BCOM Marketing 2

BACHELOR OF COMMERCE
Study Guide
MARKETING MANAGEMENT 2
Copyright © 2011
REGENT Business School
All rights reserved; no part of this book may be reproduced in any form or by any means, including photocopying
machines, without the written permission of the publisher
Marketing Management 2 Bachelor of Commerce
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CONTENTS
CHAPTER SECTION PAGE
1 Understanding Marketing Management 2
2 The Marketing Environment 17
3 Consumer Behaviour 29
4 Market Segmentation, Targeting and Positioning 39
5 Marketing Information and Research 49
6 The Marketing Mix 61
Product 63
Price 71
Promotion 76
Place 72
Bibliography 93
Regent Business School Page 1

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Module Outcomes
Having worked through this module, the learner will be able to:
Define Marketing
Understand the nature and scope of the marketing environment
Identify and evaluate environmental factors that impact on the marketing of the
organization
Apply basic marketing research concepts to the organization
Define market segmentation and determine target markets for particular products
and services
Understand consumer behaviour and its impact on the marketing strategy
Develop a marketing strategy for the organization based on the marketing mix
Define, classify and determine product and its prices
Understanding the role of communication in the marketing process
Determine the right blend of promotional mix in marketing the firm‟s offering
Understand the role of the channels of distribution and differentiate between the
different types of channels
Prescribed Reading:
Kotler, P and Keller, KL.(2009). Marketing Management. (13th Edition). Upper Saddle
River, New Jersey: Prentice Hall.

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CHAPTER 1
UNDERSTANDING
MARKETING
MANAGEMENT

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CHAPTER 1
UNDERSTANDING MARKETING MANAGEMENT
Chapter Outcomes
After working through this chapter the learner should be able to:
Define marketing
Understand the conditions that must exist for an exchange to take place
Understand how markets evolved
Explain the importance of customers to marketing
Explain the marketing concept
Explain what marketers do
1.1 WHAT IS MARKETING?

Marketing is about creating value, not creating needs. It is concerned with creating and
retaining customers. Its aim is to attract new customers and retain existing ones in the hope
that customers buy again and again. “Marketing is therefore concerned with providing people
with products and services which work effectively, continue to work effectively in the longer
term, and are offered at a fair price.” (Blythe 2006:3)
Etzel et al (2005:6) define marketing as follows:

“Marketing is a total system of business activities designed to plan, price, promote, and
distribute want-satisfying products to target markets in order to achieve organizational
objectives.”
This definition highlights two important aspects:
Focus: The entire organization‟s business activities should be centred around the customer.
Customers‟ wants must be recognized and satisfied.
Duration: Marketing should start with an idea about a want satisfying product and should
not end until the customers‟ wants are completely satisfied, which may be some time after
the exchange is made.
Kotler (2003:9) defines marketing as:

“Marketing is a social and managerial process by which individuals and groups obtain what they
need and want through creating and exchanging products and value with others.”

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Kotler speaks about “exchanging products and value with others”, which leads to an
understanding of the exchange process.
The following conditions must exist for a marketing exchange to take place:
Two or more people or organizations must be involved, and each must have needs or
wants to be satisfied. If you are totally self-sufficient, there is no need for an exchange.
The parties involved must do so voluntarily.
Each party must have something of value to offer in the exchange, and each must believe
that it will benefit from the exchange.
The parties must communicate with each other. The communication can take many forms
and may even be through a third party, but without awareness and information there can be
no exchange.
1.2 WHAT IS A MARKET?

A market is a physical place where buyers and sellers gather to buy and sell goods. Economists
describe a market as a collection of buyers and sellers who transact over a particular product or
product class. Marketers often use the term market to cover groupings of consumers. They view
the sellers as constituting the industry and buyers as constituting the market.
The marketplace is physical, for example, one goes to a shop to buy a product, while the
marketspace is digital, as when one goes shopping on the Internet. The metamarket refers to
a number of closely related products or services in the minds of the consumers. For example in
the automobile manufacturing industry there are new car sales dealers, used car sales dealers,
financing companies, insurance companies, services shops, mechanics, car magazines and
panel beaters.
1.3 EVOLUTION OF MARKETING

Large-scale marketing started in the United States of America and began to take shape only
during the Industrial Revolution since the late 1800‟s. The following stages mark the evolution:

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Stages of Marketing Evolution
1.4 WHAT MARKETERS DO

A marketer is someone who seeks a response (attention, purchase etc) from another party,
referred to as the prospect. If two parties are seeking to sell something to each other, both are
marketers. The chief marketer has five key functions:
(1) strengthening the brands,
(2) measuring marketing effectiveness,
(3) driving new product development based on customer needs,
(4) gathering meaningful customer insights and
(5) utilising new marketing technology.

