, or behaviour of a few people. While these people
are chosen so as to be reflective of the universe or population, they are
numerous enough to be totally acceptable as representative of the universe.
However, information and insights obtained in this way are often used as a
starting point for drafting questions. They are later used in services that do give
a statistical accurate view of the whole. Even where this is not the case,
however, qualitative research can often have great value in helping to
understand why people behave as they do, instead of merely telling; What they
do – which is largely what is obtained for such research as retail audit.
 ADVERTISING RESEARCH
 Marketing research carry out as an aid to advertising decisions has become so extensive as to be a subject, and an industry in its own right. Two
main areas of research are important and they are:
 Advertising Research: This includes testing a proposed advertisement to determine whether they are likely to have the desired effect
(advertisement pre-testing) and also research to assess what the effect actually has been (this is advertisement post testing).
  
 Media Research: This consists primarily of identifying the size and nature of the audiences for the various media but also tries to determine
such matters as the effect of varying size and position of advertisement.
 Many of the standard techniques of marketing research – questionnaire and group discussion for example – can be used to yield information
about the ways in which they have reacted to the advertisement or how they would be likely to react. Interviewers can for example be shown a
publication and then asked questions about which advertisement they can recall. This, of course, is a post testing technique but a similar pre-test
can be obtained by making up a folder or dummy magazine containing one or more projected advertisement – perhaps alongside existing ones –
to obtain reaction to them before incurring the cost of placing them in publication. T.V. commercials, similarly, can be tested before or after
showing over the air. Members of the public may be invited to a private film show.
 Following a brief feature or cartoon a number of commercials are screened including the technique enabling the audience to recall their
reactions, using the questionnaires and perhaps supplemented by group discussions. Sometimes a brand awareness questionnaire is completed
before and after showing, giving a measurement of change in awareness brought about by seeing a commercial or commercials under test.
 It should be noted that post testing can in some situations be carried out much more simply particularly when the purpose of the advert is
simple and clear. Thus the number of coupons returned, articles bought (the case of mail order advertising) or leaflets requested can be a direct
measure of advertising effectiveness.
 In U.K., The Institute of Practitioners in Advertising (body representing advertising agencies). In conjunction with other bodies
representing the advertisers and the media owners sponsor the following independent research bodies and organisations which are forthcoming
with data on the size and composition of audiences who:
 Watch T.V. – Joint Industry Committee for T.V. Advertising Research (JICTAR).
 Listen to radio – Joint Industry Committee for Radio Audience Research (JICRAR).
 Read dailies (news papers, magazines) – Joint Industry Committee for National Readership Survey (JICNARS).
 Are keen on posters – Joint Industry Committee for Posters Audience Surveys (JICPAS).
 Desk Research
 PRODUCT AND PACKAGE TESTING (PRE-
TESTING)
 One of the important uses of marketing research is in testing product so that only those likely
to be acceptable to customers reach the market. Not only the product is researched but its
packaging and everything about it can be subjected to testing before the product is lunched.
 Straightforward questions of carefully selected samples of people can be adopted. Often,
however, subjective reactions are provoked and rather more suitable techniques need to be
used. For example, a group of housewives can be asked to choose between a number of
alternative products (unknown to the group) with only minor differences such as colour, or
design of package. This ‘bland’ approach can give more reliable results than open questions
such as “which of these do you prefer”? Products can be tested by getting suitable samples to
taste them and give their views. Two commonly used ways of doing these are the following:
 Invite people in from the busy shopping street. Give them a cup of tea and a snack (that is the
product) and then ask their reactions to the taste of the snack (product). This approach is known as the
“hall Test”.
 Give people a sample to try in their homes and call back a few days later to collect their views (this is
sometimes called “PLACEMENT TEST”).This is a more expensive method but has the advantages
that the whole family’s reaction can be gathered and that it is carried out under more natural
conditions than Hall Test.
TEST MARKETING
 In a way or in a sense the reason for all marketing research is to
reduce the level of costly failures. The best way to know whether
your marketing mix is correct is to try it on the customers and see
whether they buy (and go on buying in its sufficient numbers)
 Test marketing is the process whereby one part of the total market
is chosen for launching of a new product. If this is successful, we
then go on to the complete national launching or step by step,
area by area. (A ROLLING LAUNCH) built up to the national
marketing stage. In many situations (especially where the price of
failure is not very high) it may be more cost effective to go
straight into the national launching particularly with the product
(eg in the fashion world) which have a short life cycle.
 DIFFERENCES BETWEEN MARKET RESEARCH AND
MARKETING RESEARCH
MARKET RESEARCH: It is concerned with measuring and analysis of market in terms of:
 Age, income, occupation and social status of customers.
 The geographical creation of potential consumers.
 The market shares of competitors (ie hand share analysis).
 The structure, composition and organisations of distribution channels serving the market.
 The nature of economic and other environmental trends affecting the structure of the market.
MARKETING RESEARCH: This is concerned with the study of those factors which imprint upon
the marketing of goods and services and also includes the study of advertising effectiveness,
distribution channels, competitive products and marketing policies and the whole field of
consumer behaviour. In practice, the two terms Market Research and Marketing Research are
used synonymously. But note that, as students in marketing, Marketing Research is all embracing.
It covers all research activities carried out in connection with any aspect of marketing work.
Marketing Research concentrates on special segmentations of Market, Economic and
Environmental trends. (Marketing research activities plus advertising effectiveness, competitive
products etc).
DEALER AUDIT: A procedure where manufacturers are furnished regularly on how their goods
move on the shelves of their distributers.
CONSUMER PANNEL: A form of collecting continuous information either forth nightly or monthly
on consumers’ purchasing activities. Data collected include brands purchased, price, package,
MARKETING FUNCTIONS, VARIABLES
THE PLACE OF MARKETING DEPARTMENT
IN BUSINESS
 While it is true that everyone in the company should be marketing oriented
striving to provide customer satisfaction at good profit. It is also true that some
are more directly concerned with customers than others. The purchasing
manager’s main attention will be on suppliers and their delivery dates, quality
standards and negotiating the best price for his company. The production
manager will have his eyes particularly on equipment and raw materials, on the
recruitment, training and motivation of his skilled workforce or work people. In
many parts of the company, in fact, the customer is the distant horizon. On the
other hand, there are other groups of people in the company who are mainly
dealing with customers and are much more immediately concerned with their
needs. For sales, advertising, marketing research and product development,
customers are their main concern. Consequently, it often makes sense to group
all these people and departments together, thus making it easier for them to work
closely with each other and easier to direct and coordinate their activities as a
group of specialists. This is marketing in its functional role.
 MARKETING FUNCTIONS, VARIABLES
THE PLACE OF MARKETING DEPARTMENT IN
BUSINESS con’t
Generally, a marketing department within a company may be found to carry out one of these three roles.
 Co-ordinating
 Planning
 Specific function
It is the responsibility of the marketing department to ensure that other departments contribute to the development
and execution of the company’s marketing plan. Eg; it is no good preparing a marketing plan for a product that
cannot be economically produced on the existing equipment unless finance can be made available for new
equipments and unless the necessary new staff can be recruited and trained at the appropriate time. Once the plan
is agreed, the continuing co-ordination is necessary to ensure that ongoing production schedule can be met (or
the plan modified accordingly).
 Planning means deciding on what to do now in order to bring about a desirable situation in the future and in
its planning role marketing department should:
 Access what the true present position is.
 Decide what the most desirable future situation is.
 Access alternative ways of getting there.
 Select the most attractive of the alternative.
 Make detail arrangements for pursuing the chosen course.

Thus, an important part of the taste of most marketing departments is the detail continuous monitoring of the present
situation, and the preparation from time to time. Eg; Detailed plans showing how top management’s objectives
(expressed in terms of profit levels, sales targets or market shares can be achieved). On the basis of this proposal,
top management will make its decisions about future action.
 As well as co-ordinating the work of its own and other specialist, and preparing plans for management, the
marketing department will normally have its own specialised functions to carry out. Some of these such as
market research will be necessary in order for it to perform its planning, monitoring and co-ordinating functions.
 MARKETING FUNCTIONS, VARIABLES
THE PLACE OF MARKETING DEPARTMENT IN
BUSINESS con’t
Broadly speaking, there are two groups of functions that can be part of the marketing department – the
core functions, at the centre of the marketing activities and peripheral functions, which can often
be performed quite adequately in some other parts of the company, even though they have a close
connection with the customer end of the business. The core functions are the following:
 Marketing Research: Seeking, recording and processing all necessary data about the economy, market,
competition, the effectiveness of sales and advertising programmes.
 Product Planning: Determining the product mix and ensuring that the company’s products are in line with
the customer’s requirements including packaging and pricing.
 Sales: Field selling, selection of distribution channels, forecasting, budgeting and analysis of sales, sales
office administration.
 Promotion: Advertising, trade and consumer promotions, point of sales and merchandising materials.
The peripheral functions must extend to the following:
 Product development
 Physical distribution
 Credit control
 Stock control
 Recruiting and training of sales and other marketing staff.
 Clearly of these, v, vi and viii could be controlled by the production department, vii by finance and
ix by Personnel in many companies they are. There is no ‘right’ organisation - it depends on the
company, the people and the circumstances and it will constantly be changing as these change.
This is why the organisation chart has its critics – They see organisation as a fluid and constantly
 ORGANISING THE MARKETING
DEPARTMENT
 The need for a clear cut organisation emerges as the size of marketing department increases and
the number of people a specialist functions proliferate. There are four basic ways in which the
work of the department can be sub-divided by function, by region, by market and by product.
 In organisation by function, the marketing director will have a series of managers for
each main function as shown in the figure below.

