CHAPTER SIX

Product, Marketing & Sales

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 LEARNING OUTCOMES

In this chapter, you will learn to:

 Define marketing and identify the core marketing
concepts.
 Discuss the marketing management orientations.
 Describe the micro and macro-environmental forces
that can affect the company’s ability to serve customers.
 Define consumer market and name the four major
types/factors that can influence consumer buying
behaviour.
 Elaborate on the stages in the buyer decision process.

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 LEARNING OUTCOMES (cont.)

 Identify the steps in designing a customer-driven market

strategy: market segmentation and market targeting.
 Define product and the major classification of consumer
goods.
 Identify the decisions that the company will have to make
concerning the product.
 Describe the steps and marketing strategies of the
product life cycle.
 Define pricing and factors to be considered when setting
pricing.

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 LEARNING OUTCOMES (cont.)

 Define marketing channel and the key functions of

marketing channel.
 Identify the steps in the channel design decisions.
 Explain the types of retailers and their roles in the
distribution channel.
 Discuss the communication process.
 Set the total promotion budget and promotion mix
strategies.
 Describe the major decisions involved to develop
advertising programmes.
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 LEARNING OUTCOMES (cont.)

 Explain the role of public relations in the promotion mix.

 Identify the sales promotion campaigns that are being
developed.
 Discuss the steps in the personal selling process.
 Define direct marketing and the benefits to the buyers
and sellers.
 Discuss the major forms of direct marketing.

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 WHAT IS MARKETING?

Marketing is a process whereby individuals

or groups obtain what they need and want
through exchanging products, services and
value with others.

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 CUSTOMER NEEDS,
WANTS AND DEMANDS

• Human needs are basic part of human make-up.

• Human wants are driven by culture and
individual personality.
• Demand occurs when there is buying power;
wants will become demands.

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 PRODUCTS, SERVICES
AND EXPERIENCES

The customer’s needs and wants are fulfilled

through marketing offer—the combination of
products, services, information or experiences
offered to satisfy the needs and wants.

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 CUSTOMER VALUE
AND SATISFACTION

• Customer value—consumer’s assessment of the

product’s overall capacity, i.e. the difference
between values that consumers gain from owning
and using a product, and the costs of obtaining the
product.
• Customer satisfaction—the expectation of the
consumers matches with the performance of the
product and service provided.

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 EXCHANGES AND RELATIONSHIPS

• Exchange is where both parties gain something from

each other.
• The conditions for an exchange to take place:
– Two parties must participate
– Each party must have something of value to the other
– Each party must want to deal with the other
– Each party must be free to accept or reject the others’
offer
– Each party must be able to communicate and deliver
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 MARKETS

Marketing is meant by managing markets to

bring about profitable customer relationships.

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 EVOLUTION OF MARKETING

Evolution of marketing is based on five

concepts/philosophies:
• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal marketing concept

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 PRODUCTION CONCEPT

• The consumers will favour products that are available and

highly affordable. This concept is useful in two situations:
– Demand for a product exceeds the supply whereby the
management will look for ways to increase production.
– The product cost is too high and improved productivity
is needed to push the cost down.
• The consumers will favour products that offer the best
quality, performance and innovative features.
• Organizations focus on continuous product improvements.

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 SELLING CONCEPT

• The consumers are not interested and will not

buy the company’s product unless it does
heavy promotion.

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 MARKETING CONCEPT

• This concept holds that the organization will

have to identify the needs and wants of target
customers and deliver the products to the
consumers better than competitors.

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 SOCIETAL MARKETING CONCEPT

• The organization should deliver the satisfactions

effectively and efficiently, improve the consumers’
short-run want, long-run welfare and the society’s
well-being.
• The organization will consider the environmental
problems, resource shortages and rapid population
growth and try to serve what is best for consumers
and society.

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 MARKETING ENVIRONMENT

• Micro-environment • Macro-environment
1. Company 1. Demographic
environment
2. Suppliers
2. Economic
3. Marketing environment
intermediaries 3. Natural environment
4. Customers 4. Technological
5. Competitors environment
6. Publics 5. Political environment
6. Cultural environment
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 CONSUMER MARKET

• All the individuals, groups and households who

buy goods or services for their own personal use.
• The five stages in a buyer decision process:

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 MARKET SEGMENTATION

• Market segmentation is dividing a whole, big

market into smaller groups of buyers based on
their needs, characteristics or behaviour who
might require different and separate products.