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In practice, marketing encompasses functions that may appear in other departments, but are
still considered marketing functions since they directly address customer needs. Blythe et al
(2006:13-16) refer to the two well-known models for defining the marketing mix, i.e. McCarthy‟s
4P model (product, price, place and promotion) and Booms and Bitner‟s 7P model. The latter
included three more Ps to the existing four (people, process and physical evidence), which are
especially useful in the service industry.
The following is a brief outline of the 4Ps. A more detailed study will be discussed in later
chapters.
Product
Is a bundle of particular benefits the supplier offers to a specific group of consumers.
Price
Is the total cost to the customer of buying the product. It goes beyond the monetary cost, and
includes psychological factors, cost of ownership, and even the “embarrassment” factor of
owning the wrong brand.
Place
Is the location where the exchange takes place. Some examples are: catalogue, retail store,
website, etc. Deciding on a strategic channel of distribution hinges around making it easier for
the customer to find the goods and make the purchase.
Promotion
Are the communications activities such as advertising, public relations, sales promotions,
personal selling, etc. This function is generally mistaken for the whole of marketing.
THE TASKS OF MARKETING MANAGEMENT

1. Developing marketing strategies and plans. The first task is to identify the organisations
potential long-run opportunities, given its market experience and core competencies
2. Capturing marketing insights. Marketers must understand what is happening inside and
outside the organisation by monitoring the marketing environment and conducting
marketing research to assess buyer needs and behaviour, as well as actual and
potential market size.
3. Connecting with customers. The firm must determine how to best create value for it‟s
chosen target market and how to develop strong, profitable, long-term relationships with
consumers and business customers. Marketers should identify major market segments,
evaluate each and target those which the firm can serve most effectively.

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4. Building strong brands. Marketers need to understand how customers perceive their
brand‟s strengths and weaknesses. Marketers need to deal with the competitive situation
as well as developing and communicating appropriate positioning.
5. Shaping market offerings. The company‟s tangible offering to the market includes
product quality, design, features and packaging. Marketers may also include services as
part of the market offering and take due consideration for pricing of their offerings.
6. Delivering value. Marketers determine how to deliver the offerings value to the target
market by identifying, recruiting, and linking with marketing facilitators such as retailers,
wholesalers and physical-distribution firms.
7. Communicating value. The marketer must convey the value embodied by the offering to
the target market through an integrated marketing communication program that
maximises the individual and collective contribution of all communication activities
8. Creating long-term growth. The companys marketing strategy must take into account
changing global opportunities and challenges. Management must put in place a
marketing organisation capable of implementing the marketing plan.
(Kotler & Keller, 2009)
1.5 WHAT IS MARKETED?

Marketers focus their efforts on ten types of entities:
1. Goods – Physical goods constitute the bulk of most countries, production and marketing
effort. Each year, companies market countless number of fresh, canned, bagged, and
frozen food products and other tangible items. Even individuals can effectively market
goods.
2. Services – A growing proportion of countries activities are focused on the production of
services. Services include the work of airlines, hotels, car rental firms, hairdressers,
beauticians, maintenance and repair personnel as well as professionals working within
companies, such as accountants and programmers.
Many market offerings consist of a variable mix of goods and services, e.g. a restaurant
offers food with a service
3. Events – Marketers promote time-based events, such as major trade shows and artistic
performances. Global sporting events (e.g. Olympics, Soccer world cup) are promoted
aggressively to companies and individuals
4. Experiences – By coordinating several goods and services, a company can create,
stage, and market an experience. Theme parks or cruise travels are examples of

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experiential marketing. Customized experiences such as camp trips can also be

marketed.
5. People – Celebrity marketing is a major business. Musicians, artists, physicians, lawyers
and other professionals can be assisted by marketers
6. Places – Cities, states, regions and whole nations compete to attract tourists, production
plants, company head offices, and new residents. Place marketers include economic
development specialists, real estate agents, commercial banks, business associations
and advertising and public relations agencies
7. Properties – Properties are intangible rights of ownership of either real property (real
estate) or financial property (stocks and bonds). Properties are bought and sold through
the marketing efforts of real estate agents, investment companies and banks.
8. Organisations – Organisations actively work to build a strong, favourable and unique
image in the mind of their target public. Universities, museums, theatres and non-profit
organisations use marketing to boost their public image and compete for audiences and
funds
9. Information – Educational institutes essentially produce and distribute information at a
price to students and communities. Newspapers, books and magazines also market
information. One of the world‟s major industries is the generation and distribution of
information. Even companies that sell physical products add value through the use of
information.
10. Ideas – Every market offering includes a basic idea. For instance, social marketers
promote ideas such as “Friends don‟t let friends drive drunk”
(Kotler & Keller, 2009)
1.6 THE MARKETING CONCEPT

Managers who adopt a market orientation recognise that marketing is vital to the success of
their organisations. This is reflected in the manner in which the company does business – the
company must give the customer the highest priority. This is called the marketing concept – it
emphasises customer orientation and coordination of marketing activities to achieve the
organisation‟s performance objectives.
The marketing concept emphasizes customer orientation and coordination of marketing
activities to achieve the organization‟s performance objectives. This can be illustrated as
follows:

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Figure 1 – The Marketing Concept
Customer Satisfaction:
Customers have wants and needs which marketers seek to fulfil. A want is generally a
desire to have or acquire something, whereas a need can be defined simply as any
requirement necessary for a human being to function effectively.
According to Blythe (2005:12), customers have the following needs:

Current needs
Future needs
Desired pricing
Information needs
Product needs
Maslow distinguishes between three types of needs:

Physical needs: necessary for survival i.e. food, clothing, shelter
Social needs: need for security i.e. safety, belonging
Psychological needs: Esteem, Aesthetic and Self-Actualisation

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Since purchasing behaviour is directly linked to wants and needs and “the purpose of business
is to get and keep a customer” (Levitt, 1996:6), marketers need to understand what drives
consumer behaviour. Thus the marketing concept embraces the realisation that the customer is
the highest priority and this is reflected in its fundamental approach to doing business.
Total Company Effort
A total effort is required in achieving the short and long-term goals of the organisation. All
departments work together in achieving customer satisfaction as every department‟s effort
impacts on the customer.
Profit
Survival of any company is just as dependent on profits as it is on customers. There is a
continuous effort by marketers in seeking innovative ways to build and sustain their
relationship with customers. Hence, the marketing concept embraces an integrated
approach, which combines customer satisfaction, and total company effort with the
overarching aim of achieving profits.
ACTIVITY:
Select an organisation and write down the needs and wants that the organisation strives to
satisfy. Discuss whether they satisfy all customer needs and wants.
The marketing concept is based on three beliefs:

All planning and operations should be customer-orientated.
All marketing activities in the organisation should be coordinated.
Customer-orientated, coordinated marketing is essential to achieve the organisation‟s
performance objectives (Blythe, 2001:2-4).
All ideas are subject to refinement and the marketing concept is no exception. As organisations
learn more about consumers, priorities are often re-evaluated. There are developmental areas
related to the marketing concept, i.e.:
1. Quality:
A number of companies compete in both local and international markets by means of providing
quality products to their customers (usually in comparison to similar / same products offered by
the competition. The concern of most companies in regard to quality is the fear that quality will

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bring about higher costs. However, it is possible to increase quality without unacceptable cost
increases, by means of:
- Obtaining and responding to input from customers about how they define quality in a
particular product.
- Improving designs to improve problems in manufacturing, and identifying and
correcting problems early in the production process to reduce expense reworking
and waste.
- Encouraging employees to call attention to quality problems, and empowering them
to initiate action to improve quality.
Concerns about quality are not limited to the manufacturing process and services. Every
business function as a quality component. Within marketing there are quality aspects to making
sales calls, answering customers‟ questions, and preparing advertisements (Hawkins, 1993).
2. Relationships:
Marketers recognise that identifying the needs of customers and satisfying them can be
profitable. However, it is only recently that many organisations are making a concerted effort to
relationship marketing – establishing a relationship with the customer such that the organisation
is viewed as a partner. More recently, the notion of establishing relationships has been
extended beyond customers to all groups an organisation interacts with. These include
suppliers, employees, the government and even competitors.
3. Mass customisation:
The modern marketing system was built on identifying a need experienced by a large number of
people and using mass production techniques and mass marketing to satisfy that need. By
producing and selling large quantities of standardised products, companies were able to keep
the unit costs low and offer needs satisfying products at attractive prices.
However the market has changed. Mass marketing is being replaced with mass customisation,
that is developing, producing and delivering affordable products with enough variety and
uniqueness that nearly every potential customer can have exactly what he or she wants.
The movement towards mass customisation has been made possible by the tremendous
advances in information technology. Companies are now able to learn a lot more about their

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current and prospective customers. The information obtained from customers is then used in the
design, planning, manufacturing and distribution of products.
4. Value Creation:
Value is the customer‟s perception of all the benefits of a product weighed against all the costs
of acquiring and consuming the product. The benefits that an individual can derive is:
- Functional, e.g. the roominess of a mini van for a large family
- Aesthetic, e.g. the attractiveness of the mini van
- Psychological, e.g. the peace of mind that the van can withstand a collision
Marketers are taking a closer look at what customers value in a product. Organisations have
realised two importance considerations: (1) Value means much more to the buyer than the
amount of money charged for the product, and (2) the determination of value is distinctive for
each individual (Drucker, 1973:15-20).
1.7 HOW IS MARKETING DONE?

In practice, marketing follows a logical process. The marketing planning process consists of
analyzing marketing opportunities, selecting target markets, designing marketing strategies,
developing marketing programs, and managing the marketing effort. Marketing is not merely
confined to the marketing department. Marketing needs to affect every aspect of the customer
experience- all possible touch points (store layouts, package designs, product
functions).Marketing must also be closely involved in key management activities such as
product innovation and new business development. (Kotler & Keller, 2009)
1.8 CORE CONCEPTS

Marketing can be better understood by defining several of its core concepts. This merely serves
to introduce the concepts, since these concepts will be covered in more detail in sections to
follow.
Target Markets And Market Segments

Not everyone likes the same movie, reads the same book, eat the same chips, or like the same
hotel. Therefore, marketers realise that they can not satisfy the needs of everyone.
Organisations therefore identify the group of consumers that have similar characteristics and
may prefer similar products or service offerings. This is called market segments.