MARKETING DIRECTOR

ADVERT FIELD SALES MARKETING PRODUCTION etc

MANAGER MANAGER PLANNING PLANNING
MANAGER MANAGER

 In organisation by region, the breakdown will be by geographical r

 egions, continents, countries or arbitrary areas being the units. The marketing director has a
territorial manager for each region. Each must have his own functional organisation as above or
responsibility within his area only for some functions, the rest remaining centralised and
responsible to the Marketing Director. This is clearly the likely organisational approach for
multinational companies or those with a very large field force.
 ORGANISING THE MARKETING
DEPARTMENT
 In organisation by product, each major product or groups of products have its own marketing
organisation. It can be set up in one of two main ways as follows:
 Product Divisions – The situation where each main groups of product has a separate marketing
division with its own sales force and marketing specialists.
 Product Managers (also called Brand Managers) – Alternatively there can be a single sales
force, with a product manager for each or group of products. The Product Manager’s task varies
somewhat from company to company but normally includes the co-ordination of all advertising,
promotion, packaging and product improvement for his personal products or brand. The sales
manager may have fifty brands to worry about, but the brand manager may have only two or three.
 With organisation by market, some products are sold to many different markets and the
marketing organisation needs to have a clear knowledge and understanding of its customers’
problems. Eg. Let us look at an electronics component manufacturer selling to many different
companies making some or all the following products a) Telecommunication products, b) Radio
and T.V. products, c) Aircraft control systems, d) Radar systems, e) Computers.
 To design and market such components successfully, the sales force must be able to talk
MARKETING DIRECTOR
technicalities with the designers and production engineers of their customers. But it is virtually
impossible for one man to be thoroughly conversant with all five areas – each technology in its
own right – so that the marketing organisation may be sub-divided by market as in the figure
Marketing Manager Marketing Marketing Marketing Marketing Manager
below.
(Telecommunications) Manager (Aircraft Manager (Radar Manager (Radio & T.V.)
System) System) (Computers)
BUYING IN SPECIALISED SERVICES

 All the functions referred to above are not necessary staffed

only by people on the company’s pay roll. Adverts for example
can be carried out wholly by the company or wholly outside.
Typically it is the mixture of the ‘two’. Similarly market
research, public relations or new product development may be
wholly or partly brought in from some specialist organisation.
It is not even essential for a company to employ its own sales
force. In some cases, suitable middlemen can take care of all
necessary personal contact with customers, or the in-company
sales force can be supplemented as necessary. Eg. By hiring a
‘commando sales force’ to help with launching a new product
or to sell in a special promotion to retailers.
SOME BASIC CONCEPTS AND DEFNITIONS IN
MARKETING
MARKETING MIX
 At a particular point in time the firm is faced with a host of decisions on production,

promotion, distribution and pricing known as the Marketing Decision Variables. The setting
of these decision variables at a particular point in time is the Marketing Mix.
 Basically, the marketing mix comprises of four key variables of factors known as the 4P’s.

These are:
 Product – What to produce?
 Price – How much should the product cost?
 Place – How should the product be distributed to meet the ultimate consumers or where it is to be
sold this refers to the distribution channels?
 Promotion – What type of promotional tools to adopt to make people aware of the product and to
realise the required sales. Note that promotion is a term in marketing used to include all forms of
advertising, sales promotion, packages and display, public relations, personal selling and
merchandising.
 It must be recognised that Marketing Mix represents only those factors over which
management has control. Decisions must be taken in the light of all the many factors that are
not controllable such as social, political and economic planning which influence available
spending power and consumer choices as well as level and type of industrial investment.
SOME BASIC CONCEPTS AND DEFNITIONS IN
MARKETING cont
The marketing concept may be portrayed in the diagram below.
 The Marketing Concept Produces what people want to buy,
 not sell what we like making.

  

 Means that: Put customer first Organise and co-ordinate the company

 so that this happens.

  

 So we must: Find out what Carry out Market Research.

 customers’ needs are

  

  

In order to: Supply satisfactions for

 their needs.
  
  


Which Marketing Mix Product – The right article

 we do by Price – The right price
 offering Place – Available through the
 the right: right channel
 Promotion – Presented in the
 right way

SOME BASIC CONCEPTS AND DEFNITIONS IN
MARKETING cont
 To satisfy customers’ needs profitably depends on making right decisions in the four
main areas of products, price, place and promotions (4P’s). In practice, this will mean
answering a whole series of key questions which will vary from situation to situation but
will commonly include the following:
 Product Range: What should the product range be? Should we standardise on few items, offer a wide
selection or produce to customers’ requirements? How much stock should we carry? How many variations
should we make available?
 Pricing Policy: What is our pricing policy? Shall we offer products that are ‘expensive’ or those that are
‘economical’? Shall prices be standard or subject to negotiation in view of customers’ special requirements?
What about wholesaler/retailer margins and quantity discount?
 Place: How and where shall we sell? Shall we sell direct to customers or through
wholesalers/agents/retailers? Which retailers? What kind of salesmen and how many? What after sales
services shall we offer?
 Distribution: How should we distribute the product? Should we use our own transport or send by
road/air/rail/sea? Should we dispatch directly from factory or do we need regional depots (build our own or
rent)? How important is speedy delivery and how shall we achieve it?
 The kind of product will have a great bearing on the kind of selling and distribution
channels used. If delivery time is really important, we shall certainly have to carry stocks
and they may have to be held near our customers. On the other hand, if customers do not
expect quick delivery, deliveries can be made from a stock held at the factory or even
delayed until a new batch is made.
SOME BASIC CONCEPTS AND DEFNITIONS IN
MARKETING cont
 The following three examples may help to illustrate the different marketing mix that emerges from different
situations. They are ‘typical’ cases but it must be noted that within the categories referred to, they will still be
considerable individual differences.
 Example 1: Fast moving consumer package goods: The typical food and confectionary products fall into this
category. This is a mass market that can be economically reached through advertising, which therefore plays a big
part in the marketing mix. Pricing may be very critical since many retail outlets are used. The sales force may be
very large (although in some cases the fact that a very high proportion of customers can be served through a few
large supermarket chains may change this picture). The product is likely to have a low unit price and ‘impulse’
buying may play an important part, so that packaging and point of sales are important. Advertising cost
(approximately 10% of turnover) tend to be higher than sales force expenses (approximately 2% turnover).
 Example 2: Consumer Durables: Cars, washing machines, freezers, furniture and similar goods present a
different feature. ‘Impulse buying’ is unlikely and frequency of purchase is much less. Price, while still important,
may not be so critical, although ‘discounting’ is common as a means of competition between retailers. The ability
to inspect the product may be important, and the availability of after sales service certainly is important.
 Example 3: Industrial capital Goods: Heavy capital equipment for industry is likely to be supplied through order
rather than from stock. Technical performance of the product is all important and price may be a secondary
consideration. There are probably a small number of customers and therefore a small (though highly trained and
specialised) sales force. Because of the specialist role and the lengthy selling process, sales force course can be
hired. Advertising is likely to play a very minor role. Distribution is almost certain to be direct to customer, while
installation and after sales services may call for a large engineering division quite apart from manufacturing.
Similarly, research and development drawing office and such commitment will be hired.
CONSUMER SOVEREIGNTY
 The modern concept of marketing sees the
consumer as the boss, what he wants he gets.
Consumer sovereignty holds that all production
today revolves around the consumer. He decides
what, how, when and where to produce. How it
should be distributed, priced and sold. It would not
be an exaggeration to say that without the
consumer, no production activity will take place.
CONSUMERISM
 By consumerism we mean the organised manner of
consumers against the perceive injustices of the
economic system, they come together and ensure
that they are protected against high prices as well
as offering of shoddy products and any deceptive
practices by the producers. In effect, consumerism
holds that the consumers have the right to safety, to
be heard, informed and right to choose.
 THE PRODUCT
 What a customer buys is a set of satisfactions and those satisfactions are the products. It is not the product
as such those customers are interested in, but what it can do for them. Products must be evolved not purely
in terms of engineering or techniques, but in terms of design, presentation, packaging brand image and all
the attributes which together give the customer the satisfaction he is paying for. A box of high quality
chocolate and expensive perfume or fashion shirt cannot be divorced in its packaging, its presentation and
the atmosphere created around it by advertising and other forms of display. All these together make up the
product.
 The word ‘product’ does not mean only tangible ‘things’ but includes services (the intangibles) as well as
things that can be touched and even seen and tasted. Thus a hair dressing, car hire or business consultancy
service is just as much a product as a washing machine or fish. Products are often grouped under three main
categories of:
 Durable Goods – Tangible goods that are used many times over a long period. Cars, domestic appliances,
washing machines etc. Hired equipments, cameras, all fall into this category.
 Consumables (non-durables) – These are goods normally consumed over short periods. Food stuffs,
drinks, tobacco and confectionery are typical examples, also stationery items, heating oil, sowing cotton
and many other goods are consumables.
 Services – Services complies intangible activities, benefits or satisfactions offered for sale. Insurance,
travel, hair dressing and teaching are typical examples.
 For the above classification, you may also distinguish between consumer products bought for the use of the
purchaser and his family and industrial products bought for use by an organisation. Sometimes the goods
can be the same ones used in different situations (eg. Stationery, furniture, light bulbs, heating fuel) are
examples of goods with industrial and consumer use. Products like machinery and equipments are industrial
durables; and raw materials, stationery, fuel are industrial consumables.
 THE PRODUCT cont
 Generally then, products or goods can be classified as
consumer goods or producer goods. All products are
designed for the satisfaction of the wants of consumers; but
whereas some fulfil this purpose directly, others do so only
in an in-direct way. When goods are in the form in which
consumers want, then they are known as consumers’ goods;
and these things satisfy consumers’ wants directly. They can
be further subdivided into foodstuffs and manufactured
goods. All other goods/products are producers’ goods which
consist of raw materials like cotton wool, iron ore; semi-
manufactured goods which have not yet reached the final
stage of production like yarns and technical products like
machinery and industrial equipments. Diagrammatically, we
may have the following classifications.
THE PRODUCT cont