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 PROCESS OF SEGMENTING
CONSUMER MARKETS

• Geographical segmentation
• Demographic segmentation
• Psychographic segmentation
• Behavioural segmentation
• Multiple segmentation

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 GEOGRAPHICAL SEGMENTATION

• Geographic segmentation is where marketers

divide and offer their products or services into
different geographical units such as by regions
or states.

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 DEMOGRAPHIC SEGMENTATION

• Demographic segmentation is dividing the whole

market into small groups such as:
– Age and life-cycle
– Gender
– Income and occupation

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 PSYCHOGRAPHIC
SEGMENTATION

• Psychographic segmentation is dividing a

market into various groups such as social
class, life-style or personality characteristics.

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 BEHAVIOURAL SEGMENTATION

• Behavioural segmentation is dividing customers

into groups based on their attitude, use or responses
to a product:
– Occasions segmentation
– Benefits sought
– User status
– Usage rate
– Loyalty status

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 MULTIPLE SEGMENTATION

• In multiple segmentation, usually marketers

use this segmentation basis in an effort to
identify smaller, better-defined target groups.

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 FACTORS TO BE CONSIDERED
FOR EFFECTIVE SEGMENTATION

• Measurable
• Accessible
• Substantial
• Differentiable
• Actionable

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 DEFINING TARGET MARKET

• A set of customers sharing the same needs or

wants which the company decides to serve.

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 SELECTING TARGET
MARKET SEGMENTS

• Undifferentiated (Mass) marketing

• Differentiated (Segmented) marketing
• Concentrated (Niche) marketing
• Micromarketing

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 MARKETING MIX

• Refers to a mixture or blend of product, place

(distribution), promotion and pricing strategies
which are designed to create understanding and
satisfy exchanges with a target market.

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 DEFINING A PRODUCT

• Anything, both favourable and unfavourable,

that a person receives in an exchange between a
marketer and a customer.
• It is one component of the marketing mix.

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CLASSIFICATION OF
CONSUMER PRODUCTS

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DIFFERENCE BETWEEN
PRODUCT MIX WIDTH
AND PRODUCT LINE LENGTH

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 BRANDING

• A brand is a name, term, symbol or

combination which can identify the sellers
product and differentiate them from the
competitors’ products.

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 BRANDING STRATEGIES

• Manufacturer’s brand: This is a brand created and

owned by a producer.
• Private brand: This is a brand created and owned
by a retailer of a product or service.
• Licensed brand: A licensed brand is where the
company sells its output or product under another
brand name.
• Co-branding: This is where two companies agree to
make and manufacture one product.

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 DEFINING PACKAGING

• The activities that design, shape and produce

the container or wrapper for a product.
• Three levels of packaging:
– Primary packaging
– Secondary packaging
– Shipping packaging

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 FUNCTIONS OF PACKAGING

• Self-service: The package performs many sales

tasks such as describing the ingredients and benefits
of the product.
• Consumer affluence: Consumers are willing to pay
extra for convenience of handling and dependable.
• Innovational opportunity: It means better and
improved product offering such as reusable package.
• Enhanced brand image and company: The
packaging can enhance the image of the product.
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PRODUCT LIFE CYCLE

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 PRICING

• The amount of money charged for a product or

service that consumers buy with the exchange
for the benefits of having or using the product
or service.
• Approaches of pricing strategy:
– Value-based pricing
– Cost-based pricing
– Break-even analysis

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COST-BASED PRICING
ILLUSTRATION

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 BREAK-EVEN ANALYSIS

Break-even point formula:

Total Fixed Cost

Price – Variable Cost per unit

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FACTORS TO CONSIDER
WHEN SETTING PRICES

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 DISTRIBUTION

• As a set of interdependent organizations involved

in the process of making sure products or
services are available for the use of consumers or
businesses.