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Market segments can be identified by examining the demographics of the buyers, such as their
age, gender, income levels and educational backgrounds. The marketer should then decide
which market segment presents the greatest opportunity to make a profit – this is referred to as
a target market. For each selected target market the organisation develops an offering. The
offering will focus on the benefit that the customer can derive from buying the product or service
(Wallace, 1997).
Needs, Wants and Demands

Needs are basic human requirements, such as a need for food. These needs become wants
when they are directed towards specific objects, for example, you need food, but you want a
McDonald‟s Hamburger. Demands are wants for specific products, backed up by the ability to
pay, for example, many people wish that they could drive a Porsche, but only a few people can
afford it. Marketers do not create needs, but they do influence wants and promotes the idea that
a Porsche is linked to social status (Symonds, 1993).
Product, Offering And Brand

The consumer wants to get value out of buying a product / service. The organisation should put
together an offering, which can be a combination of products, services, information, and
experiences. A brand is an offering of a known source, such as McDonalds, which brings
certain images to mind: parties, hamburgers, ice cream, fun and laughter. These associations
are referred to as a brand image (O‟Neal:1994).
Marketing Network
A marketing network consists of the company and its stakeholders, such as consumers,
employees, suppliers, retailers, etc. Building an effective network can ensure the continuity of
the business in difficult times (Symonds, 1993).
MARKETING CHANNELS
The marketer can use three kinds of marketing channels to reach the target market.
The first type of marketing channel is a communication channel, which delivers and receives
messages to and from the consumers. The message can reach the consumer by means of
radio, television, advertising on billboards, and fliers. The marketer also uses distribution
channels to display, sell or deliver the physical products or services to the buyer. These include

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distributors, retailers, wholesalers and agents. The marketer may also use service channels to
carry out transactions between the organisation and the customer. Service channels include
warehouses, banks, insurance companies and transportation companies.
Competition
Competition refers to all the actual and potential products and services, as well as the
substitutes that the consumer may consider. The marketers and the organisation should also
monitor brand competition, for example, Volkswagen may consider Honda, Toyota and
Renault as potential organisations competing with it for brand positioning. However,
Volkswagen is also competing against all other motor manufacturers; this is referred to industry
competition.
Volkswagen should also be aware that they are not only competing against motor
manufacturing companies, but also all companies that manufactures products that provide the
same service, for example, trucks, bicycles, and motorcycles – this is called form competition.
Lastly, Volkswagen is also competing in the generic competition category – that is all
companies that compete for the consumer‟s money, for example the consumer durables,
vacations and homes (Symonds, 1993).
1.9 THE CHALLENGES FACING THE MARKETING FUNCTION

Marketing is constantly faced with a number of challenges, which includes the following:
The preferences of consumers are forever changing and it is the responsibility of the
Marketing section to remain up to date with the research and development of the various
product and service offerings of the company.
Marketing should be constantly aware of new competitors entering the market, since this
may influence the customer base of the company
Marketing should advise the company on the pricing strategy to ensure that the
consumers perceive the price of the products / services as being reasonable.
Marketing should continuous strive to survive even in difficult circumstances.
The Marketing section should work towards the long-term profitability of the business. In
striving towards profit maximising, marketing should attempt to achieve the highest
possible income (output) at the lowest possible cost (input).
Marketing should realise that it does not operate in isolation and that it is dependent
upon the inputs from other departments. Similarly, other departments, such as
Production and Finance, are again dependent upon Marketing.

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The Marketing section should constantly have a consumer orientation. This means that
the marketing strategy of the organisation should be based on the needs, demands and
preferences of the consumers.
Marketing should encourage growth by timeous adaptation to the ever-changing
environment. This may be achieved by means of environmental scanning and realistic
sales projections.
The Marketing section should attempt to achieve the highest possible market share. A
large market share in comparison to those of the competitors will ensure higher sales
volume and lower unit costs.
The Marketing section should attempt to increase sales and should monitor the sales
figures to determine which the sales per market segment, which will influence the
advertising costs for the organisation.
The Marketing section should promote co-operation in the distribution channel, e.g. the
suppliers, wholesalers and retailers should work together to bring the product / service to
the customer.
The Marketing section is responsible to launch a new image for the organisation‟s
product / service offerings (http://www.marketingnews.com)
SUMMARY
This chapter focused on the basic definitions of marketing and traces through the evolution
stages in marketing to its current position. The basic building block, which is required in every
business, is indeed a satisfied customer. The integrated role of the customer, combined efforts
of various departments, and the environment play an important role in increasing profitability in
organizations. There should now be a clearer understanding of the background of marketing, its
evolution and the importance of the marketing concept as well as the various functions
performed by the marketing department.

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CHAPTER 2
THE MARKETING
ENVIRONMENT

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CHAPTER 2
THE MARKETING ENVIRONMENT
Chapter Outcomes
Understand and explain the concept of environmental monitoring.