PRODUCTS/GOODS
 
 
CONSUMER GOODS PRODUCER GOODS
 
Technical
Products
Foodstuffs Services Raw Materials Semi-manufactured

Goods

Manufactured Goods Services

 
 
Consumables Durables
 MANAGEMENT OF PRODUCTS
Every company has to make decisions about the products it sells – how many products, of what kind,
at what price level, suitable for which market, etc. These decisions will have a profound influence
on the company’s long term success or failure. They have to be taken in relation to the best use of
the company’s financial and manpower resources, the kinds of market opportunity that exist, the
economic climate, the changing technological situations and the activities of competitors.
 The four main product-market strategies for companies seeking to increase business are as

follows:
 Market Penetration: The company seeks increased sales for its present products in its present market
through more aggressive promotion and distribution.
 Market Development: The company seeks increased sales by taking its present products into new markets.
 Product Development: The company seeks increased sales by developing improved products for its
present market.
 Diversification: The company seeks increased sales by developing new products for new markets and
existing markets.
 Since the sole purpose of the product is to provide satisfaction for customers, every marketing
organisation is in a highly dynamic situation. This is because customers’ needs are constantly
changing: their incomes, life styles, fashions; customs are dynamic and not static. Therefore, our
marketing policies must be dynamic not static and the products use offer must come constantly
under review and must frequently change.
 CUSTOMER BEHAVIOUR – REASONS FOR
CHANGES IN CUSTOMER NEEDS
Here are some reasons why customers demand new satisfaction.
 Rising Incomes and Expectations: Once the basic necessities of life are satisfied (food, shelter, clothing), rising

incomes makes a whole range of other satisfactions possible – possession of carpets, T.V., Hi-Fi. Freezer, etc.
 Increasing Education and Sophistication: Universal education to an increasingly high level, social trends like

holidaying abroad and the fact that virtually everybody sees a wide range of different life styles and activities on T.V.,
all lead to a much greater readiness to accept new things. Coupled with this demand for new things is a rising
expectation in the standard of performance of existing things. Cars are not new, but cars with efficient heating or
ventilation/air-conditioning, reclining seats, tinted glasses, built-in Hi-Fi, T.V., automatic and many other comfort and
safety devices (bullet proof) are new.
 Changes in Social Habits and Customs: Rising incomes, more education and foreign travel have all led to a much

more fluid social situation where habits and customs change rapidly. This leads to ready acceptance of new forms of
entertainment, new styles of dressing, new eating habits.
 Fashion: Fashion changes take place more rapidly partly due to the fluid social situations and partly due to the much

greater range of the communication systems now available. All these influences lead to the demand for the constantly
changing products to meet the developing needs of the consumers. Other factors at the same time make these changes
possible and also reinforce the rate of change.
 Technological Changes: New materials and processes make the satisfaction of old needs possible in new and

cheaper ways.
 Business Factors: Because customers are becoming increasingly receptive to changes, so are industries and

companies responding to these changes. This is especially true in retailing. Thus, the commercial situation itself is
being the first to offer a new or revised product for which the demand is anticipated. This itself leads to marketing
management tasks, since many of the new products meet a rapid death.
THE PRODUCT LIFE CYCLE
 All products have a limited life. This fact is
commonly expressed in the form of the product life
cycle curve. The product life cycle is an attempt to
recognise the distinct stages in the sales history of a
particular product from the day it is launched until
it is finally withdrawn. The Product Life Cycle may
be classified into four major time periods, namely;
i) The Introduction Stage, ii) The Growth Stage, iii)
The Maturity Stage, iv) The Decline Stage.
THE PRODUCT LIFE CYCLE
¢
SALES
&
PROFIT sales

STAGE III
 
STAGE II profits STAGE IV
 

STAGE I

-ve INTRODUCTION GROWTH MATURITY DECLINE

TIME
Profit
 THE PRODUCT LIFE CYCLE
 The distinct opportunities and problems in each stage with respect to marketing strategy as well as the profit potential are as follows.
 STAGE 1: INTRODUCTION STAGE: This stage covers the period of the introduction of the product to the market; stocks have to
be created followed by special advertising and other promotional expenditures. Three promotional activities ensure among other
things that potential customers are informed of the new and unknown product, including trail for the product and securing
distribution in the retail outlets. Prices are set high due to the high cost incurred during production, because of the low output rates,
the need for high margins to support the heavy promotional expenditures and the inability to master the technical problems which
arise at the early stages of production. During this stage, only few competitors operate, and sales are usually directed to the higher
income groups (of course depending on the nature of the product-price). The company in most cases might be operating at a loss due
to heavy investment in machinery, creating stocks, low output rates and promotional expenditures.
 The product life cycle curve suggests that for the product to be profitable, the company must try to get its new products into
the rapid growth stage as soon as possible (ie the growth stage), and finally, the mature phase should also be stretched as long as
possible before decline sets in.
 STAGE 2: THE GROWTH STAGE: This stage is characterised by an increase in the number of competition, major product
improvements, line production methods and penetration of other segments. Promotional expenditures remain high although they turn
to fall as a ratio to sales (ie promo-expenditure, sales decreases) because sales climb or rise faster. This falling ratio is one of the most
important contributors to high profits during this stage. Also, profit mounts as unit cost decreases with greater volume of production.
Prices are still kept high in order to realise maximum profits; they will only be lowered if the firm has excess capacity or wants to
discourage new entrants or competitors.
 STAGE 3: THE MATURITY STAGE: At this stage, the rate of sales growth slows down as most of the potential customers have
tried the product; ie initial demand is beginning to be satisfied. There is a pressure towards reduced prices, dealer margins and profits.
Weaker competitors leave the industry while major ones become well entrenched. Much effort is extended in searching for better
advertising messages, consumer-deals and trade deals. Many companies see their major hope in devising new uses of their product,
new product refinement and features. Guinness/Star beer for instance is a long-lived product which has suffered low decline, but has
periodic market challenges. These threats are met by injections of product modification, restyling, repacking and market education.
This is termed as ‘The Leap Frog Effect’. With some other products however, the LC continues to take off from the point of maturity
as new uses and markets are discovered. Nylon is a typical example. Form a substitute for silk in stockings; it went to synthetic
textiles (shirts, singlets, pants, dressed), ropes, and fishing nets. This is known as ‘Staircase Effect’. Note that the P.L.C. curve as
illustrated is a generalisation. The curve for any product may be steeper or flatter; the line scale may be longer are shorter. Some
products seem to go on for a very long time indeed.
THE PRODUCT LIFE CYCLE
Sales Sales
 
 
 

LEAP FROG EFFECT TIME STAIRCASE EFFECT TIME

 STAGE 4: THE DECLINE STAGE: The decline period for some products may be rapid or gradual for others. This
stage is marked by a gradual decline in a number of firms producing the products, withdrawal from smaller markets and
reduced promotions.
 SUMMARY: The P.L.C. concept is a useful tool in the market forecasting, planning and control. The P.L.C. pattern
stands as a warning that it is dangerous to rely too heavily for too long on one product. The wise course in marketing
management is to plan for a succession of products so that as profit for one decline, profit from its successor rises to fill
the gap. Ideally, this will give a steadily rising profit for the company as a whole even though some products have entered
the decline phase of the P.L.C. It must be emphasised that the P.L.C. diagram is not a ridged description of exactly how all
products always behave. Rather it is an idealised implication of the pattern most products must be expected to follow.
THE PRODUCT LIFE CYCLE
 There is nothing Fixed about the length of the cycle or the length of each stage. The
length of the cycle is governed by the rate of technical change, the rate of market
acceptance and the ease of competition entry. Thus, each year numerous new
fashion styles are introduced, many of which to last only a few months. At the other
extreme, a new aircraft or ship must have many years of life if it could be
commercially worthwhile.
 The main importance of the P.L.C. concept is to remind us constantly of the 3
following facts:
 Products have a limited life
 Profit levels are not constant but changes throughout a product life in a way that is
to some extent predictable.
 Products require a different marketing programme at each stage of the L.C.
 If we accept the fact that no product will go on earning profits indefinitely, then
we must plan so as to have a whole succession of new products coming through the
pipeline as shown in the following figure.
THE PRODUCT LIFE CYCLE
PROFIT
C
D
B
Product A
 