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 KEY FUNCTIONS PERFORMED
BY CHANNEL MEMBERS

• Research and information

• Promotion
• Contact
• Matching
• Negotiation
• Physical distribution
• Financing
• Risk taking

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 NUMBER OF CHANNEL LEVELS

• Channel 1

• Channel 2

• Channel 3 Wholesaler

• Channel 4

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 CHANNEL CONFLICT

• Channel conflict – occurs when channel members

disagree on roles, activities, or rewards.
• Types of conflict:
– Horizontal conflict: This occurs among firms at
the same channel level, e.g. conflict between
retailers and retailers.
– Vertical conflict: This occurs among firms at
different channel levels, e.g. conflict between
wholesalers and retailers.

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 CONVENTIONAL MARKETING
DISTRIBUTION CHANNELS

• This method is the traditional way where the

manufacturers, wholesalers and retailers work
independently where each is a separate business
trying to get their own profits.

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 VERTICAL MARKETING SYSTEM

• It is whereby the manufacturers and the

intermediaries such as the wholesalers and
retailers work as a team and act as one or a
unified system.

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 COMPARISON BETWEEN CONVENTIONAL
MARKETING DISTRIBUTION CHANNEL
AND VERTICAL MARKETING SYSTEM

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 CHANNEL DESIGN DECISIONS

1. Analyzing consumer needs

2. Setting channel objectives
3. Identifying major alternatives
• Types of intermediaries
• Number of marketing intermediaries
• Responsibilities of channel members
4. Evaluating major alternatives

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 RETAILING

• Activities which are involved in selling goods or

services directly to final consumers for their own
personal use.
• Types of retailers:
1. Specialty stores
2. Department stores
3. Supermarkets
4. Convenience stores
5. Off-price retailers
6. Superstores
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 MARKETING COMMUNICATIONS
MIX/PROMOTION MIX

• Marketing communications mix or promotion

mix consists of the advertising, personal selling,
sales promotion, and public relations a company
uses to pursue its advertising and marketing
objectives.

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 ELEMENTS IN THE
COMMUNICATION PROCESS

• Sender • Decoding
• Encoding • Response
• Message • Feedback
• Media • Noise
• Receiver

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 PROMOTION MIX STRATEGIES

• Push strategy: A push strategy involves ‘pushing’

the product through marketing channels to final
consumers.
• Pull strategy: In pull strategy, the producers will
use advertising and consumer sales promotions to
generate strong consumer demand for products. In
turn, the consumers will demand for the products
or services from the marketing intermediaries, who
will demand for them from the producers.

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 PROMOTION TOOLS

• Advertising
• Sales promotion
• Public relations
• Personal selling
• Direct marketing

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 MAJOR DECISIONS
IN ADVERTISING

1. Setting objectives
2. Setting the budget
3. Developing the advertising strategy
• Creating advertising messages
• Selecting advertising media
4. Evaluating advertising campaigns
5. Measuring sales effect

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 SALES PROMOTIONS

• Are short-term period and have the incentives

to encourage sales of a product or service.
• Types of sales promotion:
1. Consumer promotion
2. Trade promotion
3. Sales force promotion

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 CONSUMER PROMOTION TOOLS

• Samples
• Coupons
• Cash refunds (rebates)
• Patronage rewards
• Contests, games and sweepstakes

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 CONSIDERATIONS
WHEN DEVELOPING
SALES PROMOTION PROGRAMME

1. Size of incentive
2. Conditions for participation
3. Promotion and distribution of the sales
promotion programme
4. Length of the programme
5. Evaluation

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 PUBLIC RELATIONS

• Objective of public relations is to build good

relations with the company’s various publics by
building up a good corporate image.
• Functions of public relations:
– Press relation or press agency
– Public affairs
– Lobbying
– Investor relations

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 PUBLIC RELATIONS TOOLS

• Speeches
• Buzz marketing
• Corporate identity materials
• Mobile marketing

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 PERSONAL SELLING

• Personal selling is a direct communication

between buyers and sellers.
• Steps in a personal selling process:
1. Identify and qualify potential customers
2. Gather information
3. Approach customer
4. Present and demonstrate
5. Close
6. Follow-up

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 DIRECT MARKETING
AND CUSTOMER DATABASE

• Direct marketing: Is a direct one to one

connection with targeted consumers to obtain
response and build relationships with customers.

• Customer database: Is a collection of data of

customers which include the psychographic and
behavioral data. A good customer database can
build strong and lasting relationship with
customers.

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FORMS OF DIRECT MARKETING

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