Distinguish between the internal and the external environment.
Classify environmental factors into macro and micro forces.
Understand the problems of dealing with the various micro and macro forces and how they
influence the firm‟s marketing.
Understand the fundamentals of PEST analysis and how it impacts on the marketing
environment.
Understand the fundamentals of Porter‟s Five Forces Model
Explain what a SWOT analysis is
2.1 WHAT IS ENVIRONMENTAL MONITORING?
According to Etzel et.al (2006:30) environmental monitoring – also called environmental

scanning – is the process of:
Gathering information regarding a company‟s external environment
Analysing it, and
Forecasting the impact of whatever trends the analysis suggests
The organization operates within an external environment, which it generally cannot control,
and an internal environment, which can be controlled by its executives. The internal
environment comprises those factors that operate within the firm (the corporate culture and
history, staff behaviour and attitudes, the firm‟s capabilities) and the external environment
comprises those elements, which operate outside the firm (competitors, government,
customers, etc.). These factors influence a firm‟s marketing strategy, hence they need to be

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constantly monitored carefully. The external environment can be further classified into macro
and micro environmental forces.
2.2 MACRO ENVIRONMENT
This includes all factors that can influence and organization, but that are out of their direct
control. A company does not generally influence any laws (although it is accepted that they
could lobby or be part of a trade organization). It is continuously changing, and the company
needs to be flexible to adapt. There may be aggressive competition and rivalry in a market.
Globalization means that there is always the threat of substitute products and new entrants. The
wider environment is also ever changing, and the marketer needs to compensate for changes in
culture, politics, economics and technology.
Macro environmental forces affect all firms in the industry influencing considerably the
marketing opportunities and activities. The external environment can be audited using the
PEST analysis. PEST is an acronym for Political, Economic, Socio-cultural and Technological
conditions in the marketing environment. Some authors regard demographics as part of the
Socio-cultural factors while others feel it is a significant factor that needs to be considered
entirely on its own.

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PEST ANALYSIS
Demographics
This refers to characteristics of the population, including such factors as size, distribution and
growth in cities, regions; and nations; age distribution and ethnic mix; educational levels;
household patterns; regional characteristics and movements.
Economic Factors
The marketing program is affected by economic factors such as the stages in the business
cycle, inflation and interest rates. According to Blythe (2006:33) most national economies follow
the “boom-and-bust” economic cycle. Generally, every 7-8 years the country goes into a
recession, which means that the production of goods and services shrinks and unemployment
rises. On the other hand, during times of prosperity marketers tend to expand their marketing
programs as they add new products and enter new markets. During times of inflation,
consumer buying power declines. When interest rates are high, consumers tend not to make
long-term purchases such as housing, cars, etc. Government inadvertently tries to control the
economy through various measures such as fiscal and monetary policies to bring about
economic stability and balance.
Social and Cultural Factors

These include language, religious beliefs, gender roles, etc. Family values, beliefs, and
lifestyle, particularly perceptions of the role of women, have also changed. The past few
decades have seen the role of women change from that of housekeeper, dependent on a male‟s
income, to one of independence and parity with males. Commonly today, households are dual-

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income households, with both males and females contributing to family wealth. Thus working
women represent a prime market for frozen and prepared food, and more efficient appliances,
and cleaning products and services such as house cleaning and fast food. Further, they are
more likely to reward themselves by going to the beauty salon for a makeover, etc.
Political and Legal Factors

This includes all legislative „rules‟ (legislation and ordinances) that influence marketing
decisions. Factors of importance are the role of the State, and laws and regulations produced by
various levels of government, pressure groups and State departments. Also of importance in the
global economy are activities of foreign governments. Some examples of government control in
business are as follows:
Patent legislation
Taxation
Safety regulations
Contract law
Consumer protection legislation
Control of opening hours
Technological Factors
New products are introduced into the market at an alarming rate. Products that are in common
use now did not exist 100 years ago: the refrigerator, television, dishwashers, microwave
ovens, frozen foods, etc. According to Blythe (2006:52) Sony now estimates that a new
electronic device has a life of around three months before its replacement will be produced.
Twenty to thirty years ago cellular telephones were unheard of; today they are used in even the
remotest areas of the world.
Etzal et al (2005:43) state that technological breakthroughs can affect markets in three
ways:
By starting entirely new industries, as computers, lasers, and robotics have done.
By radically altering, or virtually destroying, existing industries eg. Video crippled the
radio and movie industries.
By stimulating markets and industries not related to the new technology. New home
appliances and microwavable foods give people additional time in which to engage in
other activities.

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2.3 MICRO ENVIRONMENT

This environment influences the organization directly. It includes suppliers that deal directly or
indirectly, consumers and customers, and other local stakeholders. Micro tends to suggest
small, but this can be misleading. In this context, micro describes the relationship between firms
and the driving forces that control this relationship. It is a more local relationship, and the firm
may exercise a degree of influence. The micro-environment influences the organization directly.
It includes competitors, suppliers, consumers, customers, and other local stakeholders. Dealing
effectively with these forces is critical to business success. Although all of these external forces
are generally uncontrollable, they can be influenced in some situations.
Suppliers
Suppliers are an important link in an organization‟s value chain. Supply problems can seriously
affect marketing. Shortages or delays caused by strikes or accidents can damage customer
satisfaction.
Marketing Intermediaries
These are also called channel members, who help the company to promote, sell and distribute
goods to final buyers. These include wholesalers, and retailers who buy and sell merchandise.
Today marketers recognize the importance of working with their intermediaries as partners
rather than simply as channels through which they sell their products (Kotler and Armstrong,
2001).
Public (or Stakeholders)