TIME
IMPLICATIONS OF THE PRODUCT LIFE
CYCLE CHARACTERISTICS INTRODUCTION GROWTH MATURITY DECLINE

SALES LOW FAST SLOW GROWTH DECLINE

GROWTH

NEGLIGIBLE PEAR LEVEL DECLINING LOW or ZERO

PROFITS

CASH FLOW NEGATIVE MODRATE HIGH LOW

CUSTOMERS INNOVATIVE MASS MARKET MASS MARKET LAGGAROSS

COMPETITOERS RESPONSES FEW GROWING MANY RIVALS DECLINE NUMBER

STRATEGIC FOCUS EXPAND MARKET HIGH PRODUDTION DEFEND SHARE PRODUCTIVITY

MARKETING EXPENDITURE HIGH HIGH (declining %) FALLING LOW

MARKETING EMPHASIS PRODUCT AWARENESS BRAND PREFERNCE BRAND LOYALTY SELECTIVE

DISTRIBUTION PACTLY INTENSIVER INTENSIVE SELECTIVE

PRICE HIGH LOWER LOWEST RISING

PRODUCT BASIC IMPROVED DIFFERENTIATED RATIONALISED

IMPLICATIONS OF THE PRODUCT LIFE
CYCLE

Sales
 
1st
Cycle Recycle
 
 

Time
The 2nd hump in sales is caused by a tradition of production push in the decline stage. Other names are 2 nd Cycle,
Cycle Re-cycle. Example, car which is approaching the decline and a new model has been made but dealers
still have stock made up of the old stock. Promotion is intensified to raise sales and to clear the old stock.
 THE IMPORTANCE OF PRODUCT
DIFFERATION
One of the problems confronting marketing organisations is that rarely do they have sale rights to a
particular product (detergent powder or liquid soap) etc. On the other hand, it is obviously disable
to be able offer customers something that is unique, really different from anything else on the
market. How does one do this with a product that is fundamentally exactly the same as everybody
else’s? This is achieved through branding, packaging, presentation, positioning, etc. Cigarettes are
a case in point. Each manufacturer has a wide variety of brands which will vary in flavour, size,
zipped or unzipped, coupons or no coupons, style of packaging. Each one of these changes
represents an additional item into product range, and to product mix has to be carefully worked out
to appeal to the maximum number of customers with the minimum of manufacturing of market and
distribution complications.
 BRAND – Is the name, term, sign, symbol or design or the combination often which is intended to
identify the goods or services of one seller or group of sellers/companies and to differentiate them
from those of their competitors. This is a broad term and includes the use of a brand name, trade
mark and practically of all other means of production identification.
 BRAND NAME – IT is that part of the brand which can be vocalised or spoken. (Eg. Coke,
Double 22, James Burnns).
 BRAND MARK – It is that part of the brand which can be recognised, but is not utterable, such as
symbol, design or distinctive colouring or lettering.
 TRADE MARK – A brand or part of the brand that is given legal protection. Thus a trade mark is
essentially a legal term protecting the sellers’ exclusive rights to use the brand names and marks. It
includes the law designates as trademarks. A trade mark needs not be attached to a product.
Trademarks may have a limited period.
THE IMPORTANCE OF PRODUCT
DIFFERATION
 PACKAGING – A packaging may be considered as a management of container of product. The nature, style and design of
pack have to be decided upon whether to have cardboard cartons, plastic, glass, jars or a choice of two or more. Packaging
colours are equally important. A package may have a number of quite different functions to perform such as;
 Protection: for fragile products (glass ware, delicate equipments, and food items) need packaging that will resist clashing
during transit or withstand shocks during handling. Others need protection against contamination, dust, light, heat and many
other conditions.
 Identification: Distributors and retail customers need to be able to identify the product readily, especially if there are many
competitors (eg. Cigarettes) or many varieties (eg. Car accessories)
 Display: Packages have to contribute to distinctive display in shops and at the same time carry through the brand image in a
company way.
 Packaging may suggest quality, exclusivity and sophistication, modernity, although the content may be little changed.
 Reuse: A pack is not merely a handy container of product – it also contributes to the personality and influences the
acceptability of products of many types, with some products example cosmetics, packaging is an indispensible part of the
product mix. It adds glamour and excitement to a lipstick or face powder to give psychological satisfaction that is important
to life. Through the medium of packaging, marketers complete the quality of their particular brand of merchandise. It may
suggest exclusively (. . . as with some cigarette packs) and sophistication and suggest that cultural and societal satisfaction
are derived from consuming that brand of product.
 Security: The design of the packaging should be a blend of functional value. Example durability and aesthetic satisfaction
with modern methods of distribution. Many products have to ‘sell themselves’ when on display in self service shops or
stores. The overall design of a package and its labelling should assist a shopper to identify the brand among the many other
competing products.
 Packaging can help build customer loyalty.
 PRESENTATION – Number of items or products to be placed in a pack, sizes, colours, flavour etc.
 POSITIONING – Putting the product in its right slat – whether the product is for the old or young, male or female or both,
for the big spenders or those on low income, for families with young children or for sophisticated couples on their own – is
often referred to as positioning of the product. Thus we can position a product as ‘up-market’ (for the more sophisticated
and big spenders) or ‘down-market’ (for ordinary people with limited budget).
 MARKET SEGMENTATION
 A further choice to be made by companies deciding on their product mix is whether to attempt to provide a product or range of products
that appeal to the maximum number of people or whether to select a smaller group or groups of people on the market place and
concentrate on pleasing them. The process of selecting carefully analysed segment of the market and deciding products to meet the
requirements of that particular group of people is known as market segmentation. There are various ways in which markets can be
segmented among which are the following:
 Demographic Segmentation – This means by age or sex or other socio-economic groupings. Example; a shoe manufacturer might
concentrate (as some have) on children’s shoes, on high function shoes for women or on men’s safety shoes for industrial use, rather than
attempt to provide shoes that will be reasonably satisfactory for everybody in all situations.
 Segmentation by Personal Taste/Group Needs – With products such as food, not everybody’s tastes are the same and the product that
satisfies most people will leave others completely satisfied. People less than completely satisfied by the standard product forms a ready
market for a product formulated rather differently to meet their particular requirements. The attempt to meet these different taste is seen ,
example in the instant coffee market, which now offers a range of special brands in addition to the standard brew. Also markets for
overweight and under sizes and various handicaps.
 Geographical Segmentation – Concentration of effort can be achieved by aiming products only at those regions or areas containing a
high proportion of customers for a particular product. Note that, these are now beginning to be supplemented by behavioural research into
such areas as of life style, attitudes, and priority spending patterns. They are often combined with converting data and is used for both
products and services – bank credit cards, and resident property and product position in international markets.
 PRODUCT CONCEPTS/DEFNITIONS
 PRODUCT MIX: The composite of products offered for sale by a company. Example, shirts in various styles, colours and sizes, suits in
various styles, colours and sizes, etc. As a result of the Product Life Cycle, few companies can rely on only one product. Most need to
offer a series of products forming a product range or mix. In some situations in any case, a marketing organisation will be forced to have
a range of products rather than just one.
 For example it is always inconceivable that a shirt manufacturer would offer only one type of shirt. He is almost bound by the nature
of things to offer various collar sizes and selection of different patterns and colours.
 PRODUCT LINE: A group of products that are closely related either because they satisfy a class of needs, (example; a chair and table,
fork, spoon and knife) are used together, are sold to the same customer group, are marketed through the same type of outlets or fall within
a given price range.
 PRODUCT ITEM: A specific version of a product that has a separate designation in sellers list. Example, Kodak Instamatic is a product
item. Range of Kodak Eastman cameras, films, chemicals, are a product mix.
NEW PRODUCT DEVELOPMENT AND
PLANNING
 By a new product, we mean anything new that is added to the existing product line or mix. A new product may
be either:
 Innovative: These are unique products for which there is a need not being met satisfactorily by an existing
product. Penicillin, telephones, cars, when first introduced fell into this category. We can also describe as
innovative, those products which while replacing existing goods that have been satisfying existing market very
well offer totally different solution. Example, T.V. and cinema, zip fastener instead of strings or buttons, and
solar power for other energy sources (solar energy instead of batteries for watches, calculators, etc).
 Adaptive: These offer significantly different variations on existing products. They include such items as instant
coffee; freeze dried foods, self-adhesive wall paper, package changes, styling modification, new design and
colours.
 Imitative (ME – TOO): These products are already being sold by someone else but further sales opportunities
exist. The truly innovative product is rare. Adaptive new products can sometimes necessitate the great deal of
new technology and extensive research and development, though a new product can often be produced by
changes to an existing one. These may range from relatively minor changes, which effectively extend the Life
Cycle of a product or too much more extensive improvement. Example, Nylon was first introduced a stockings
for women. Product Life Cycle was lengthened by introducing different colours of stockings, stretch stockings
and ‘socks’; and moving into other fields such as carpets. In this way, Nylon sales showed an over lapping series
of Life Cycle curves giving a continuous upward trend. The Nylon success story depended both upon changing
the product for existing users and making it suitable for a whole new market. Changing product for existing
markets can be done in a number of ways, in particular by improvement in quality, features and styles.
 Basically, there are three methods of obtaining new products. These are:
 Modifying an existing product
 Acquiring (Buying) a new product
 Developing an entirely new product
MODIFYING AN EXISTING PRODUCT

 Introducing new products can be a difficult, costly and even

dangerous business. However seizing new opportunities as they
emerge is a way to increase profit. To be first in the field with a
successfully new product gives one the chance of creaming off
larger profits before effective competition develops. Also, there is
the need for new products because it is dangerous to assume that
profit from existing products will continue at present level forever.
The Product Life Cycle concept tells us that they will certainly not
continue forever. At different rates, over varying time scales, all
products eventually achieve market saturation and then start to
decline. Even while sales volume holds up, profits may well not;
and retaining sales volume and profit may call for regular updating
of existing product.
AQUIRING A NEW PRODUCT

 There are various ways in which new products can be bought. A

company needs to decide whether it will itself manufacture the
products it markets or whether it will simply be a marketing
organisation, leaving the manufacturing to specialists in that part of
the operation. Marks and Spencer is an outstanding cased of a very
successful organisation which develops detailed specification for a
wide range of products and exercises strict quality control, but does
not itself manufacture, preferring to buy in from numerous
manufacturing companies which in term are prepared to leave
(Marks & Spencer) to them to do the marketing end of the job for
them. A company must similarly decide whether it is better to do
its own product development or to ‘buy in’ this particular expertise.
Thus new products can be acquired by the following ways.

 Buying Patient rights

 Buying manufacturing rights (To manufacture with
the manufacturer)
 Arranging to act as marketing organisation for a
co-wishing company to concentrate on
manufacturing
 Acting as marketing agent in one country for a co-
manufacturing and marketing in another.
 DEVELOPMENT OF AN ENTIRELY NEW PRODUCT

 This could come about through;

 i. Product development to fill a known ‘gap’ in the range of existing product available to meet a known need an example
will be a considerable development as research currently going on to product an acceptable battery operated car to
overcome the pollution problem created by internal combustion engine and perhaps to achieve a more economical use of
fossil fuels. Also fufu pounding machine, washing machine, dish washers etc.
 Products in this group could be ascertained by;
 Examining other products – e.g. products being marketed in USA sell well in Britain and vise versa.
 Segmentation of markets e.g. for instant coffee in addition to standard flavour we have mild, bitter and so on to suit smaller
group of people prepare to pay a little more to obtain something that suit their taste.
 Gap Analysis – Examine products on the basis on how people view them i.e. what people think they are – e.g. if people
view all existing chocolate as crunchy but said they prefer a soft bar, then a gap may exist for a new chocolate bar brand
promoted as the “soft one”.
 (ii) Product Arising out of Scientific Research (New Technology Possibility) – Devoted originally to quite different
ends or from pure research in pursuit of knowledge with no commercial end at all in view, one famous e.g. is penicillin
whose effect was noticed by accident during a study of many different moulds. Another is ‘Teflon – coating’ of cooking
utensils e.g. e.g. ‘non- stick frying pans – a “spin off” from research in to heat resistance materials for the U.S space
programme.
 (iii) Creative ideas (will) with no very logical or very logical origin – Products in this range from jet engines, hover
crafts (a craft able to move at short distance above the surface of sea or land). To more trivial and less technical but
nonetheless useful ideas, such as ready salted or flavoured crisps, self assembly knock down chicken units, wardrobe beds
etc, generally speaking of course it is products that are developments of existing ones which arise from a study of a market
place and new technology which gives rise to products with high novelty.
 CRITERIA NEW PRODUCTS MUST MEET
 For a new product be successful the following must be adhered to.
 Ensuring that an adequate demand for product exits
 The product must be compatible the company’s marketing experience and resources e.g. a
washing machine manufactures could add a dish washer to his range and market it
successfully with his existing organisation and through the same distribution channel.
Customers’ purchasing habit could be expected to be familiar. But a similar manufacturer
deciding to manufacture paint would be entering a totally new marketing area and would
somehow have to acquire completely new problems of expertise. He would be faced with
quite new physical distribution problems and his advertising approach and way of
thinking would have to change.
 Ensuring that the product fits into the existing production capability (sizes, amount, etc).
 Ensuring that suitable finance is available e.g. if the new product needs high stock levels
the extra finance be available; and it its sales are seasonal, the cash flow fluctuation must
be provided for. Developing and lunching a new product generally needs very heavy
cost, so that a long time may elapse before it reaches break – even point. The cash to
sustain this period of heavy losses must be available.
 Allocating adequate management time or manpower resources to the product.
STAGES IN THE INNOVATION
PROCESS (NEW PRODUCT
DEVELOPMENT (NPD)
 The various stages in the innovation process (NPD) may consist of one or more of the following stages.
 The Idea Generation (Planning) Stage: The main technique used to achieve this is known as Brain storming.
The essence of this is approach is to assemble a group of peoples preferably with widely different attitude and
background and then encourage them to ‘spark off’ and produce a steam of ideas. The basic problem or
purpose is defined and views from all participants are entertained without any criticism. This entails altercative
searching for potential profitable new line to add to a firm’s product range. It is a positive methodical vetting
of ideas and product that appear promising. Marketing research clearly plays a central role in the identification
and profitable exploitation of new product ideas.
 Screening Stage: All ideas recorded under stage 1 are examined and salted and further consideration given to
those that look promising. Those product ideas that are inconsistence with company objectives and
incompatible with company’s resources eliminated. CONSIDERATION: demand considerations e.g. potential
demand in what market is the likely product life cycle etc, resource considerations and competitive
considerations.
 Business Specification Analysis Stage: This stage projects future sales, profits and rate of returns of the
proposed new product whether it is economically viable and determines whether these meet the company’s
overall objectives and resources. Crucial questions will include the following.
 What is the likely demand and at what price?
 Can the product be manufactured and distributed at a cost that will fit the price or demand situation and also
yield a suitable profit?
 What will be the yield of capital and manpower invested in this way as against the comparable returns from
alternative way from employing the resources, e.g. in economic terms, what is the opportunity cost?
STAGES IN THE INNOVATION
PROCESS (NEW PRODUCT
DEVELOPMENT (NPD) cont
 Product Development And Design Stage: This stage is crucial that it marks the 1st attempt to
develop the product in a concrete form, secondly, it represents a very large investment which is likely
to dwarf the initial coast incurred in the initial stage – purchase of new machine, employing new
personnel, thirdly it provides an answer as to whether the product ideal can be translated into
technically and economically feasible product. The steps involved are the following.
 Engineering – the aim is to arrive at a prototype that is trouble-free, designed for economical
manufacture and appealing to customers. Many different versions may have to try before the
satisfactory one is found.
 Consumer Preference Testing – This involves discovering the distribution of consumer preferences
of different levels of a particular product attribute. After this the firm decides which segment it can
sell profitably.
 Brand Naming – Among the desirable qualities of a brand name is that it should suggest something
about the products’ benefits product qualities such as action and colour and it should be easy to
pronounce remembered recognised and it should be quite distinctive. These characteristic should be
looked at this stage.
 Packaging – The package should protect the product from the factory to the ultimate user, it should
be convenience to the consumer as well as serving promotional function, and consumers are willing
to pay a little more for appearance. Colours used should be checked for the cultural implication in the
overseas markets. White e.g. signifies morning in Japan, green signifies happiness in Pakistan but it
can suggest ill health and immaturity in Switzerland.
STAGES IN THE INNOVATION
PROCESS (NEW PRODUCT
DEVELOPMENT (NPD) cont
 Other activities that take place during the product development stage include formulation of an advertising
programme, trade merchandising programmes and application for patents and copy rights. Depending on the
product safety test, quality test servicing and maintenance routines and many other factors will need to be
worked out. It is most important to keep clearly in mind of everyone concerned the needs of the ultimate users so
as to avoid developing all products which either does not in one respect or another meet requirements of the
market place, or which does so superbly but are so high costly that competition cannot be met or that profits
cannot be made.
 Test Marketing: Already treated under marketing research is the process whereby one part of the total market is
chosen for the launching of a new product. If successful, we can now go on complete national launch. Here it is
enough to be recognised that a full national launch of a new product is (a) very costly (b) potentially difficult.
 As an interim stage, it is often sensible to launch a product initially in one carefully selected part of the country
only. It is then possible to check whether all aspects of the marketing mix are fully effective. If the optimum has
not been straut, changes can be made in the national launch. In particular if further product improvement need to
be made in response to customer reaction this can be done without too much damage on the company’s image or
too great a loss to the company. A national launch of what turns out to be an imperfect product or (a wrongly
priced or promoted one) can be an irrevocable and disastrously costly affair. Furthermore, valuable clues on
distribution problems may be priced and a greater understanding of the various groups making up the market
would be gained during the T.M. Stage (Test Marketing Stage).
 If the trail and re-purchase rates are high, then the firm can commercialize its products. If trail rate is high but
the re-purchase rate is low, then the company can re-design the product or drop it. If the trail rate is low and the
re-purchase rate is high then there is the need to intensify advertising and promotional programmes. Finally, if
the two are low, then the company would have to drop the product.
 STAGES IN THE INNOVATION
PROCESS (NEW PRODUCT