A public is any group that has an actual or potential interest in or can impact on an
organizations ability to achieve its objectives; these may include consumers (Kotler and
Armstrong, 2001).
Competitors
A company must study its competitors as well as its actual and potential customers. The
marketing concept states that to be successful, a company must provide greater value and
satisfaction than its competitors. According to Kotler (2003:248) once a company identifies its
primary competitors, it must ascertain their specific characteristics, their strategies, objectives,
strengths, weaknesses, and reaction patterns. According to Blythe (2006:50) competitor

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analysis can be carried out using Porter‟s Five Forces Model. This model offers a way of
assessing the likely strength of competition in any given market. The figure below depicts the
five forces:
PORTER’S FIVE FORCES MODEL
Source: Kotler,P and Keller,K.L.(2006). Marketing Management. (12th Edition). Upper Saddle River, New Jersey:
Prentice Hall. p342.
(1) Barriers to entry (Threat of new entrants)

A market‟s attractiveness varies with the height of its entry and exit barriers. The most
attractive market is where entry barriers are high and exit barriers are low.
Other barriers to entry include:
 Economies of scale
 Differentiatation
 Capital requirements of entry
 Political or legislative
 Expected retaliation
(2) Powers of Buyers
A buyer group is powerful if:
 It is concentrated or purchases in large volumes

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 The products it purchases are standard

 It earns low profits, which create great incentive to lower its purchasing costs
 The buyers pose a creditable threat of integrating backward to make the industry‟s
products
(3) Powers of Suppliers
A supplier group is powerful if:
 It is dominated by a few companies
 Its products are unique
 It poses a creditable threat of integrating forward
(4) Threat of Substitute Products

A market segment is unattractive where there are actual or potential substitutes to the
product. Substitutes place a limit on prices and profit.
Examples:
Cell phone vs. Landline
Sweeteners vs. sugar
(5) Competitive Rivalry

Organizations are clearly interested in the degree of rivalry between them and other players
within the industry.
Key questions:
 Who are my competitors?
 What size are they?
 Is the market growing or declining?
 Do rivals have an advantage via lower costs?
 What are the exit barriers should things go wrong?
2.4 THE INTERNAL ENVIRONMENT

All factors that are internal to the organization are known as the 'internal environment'. They are
generally audited by applying the 'Five Ms' which are Men, Money, Machinery, Materials and
Markets. The internal environment is as important for managing change as the external. As
marketers we call the process of managing internal change 'internal marketing.'

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Essentially we use marketing approaches to aid communication and change management. The
external environment can be audited in more detail using other approaches such as SWOT
Analysis, Michael Porter's Five Forces Analysis or PEST Analysis.
SWOT ANALYSIS
The SWOT analysis (Strengths, Weakness, Opportunities and Threats) is a useful instrument
for helping managers to identify internal strengths and weaknesses of a business and external
opportunities and threats facing the business. This is sometimes described as the product or
company audit. It aims to establish where the product or company stands in relation to the
marketplace. The Strengths and Weaknesses are internal to a company. The Opportunities and
Threats are external to the organization. According to Brink (2001:21) strengths could be
matched and linked with opportunities and threats should be viewed as challenges.
Strengths:
These are areas in which a business does particularly well, that set it apart from its competitors.
It is a distinctive competence that gives a business competitive advantage in the marketplace. In
many industries, the service, efficiency and personal attention offered to customers make a
crucial difference in gaining leverage in the marketplace (Brink, 2001: 22).
Further examples of strengths include:
 Good customer relations
 Technological expertise
 Good Financial standing
 Experts in the field

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 Service excellence
Weaknesses:
Weaknesses are features of a company‟s operation, which can inhibit it in the marketplace.
Sometimes a business does poorly not because its departments lack the required strengths but
they do not work together as a team (Kotler, 2003:104). A weakness may be in the form of a
lack of skill, resources and capabilities that seriously stifles or impedes a business‟s effective
performance.
Some examples are:

 Outdated technology
 Lack of marketing awareness
 High turnover of employees
 Poor reputation of service
 Inferior products
Opportunities:
According to Kotler (2003:102) marketing opportunity is an area of buyer need in which the
company can perform advantageously. Opportunities could include a rapidly developing market,
which the company is in position to enter. The identification of promising opportunities is an
absolute prerequisite for a business‟s profitability, survival and growth.
Further examples include:

 Expanding into other countries
 Introducing a new product line
Threats:
These are factors that are in the market outside the company‟s control, which could threaten its
existence (Pitt, 1998:221). Threats should not be treated as they are, but should be seen as a
challenge or even as an opportunity for businesses.
Some examples of threats are:

 Changes in consumer markets
 Substitute products
 Unfavourable rate of exchange

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 Increase in competitors
ACTIVITY:
Assume that you are the marketing Manager for S.A. Breweries.
Use the SWOT analysis to examine the environmental factors pertaining to the industry and
the company
Simple rules for successful SWOT analysis:
Be realistic about the strengths and weaknesses of your organization when conducting
SWOT analysis.
SWOT analysis should distinguish between where your organization is today, and where
it could be in the future.
SWOT should always be specific. Avoid grey areas.
Always apply SWOT in relation to your competition i.e. better than or worse than your
competition.
Keep your SWOT short and simple. Avoid complexity and over analysis
SWOT is subjective.
Once key issues have been identified with your SWOT analysis, they feed into marketing
objectives.
SUMMARY:
No business operates in a vacuum. The macro-environment is largely uncontrollable. The
micro-environment however, is much more susceptible to influence or control. The environment
can also be classified as internal or external. In effect, the firm operates within a series of layers
of environment factors, each of which has a greater or lesser impact on the firm‟s marketing
policies. As a general rule, the further out the layer is, the more difficult it is for the firm. The
following figure shows how all environmental forces combine to shape an organization‟s
marketing program. Within the framework of these constraints, management should develop a
marketing program to satisfy the needs of its markets.

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REVISION QUESTIONS
1. Explain how changes in the demographic and economic environment affect marketing
decisions.
2. Identify major trends in the firm‟s natural technological environments.
3. Explain key changes in the political and cultural environment.
4. What are some of the marketing and non-marketing forces that impinge on the firm‟s
internal environment?
5. Discuss how companies can react to the marketing environment.

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CHAPTER 3
CONSUMER BEHAVIOUR
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CHAPTER 3
CONSUMER BEHAVIOUR
Chapter Outcomes
Understand what consumer behaviour is

Identify and explain the factors influencing consumer behaviour
Explain the role of social groups in influencing behaviour
Understand what motivates human needs
Classify needs according to Maslow‟s hierarchy of needs
Explain how perception operates
Understand the learning processes
Understand the buyer using the Stimulus Response Model
Explain the decision making process using the 5 Stage Model
3.1 WHAT IS CONSUMER BEHAVIOUR?

Consumer behaviour studies all the activities that influence people to behave in particular ways
when obtaining, consuming and disposing of products and services. Understanding the way
people think, what motivates them, their decision-making processes, and post-purchase
behaviour are key factors in ensuring successful marketing.
3.2 UNDERSTANDING CONSUMER BEHAVIOUR

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The marketer‟s task is to understand what happens in the buyer‟s consciousness between the
arrival of an outside stimuli and the buyer‟s purchase decisions.
They must answer two important questions:
How do the buyer‟s characteristics – cultural, social, personal, and psychological - influence
buying behaviour? Refer to Figure 3.1
How does the buyer make purchasing decisions? Refer to Figure 3.1
Figure 3.1: Factors Influencing Behaviour Source: Kotler and Armstrong (2006:138)
3.2.1 Cultural Factors

Culture is the fundamental determinant of a person‟s wants and behaviour and is particularly
important in buying behaviour. A brand may represent a certain culture. The Mercedes
represents the German culture: organized, efficient and high quality.
The three major aspects of culture that have important effects on consumer behaviour are:
regional, ethnic, and religious differences. The consumption patterns may differ in various
regions in the world and the marketing strategy can sometimes be tailored specifically to these
regions. Also, there are a number of different ethnic groups

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3.2.2 Social Factors

Consumer behaviour is also influenced by social factors like, reference groups, family and social
roles and status.
Reference groups consists of all groups that have a direct (face-to-face) or indirect influence on
the person‟s attitudes and behaviour. These may include family, co-workers, friends and
neighbours etc. The family is the most important consumer-buying organisation in society, and
family members constitute the most influential reference group. The family consists of parents
and siblings. Marketers are interested in the role and the relative influence of the husband, wife
and children in the purchase of a variety of products and services. A person participates in
many groups – family, clubs, and organisations. The person‟s position in each group can be
defined in terms of role and status. A role consists of the activities a person is expected to
perform. Each role carries a status e.g. A CEO has much more status than a sales manager,
and a sales manager has much more status than an administrator.
3.2.3 Personal factors

A buyer‟s decision is also influenced by personal characteristics; this includes buyer‟s age,
occupation, economic circumstances, lifestyle, personality and self concept. People buy
different goods and services over a lifetime. Taste in clothes, furniture, and recreation is also
age related. Marketers need to pay close attention to changing life circumstances – divorce,
widowhood, remarriage – and their effect on consumption. Occupation and economic
circumstances also influences consumption patterns; a blue collar worker will buy work clothes,
work shoes, and lunchboxes. A company executive will buy expensive suits, air travel and
country club memberships. Product choice is greatly affected by economic circumstance.
Marketers continuously monitor trends in personal income, savings and interest rates. They are
also aware and search for relationships between their products and lifestyle groups. Personality
also plays a role in buying behaviour. Personality is often described in terms of traits such as
self confidence, dominance, autonomy, deference, sociability, defensiveness etc. Marketers
attempt to develop brand personalities that will attract customers with the same self concept.
3.2.4 Psychological Factors

A person‟s buying choices are influenced by four major psychological factors – motivation,
perception, learning, and beliefs and attitudes.
3.2.4.1 A motive (drive) is a need that is sufficiently important to direct the person to seek
satisfaction. A person has many needs at any given time and they can be

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psychological or biological. Maslow’s theory of motivation explains why people are

driven by a particular need at a particular time. He believed that needs were arranged
in a hierarchy (see figure 4.2), beginning with physiological needs and then continuing
with safety, social, self esteem, and self actualization needs). According to him a
person would try to satisfy the most important needs first.
Figure 3.2: Maslow’s Hierarchy of Needs

3.2.4.2 Perception is a process of receiving, organizing, and assigning meaning to
information or stimuli detected by our five senses. The market needs to understand
that two people with the same motivation and the same situation may act differently.
These differences in perception can be accounted for by three perceptual
processes
 Selective attention: is the tendency for people to screen out most of the
information to which they are exposed.