DEVELOPMENT (NPD) cont
We may have the following decision rate in table form in respect to test marketing.
TRAIL RATE
 RE-PURCHASE RATE
 DECISION
 LOW
 LOW
 DROP PRODUCT
 LOW
 HIGH
 INTENSIFY PROMOTIONAL TOOLS
 HIGH
 LOW
 RE-DESIGN OR DROP PRODUCT
 HIGH
 HIGH
 COMMERCIALIZE PRODUCT
 Launch and Commercialization: Only when all signals agree so far does it normally make sense to launch the product fully, although there may be some situations where it is wise
to skip the test marketing stage. At this stage the company decides to embark on full scale large production and distribution. It calls for investments in new equipments and new
facilities to make it possible. Stocks have to be created and high proportion SNR management and salesmen will be devoted to seeing the new product through.
 It also calls for certain high prices to march the initial promotional and investment expenditure. A reference back to the Product life Curve will show that up to now, each stage has
produced at a larger and larger loss. Only at some time, possibly a very long time, after the launch does revenue and eventually profit 9if all goes well) begin to be generated.
 A further significant point is that even after the launch we may well need to think in terms of a series of stages. The Life Cycle suggests this, and a useful further concept is that of
‘Adopt Categories’. Especially with innovative products some people will adopt the new product quickly, eagerly, whereas other will be slower to take to them. Stanton identifies
five (5) distinct groups as follows.
 Innovators – The venturesome 3% who are willing to take the risk of trying something out first. They turn to be younger, of higher social status and more affluent than other
categories.
STAGES IN THE INNOVATION
PROCESS (NEW PRODUCT
DEVELOPMENT (NPD) cont
 Early Adopters – About 13% of the market including more opinion leaders than the other groups. They turn to be younger, more creative, and
more mobile than the groups below.
 Early Majority – About 34% of total market. A bit more price in social and economic standing.
 Late Majority – Another 34%, more sceptical than the previous groups. Adopt only under economic necessity or pleasure from their peers.
Older, worst educated, below price in social and economic status.
 Late Adopters – The tradition bounds 16% suspicions of innovation turn to be older than the rest and at the lower end of the economic and
social scales.

 While the innovator and early adopters are considerably influenced by promotion and the apparent advantages of a new product, the latter
group will turn to wait for the situation to develop until they feel virtually forced to follow suit. This is one reason for the slow and gradual
development of P.L.C. and while a long term, carefully monitored development plan with financial target is essential.
 PRICING
 The price of a product or service is its exchange value either in monetary terms or in terms of other goods or services. Price acts as signals by
which potential buyers and sellers rationally decide to allocate their scarce resources in order to maximize their satisfaction and profits
respectively.
 That is, price means something quite different to those on one side of the deal and those on the other. Price tells the manufacturer or the
retailer if his account is good enough how much profit he would make and it tells the buyer what the cost will be or how much the cost is.
 Both personal and industrial buyers see price to some extent as a signal of quality. Some products fail to sell because they were priced too
low; it is not necessary the cheapest price which will give the consumer the greatest satisfaction. Thus the price of a product is not seen by
the buyer simply in terms of what is the cheapest. It is rather one . . . in the total ‘bundle of satisfaction’ which really constitutes a product in
the customers’ eyes.
 Pricing determines what product will and will not be sold, in what volumes and with what gain. It specifies which equipment will be
operational and how long, what inventory and working capital commitment are required, what cash flow expected, where sales force effort
should be applied, which markets to approach and penetrate, and ultimately the return to be expected on invested capital. How the product
will in itself determine the product mix to be produced and the extent of the other marketing mix to be applied.
THE ECONOMIC INTEPRETATION OF PRICE

 The economist views price from the theory of supply and demand
which simply states that - 1. Demand will fall as price increases. 2.
Supply will rise as price increases. This is logical and in
agreement with common sense to a large degree. All things being
equal, the rise in price of a product will cause few people to want
to buy it and demand will fall off (demand in economics means
the quantity that will be bought at a particular price and that if
manufacturers are ‘supplying’ a limited quantity of goods at a
given price, then the unsatisfied ‘demand’ would have to force up
the price and as the price rises, more manufacturers will be
inclined to produce similar goods so that the supply will increase.
Graphically, the supply and demand curves are as shown below.
THE ECONOMIC INTEPRETATION OF PRICE

PRICE DD SS
P1 E

 
0 Q1 QUANTITY
 
 The two graphs; demand (DD) and supply (SS) meet at point ‘E’
known as the point of equilibrium, where the quantity supplied ‘Q’
is equal to the quantity demanded at price ‘P1’. While it is true that
in real life there will be a tendency for things to reach equilibrium in
this way, in practice, it is usually not quite so simple. The reason lies
in the phrase ‘all things being equal”.
THE ECONOMIC INTEPRETATION OF PRICE

 In real life, all things are not equal, for laws of supply and demand to be true.
Economists have to assume a state of perfect competition that is a market in which
 In real life, all things are not equal for law of supply and demand to be true.
Economists have to assume a state of perfect competition that is a market in which
all suppliers and buyers are fully aware of the prices at which goods are available
and where each type of goods is homogeneous. But in most markets in real life,
sellers and buyers do not have complete knowledge of the prices at which goods are
an offer. Much more important, goods are certainly not homogeneous but widely
different in performance, quality and in many other respects. Indeed, in a
competitive economy, the sellers aim will normally be to bring about a situation
where his product or service is clearly different from other people’s - to establish a
competitive differential advantage”. Thus although total demand for a particular
category of goods is an important factor determining the price people will pay, it is
by no means the only factor and is frequently not even the most important factor.
PRICE DETERMINANTS/PRICING METHODS
The major determinants of Price or Factors affecting the Pricing of Products are:-
 The sellers or Manufacturing Cost or Cost Oriented Pricing.
 Market Demand or Demand Oriented Pricing.
 Competitive Prices or Competition Oriented Pricing
 THE COST ORIENTED PRICING - Is the practice of arriving at or selling price
by calculating the basic production cost, and adding on a margin for profit. The
production cost of a product, usually consists of two parts thus, Variable Cost and
Fixed Cost. Fixed Costs are usually made up of; Rents, Rates Capital Charges or
rentals on machinery and equipment; some wages and salaries which are incurred
whatever the level of production. As the quantity produced increases, the Fixed
Cost per Unit decreases. Variable cost may be made up of Raw materials, Power,
Distribution costs and some wages and this may vary as each unit is produced. It is
the total of the Fixed Coasts and variable costs divided by the Number of Units
produced that gives us the total cost per unit. Generally, the cost per unit decreases
as the total number of units increases. However, it is possible to reach a situation as
depicted as shown in figure 1 below; where beyond point ‘C’ overtime rate or shift
work, coupled with fully utilised equipment lead to a sharp increase in cost per unit.
PRICE DETERMINANTS/PRICING METHODS

¢
COST

Total Cost
per Unit

‘C’
Direct Cost per Unit or
Fixed Cost
 

OUTPUT OR UNITS PRODUCED

PRICE DETERMINANTS/PRICING METHODS
COST
&
REVENUE REVENUE/PRICE

PROFIT
‘E’ TOTAL COST

FIXED COST
LOSS
 

Break
Even No. Of UNITS
Point
PRICE DETERMINANTS/PRICING METHODS

 Thus to fix a price based on cost, we have to decide

first at what level of production cost is to be
calculated. If in fact, that level is not reached,
profit may be much less than anticipated, or there
could even be a loss. Even greatly exceeding the
anticipated level of production may bring higher
costs in some cases – with the same results.
 TYPES OF COST ORIENTED PRINCING AREA
Mark-up Pricing b. Coast-Plus Pricing c. Target Pricing
 MARK-UP-PRICING – Mostly found in retail trades where the retailer adds

different mark-up (Fixed %) to various goods the carries.

 COST-PLUS PRICING – This is used to describe jobs that are non-routine

and difficult to cost in advance, such as construction works.

 TARGET-PRICING – A company can set as its objectives, a return of say

10% or 20% etc. on the capital employed in the Business. The Break-Even
approach can be used to establish whether a given project is likely to achieve
this result and if the project will not be taken up.
 DEMAND ORIENTED PRICING: The seller or manufacturer looks at the

intensity of demand. A high price is charged when or where demand is

intense, and a low price is charged when or where demand is weak (Low),
even though unit cost of production may be the same in both cases, this is
not wholly true for all products. However there are products and services
which are priced low with increased demand e.g. seasonal goods, Armless
and their bookings during holidays.
 COMPETITION ORIENTED PRICING
 This is the situation where a company sets its price solely on the basis of what
its competitors are charging. In this case the firm does not seek to maintain a
rigid relation between its own price and its own cost or demand but rather on
those of competitors. The company will maintain its price if competitors
maintain their change its price if competitors change even though its own cost
or demand have mot altered. Types or cost of price are (i) Going-rate Pricing
(Imitating Pricing) Price is kept at the price level set by the industry it serves a
useful purpose in situations where cost are difficult to measure. The difficulty
of knowing how buyers and competitors will reach to price differential is
another reason for this price policy.
 BID PRICING:- It dominates in those situations where firms compete for jobs
on the basis of bits such as original equipment manufacturer, tenders contract
etc. The bid is the firm’s offer price and it is based on expectations of how
competitors will price rather than on a rigid relation based on the firm’s own
cost and demand. The man aim of the firm in the bidding situation is to get the
contract and this means that it hopes to set its price lower than that set by other
firms.
FACTORS INFLUENCING PRICE CHANGES
(PRICING STRATEGIES)
 A firm may consider price reduction in order to:-
 Penetrate the market or stimulate or stimulate demand:- Here, relatively low price is set in order to gain maximum
penetration of the mental as quickly as possible. This aim will only be achieved if the market is highly price
sensitive or elastic (i.e. many additional buyers will enter the market if the products were priced lower; if the unit
cost of production and distribution falls with increase output (e.i. where large economies of scale can be gained
from higher levels of production); and finally it the low cost would discourage the actual or existing and potential
competition. Once a company has gained/dominant of the market by “penetrating pricing” it can be very difficult
for competitors to enter successfully.
 Take advantage of lower cost of production due to economy of scale.
 Shake out weaker competitors.
 On the other hand the firm may consider price increase in order to (i) Take advantage of strong demand (ii) Pass on
higher cost of production to customers (iii) Take advantage of the fact that some buyers always stand ready to pay
a much higher than others because the product for one reason or the other has a high present value to them. This
process is known as Market Skimming objective or ‘skin the cream’ pricing. This means setting the price higher in
the acceptable range of prices, sometimes for a short period only, often for longer. It is largely though not
exclusively, associated with new products, for the following reasons.
 In the early stages of product life (because there are few direct alternatives) demand is likely to be less elastic i.e.
inelastic less price sensitive.
 If a mistake is made it is easier to lower the price subsequently than to raise it.
 High initial price can be used to recoup heavy and development expenditure.
 Since production capacity may well be limited initially a relatively low level of demand can be an advantage and
the objective of skinning price is to gain a premium (as much profit as possible from these buyers and only
gradually reduce the price to draw in the more price elastic segment of the market.
 PRICE DISCRIMINATION
 Price discrimination is a situation where a particular product is sold at 2 or more prices. It
takes various firms according to whether the basis is the customer (Price skimming, social
structure); product version (slightly different versions of the same product sold at higher
price); the place (cinema – standing, sitting, stadium), the time (demands varies over a
business cycle – airline, corn, tomatoes etc.).
 Factors that ensure its operations or ideal condition that makes price ‘D’ possible are the
following:-
 The market must be segmentable showing different intensities of demand
 There should be no chance that the members of the segment paying the lower price could
turn around and re-sell the product to the members of the segment paying the higher price
 There should be little enhancing that competitors would under sell the firm in the segment
paying the higher price.
 The cost of segmentation and policing the market should not exceed the extra revenue
derived from price discrimination.
 Price discrimination may or may not lead to long-run profit maximisation but charging what
different parts of the market segment will bear, may maximise short-run profits but may
harm customer relationship in the long-run.
 PRICE STRUCTURES
 In practice the whole structure of related prices have to device for a product
only when the manufacturer sells direct to the user is there a single one
price arrangement. Usually we have to ask ‘to whom’? Whether the goods
pass through a distribution chain, such as the manufacturer to wholesaler to
retailer to consumers. There may be a whole series of prices appropriate to
each stage of the process. When the manufacturer fixes the retail price, the
price of a product at each stage of the distribution chain may look like this.
 Example: Retail Price ¢ 5.00
 Less Retail Discount (20%) ¢ 1.00
 Price to Retailers ¢4.00
 Less Wholesalers’ Discount (10%) ¢0.40
 Price to Wholesaler ¢3.60
 Manufacturers may price the product at ex-factory (that is for goods bought
directly from the manufacturers) and deals at each stage could fix their own
mark-ups to cover costs and profit as follows.
PRICE STRUCTURES
 Example: Ex-Factory Price ¢3.00
 Wholesalers’ Mark up (10%) ¢0.30
 Price to the Retailer ¢3.30
 Retailers’ Mark up (20%) ¢0.66
 Retail Price ¢3.96
 Frequently used in pricing is “Quantity Discount”. Here the
price will vary according to the quantity bought (on the basis
of transportation cost, administration and so on will be
proportionately higher on small deliveries than on large
ones). Some manufacturers rely exclusively on quantity
discounts and should not have separate wholesale or retail
price list. Anyone can buy direct and the price is determined
solely by the quantity bought.
THE IMPORTANCE OF PLACE IN THE
MARKETING MIX – DISTRIBUTION
CHANNELS
 Generally, customers want the goods or services to be provided where they
are and somehow the manufacturer must make it so. There are a number of
ways through which a product can be made available to the consumer – the
end user as shown in the diagram below.

AGENT (Broker, Factor, Auctioneer, Jobber, etc

MANUFACTURER

OR OTHER WHOLESALE OR TRADE “SCIER”

MIDDLE
MARKETING

ORGANISATION RETAILER MEN

CONSUMER/USER (Industrial or Commercial)

THE IMPORTANCE OF PLACE IN THE
MARKETING MIX – DISTRIBUTION
CHANNELS
 The manufacturer/producer has the choice of dealing direct with the customer or of passing the
goods through other organisations including wholesalers and or retailers. The route(s) followed
by the products as they travel to the ultimate customer by way of these other organisations are
usually called the Channel of Distribution. There are a number of choices available depending
upon the nature of the commodity/product and the purpose for which it is intended. Consumer
goods are normally purchased from retail establishments whereas producer goods are routed
direct from the producers to the manufacturers who require them as machinery or to carry out the
next process of the manufacturer of the product to the form in which consumers want.
 Operating the channels of distribution are the middle men – independent businesses standing
between the producer and household consumers or industrial users. They provide a wide
assortment of services. These services span the whole range of marketing services and include;
 Storage
 Delivery
 Financial Assistance to manufacturer
 Credit to the buyer
 Sales promotion
 Product servicing
 Collection and decermination of market information
THE IMPORTANCE OF PLACE IN THE
MARKETING MIX – DISTRIBUTION
CHANNELS
 Middlemen may be grouped into four main functional categories.
 Manufacturers’ owned wholesale establishments
 Merchant wholesalers
 Agent middlemen
 Some retailers
 Wholesalers are concerned with selling to others (mainly retailers) who are buying in order to resell
or to those who are buying for business use (i.e. not for personal consumption) agents normally
arrange sales transaction but do not take title to the goods; they buy and sell for others. Agents
receive remuneration in the form of commission or fee. The two commonest types of mercantile
agents are brokers and factors.
 BROKERS: they bring together people in particular markets who are ‘anxious’ to trade but
because of lack of knowledge of the market, do not know whom to trade with. A broker does not
have direct physical control of the goods in which he deals but represents either buyer or seller in
negotiating purchases or sales. They merely sell the goods for their principal and delivery for the
goods sold is left to arrange later, for he does not have them in his possession.
 THE FACTOR: on the other hand is in possession of the goods, selling them for his principal
delivering them up to the buyer for payment and rendering an account, less his commission for the
sum due.
 Retailers are people whose main business is to sell direct to the ultimate user.
FUNCTIONS OF A
WHOLESALER
 The wholesaler buys in bulk (large quantities) and settles promptly with
cash.
 He bears risk when he buys in bulk and holds them in stock to meet
future demand.
 By selling under his own brand name, he relieves the manufacturer of
the need to advertise his products.
 He breaks bulk by offering a wider variety of goods in small quantities
to the retailer; and gives credit to certain class of retailers thus, reducing
the amount of capital needed by the retailers.
 By assuming the speculative function of buying goods when they are in
plentiful and releasing those when they are in short supply. He enables
the consumer to obtain a steady flow of goods throughout the year at
stable prices.
TYPES OF WHOLESALERS
 Traditional wholesalers – Manufacturers’ own
wholesalers
 The co-operative wholesalers – Societies
 Cash – and – carry wholesalers
 Mail order wholesalers
TYPES OF WHOLESALERS
 Traditional wholesalers – Manufacturers’ own
wholesalers
 The co-operative wholesalers – Societies
 Cash – and – carry wholesalers
 Mail order wholesalers
CASH – AND – CARRY WAREHOUSE
/WHOLESALERS

 The emphasis is on self – service, absence of credit

facilities, breaking bulk to the requirement of
individual retailers, absence of delivery facilities. It
requires the retailer to come to the warehouse, pay
cash and take away the merchandise. They usually
sell at low prices.
CO-OPERATIVE WHOLESALE SOCIETIES

 This caters for the needs of retail societies who are

its members. Its influence extends further than the
normal wholesaling function into manufacturing,
dairying, farming and transport
MAIL ORDER
WHOLESALERS
 They sell direct to the consumer in his own home,
eliminating the retailer. Their chief attraction to the
customer is short term credit facilities.
RETAILERS
 A retailer is defined as anyone who sells to the ultimate consumer or
user. Most production takes place in quantities that exceed the everyday
wants of the individual consumers. The consumers’ needs may be few or
frequent and sometimes seasonal. They want a selection from which to
choose. The retailer is consequently a catalyst who brings together
production with consumption in both a qualitative and quantitative way.
 Generally the role of retailers is as follows.
 He breaks bulk
 Prepares the goods for sale by providing expertise and advice for his
customers and maintains and after sales services.
 They provide credit and hire purchase facilities.
 Pass information on products to consumers and back to producers.
 RETAILERS
 Retailers may be either a. independent retailers (retail outlets not owned by the producer) or
b. manufacturers’ retail outlets (owned and generally operated by manufacturers). Both
independent retailers and manufacturers’ retail outlets may be any of the following types.
 Department Stores
 Multiple shops (loosely termed chain-stores)
 Variety chain stores
 Co-operative stores
 Supermarkets
 Discount houses or stores
 Super stores
 Hypermarkets
 Mail-order selling
 Vending machines
 Door to door selling
 Franchising
 Department stores – These handle a wide variety of lines of products. A department store is
a collection of many stores or departments all under one roof each with its own buyer and
or range of goods. There is a central ownership of the whole operation.
 RETAILERS
 Department store was a French invention by one Aristide Boucicaut who with the help of his wife, in 1852 to develop
trade in Paris along the following concepts.
 Prices should be the same for all customers (no bargaining) and that all goods should be marked clearly with their
prices.
 Customers should be allowed to enter, walk around and leave the shop without the pressures usually placed upon them
by the staff.
 Delivery to people’s homes in Paris should be given when required.
 Customers with justified complaints about their purchase should be given satisfaction by refund and replacement.
 Low mark-up and high rate of stock turn should be sought.
 Boucicout also established welfare plans for staff far in advance of their time. These were revolutionary changes in
retailing at that time and equally dramatic were the effects for:
 Turnover of his shop rose up dramatically to unprecedented level - ½m F to 18m F in 1869.
 He was copied by businessmen all over the world. The precepts of him became the established pattern for department
store trading.
 Today the department store represents a fascinating study in management and market often regarded as a series of
shops within a shop, the sum of their entire sale is great would be their parts in total if they were separate shops. In
other words the volume of accumulated sales is great would be the department sales if there were individual
establishments. This is due to the name and reputation usually acquired by the department shops, the wide assortment
of merchandise and the complementary nature of departments all under one roof with a cachet (something showing or
conveying prestige) not always achieved by other kinds of retailing.
 A department store may deal in all types of grocery (staple foods and general household supply) confectionery (sweets,
meat) haberdashery (small wares, ribbons, tapes) clothing, footware, electrical, furniture, furnishings, may provide
banking, insurance, hair dressing, restaurant services, etc.
MULTIPLE SHOPS
 Multiple shops have generally defined as those with retail firms with many branches all
selling similar forms of merchandise.
 Advantages of this type of shops are:
 Success breeds success – The successful shopkeeper who opens a 2nd branch has the
knowledge of the first branch behind him. If he is sensible he will not repeat the initial
mistake, by the time he has ten, he is not only ten times important to his suppliers and
bank managers but his name is becoming familiar to the public.
 Considerable economics accrued – By buying in bulk quantity there should be discount
from suppliers who will also offer other advantages in terms and conditions. Probably
the same specialist managers and staff will concentrate on buying. Accounting, training
and staff matters, display, site location, work study, advertising and shop layouts.
 Standardisation of product – Only by standardisation can large quantities of
merchandise be bought and sold, exchange between branches, price ticket printed in
bulk, staff interchange, national advertising carried out and forms or documents
handled rationally.
VARIETY CHAIN SHOP
 This is a type of multiple shop but not all multiples are variety chains. The
distinction is that whereas multiple shop companies have tended to specialise in one
commodity – fashion, food, men’s wear, footwear or chemist goods, the variety
chains have always presented a wide mixture of different goods. Example, Marks &
Spencer, Woodworth, Littlewoods, British Home Stores, etc.
 NB:
 Piggy – Backing: Questions inserted in an existing questionnaire submitted on a
continuous basis to a consumer panel. Entitles client to use existing resources for
perhaps a once – only enquiry.
 Buffer Stock: Stock carried by salesmen to replenish dealers’ stock until fresh
suppliers arrive from manufacturer or wholesaler.
 Communication Cycles: System of communication between customer and
manufacturer often structured by intermediaries as in building industry where
merchants may create communication block when a user needs service.
 Pre-Test: Trail run of run product or alternative product either identified or blind.
VOLUNTARY CHAIN – SYMBOL GROUP

 Association of independent retailers who have

joined together to purchase as a group through a
wholesaler to enjoy the advantage of mass
purchasing power
CO-OPERATIVE SOCIETIES OR SHOPS

 These are owned and controlled by the people who

shop there. Traditionally members who shopped
regularly were paid a dividend out of the trade
surplus; the value depends on the members who
purchased. In recent times, in order to counter the
growing trend of the supermarket chain, they have
largely substituted cut-price goods and trading stamps
for the old style dividend. The stamps are stacked in a
book which may be redeemed when full in cash or
goods or placed as a deposit in the share account.
SUPERMARKETS
 A supermarket is a self-service shop in which the
customer is free to choose any product which he
wishes with a minimum of assistance from sales
personnel and which persistently deals in the
grocery field (food items and general household
goods).
SUPER STORE AND HYPERMARKETS

 These are very large self-service shops on one

floor. Usually they are out of town or (periphery of
two – approx. 2 – 4 miles) and have very large free
car parking areas for customers. They normally
carry a wide range of merchandise – food products
as well as more general non-foods like consumer
durables, clothing, hard wares, etc
DISCOUNT STORES
 These are large warehouse type shops saving on cost by:
 Out of town locations – hence lower rents, etc
 Minimum service and display
 Bulk purchase
 Hence they are able to offer goods at substantially lower
prices than the conventional retailers. They are especially
common in electrical goods and furniture where their
large range of goods in stock is an added attraction.
Discount stores may operate within the framework of
many of the type of stores or distribution outlets above.
FRANCHISING/DISTRIBUTORS/DEALE
RS
 Combining the advantage of centralising management expertise
with the vigour and flexibilities of an independent distributor, the
franchiser, supplies the name and image, product services and
general knowhow including advice on locations, loan capital
facilities and methods of operation and control.
 The franchise supplies all or a large part of the capital and agrees
to purchase supplies from the franchiser. Example, ice cream
equipment, some soft drinks i.e. coca cola operates a franchising
system, with area distributors buying special syrup, from the
company diluting and bottling and distributing in their area;
petrol dealers and beer distributors. Particularly common in the
catering field are Wimpy Bars and Kentucky Fried Chicken
 DIRECT SELLING
 This is carried out by producers in the following ways.
 Door – to – door selling: Situation whereby salesmen visit people’s homes e.g. Companies like Avon
Cosmetics; salesmen of industrial products calling on company’s buyers insurance companies.
 Party – plan selling: Use of part time representatives selling on commission to people in their homes.
 Manufacturers’ own retail outlets: The manufacturer has his own retail outlet and can take any of the
types listed above – discount stores, departmental stores, etc. example BOOTS & COMET has
discount stores it does not display the commodity but displays only some few items to show that it
has that commodity in stock; when such a company deals with series or various commodities it is
said to be a variety chain store where the stores are many in a particular city.
 Mail – order selling: Through catalogues e.g. Littlewoods Marshall Wards, or through press and T.V.
advertising. Here there is no face – to – face contact and the whole transaction is carried out through
the post. Appointed agents sometimes hold a catalogue and earn a commission on any orders they
take for their friends and relatives. It tends to be passive rather than active selling. Credit terms
operate, payment is usually a small percentage of the cost price (say 5p in a £) over a period of 20
weeks. Extended credit terms are available usually 38 weeks, in some cases up to 80 weeks. They
operate a guarantee of satisfaction or return of cash. Uniqueness of the product sold is generally
ordered by mail because they cannot obtain the products at the local store. The remoteness of some
locations of stores often makes it convenient for customers to buy from catalogues/mail. Large mail-
order sellers buy direct from manufacturers or even own the factory and combines wholesaling and
retailing.