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 Selective distortion: is the tendency of people to interpret information in a way

that will support what they already believe.
 Selective retention: is the tendency of people to retain only part of the
information to which they are exposed, usually information that supports their
attitudes and beliefs.
3.2.4.3 Learning is described as changes in an individual‟s behaviour arising from

experience.
Learning occurs through the interplay of:
 A drive (a strong internal stimulus that calls for action).
 A drive becoming a motive when it is directed toward a particular stimulus object
 Cues are minor stimuli that determine when, where, and how the person responds
 Cues can influence a buyer‟s response to an impulse
 If the experience is rewarding, then the response is reinforced
A person‟s belief and attitudes are acquired through acting and learning.
A belief is a descriptive thought that a person holds about something.
An attitude is a person‟s consistency, favourable or unfavourable evaluations, feelings, and
tendencies toward an object or idea.
3.3 THE STIMULUS RESPONSE MODEL

The starting point for understanding buyer behaviour is the stimulus response model shown in
Figure 3.3.
Figure 3.3 Source: Kotler (2003:184)
Marketing and environmental stimuli enter the buyer‟s consciousness. The buyer‟s
characteristics and decision processes lead to certain purchase decisions. It is the marketer‟s

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task to understand what happens in the buyer‟s consciousness between the arrival of outside
stimuli and the purchase decisions.
3.4 CONSUMER DECISION MAKING

Buying behaviour differs greatly depending on what is being bought. More complex decisions
usually involve more buying participants and more buyer deliberation.
The buyer decision process examines how consumers make buying decisions. Kotler and Keller
(2006:191) identify five stages, illustrated in Figure 4.4, within the process: Need recognition,
information search, evaluation of alternatives, purchase decisions and post purchase behaviour.
3.5 FIVE STAGE MODEL OF THE CONSUMER BUYING PROCESS

Figure 3.4 - Five-Stage Model of the Consumer Buying Process
Source: Kotler and Keller.(2006). Marketing Management. (12th Edition). Upper Saddle River, New Jersey:
Prentice Hall. p191
3.5.1 Need Recognition
The buying process starts when the buyer recognizes need. The need can be triggered by
internal or external stimuli. With an internal stimulus, a person‟s normal needs e.g. thirst, hunger
or sex rises to a threshold level and becomes a drive or a need which can be aroused by an
external stimulus. For example, when a person passes a bakery, the smell stimulates the
persons hunger. Marketers need to identify the instances that trigger a particular need.
3.5.2 Information search

An aroused consumer will be inclined to search for more information. They may be from several
sources, personal (family, relatives), commercial (advertising, salespersons, and dealers),
public (mass media, customer ratings) and experimental sources (handling, examining, and

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using the product). Through gathering information, the customer learns about competing brands
and their features.
3.5.3 Evaluation of Alternatives

There is no single process used by consumers in any one or all buying situations. Consumers
vary as to which product attributes they see as most relevant and the importance that they
attach to each attribute. Consumers pay the most attention to attributes that respond to their
needs and beliefs. The consumer may also form an intention to buy the most preferred brand.
3.5.4 Purchase decisions

Two factors may intervene between the purchase intention and the purchase decision viz.
 attitudes of others – the extent to which another person‟s attitudes reduces one‟s preferred
choice depends on the intensity of the other person‟s negative attitude towards the
consumer‟s preferred alternative and the motivation to comply with the other person‟s
wishes.
 unanticipated situational factors e.g. the store salesperson may be rude and unhelpful.
There are also other types of purchasing decisions, namely:

 Complex buying behaviour
 Habitual buying behaviour
 Variety-seeking buying behaviour
 Routine decision making
 Impulsive decision making
Did you perhaps notice a woman buying groceries? Did she almost automatically add certain tin
food items to her trolley? That is routine decision making since she always buys the same
brand without taking much time to think about it. Did you notice a consumer buying a bar of
chocolate or even magazine while waiting in the queue at the check-out point? That is known as
impulse buying. Have you ever observed a couple looking at different types of toasters,
discussing the different brands and prices? That is complex decision making (Brink, 2001:24).
3.5.5 Post purchase behaviour

After purchasing a product, the customer will experience some level of satisfaction or
dissatisfaction. Markers must monitor post purchase satisfaction, post purchase actions and
post purchase product uses.

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According to Kotler & Armstrong (2001:197) almost all major purchases result in cognitive
dissonance caused by post purchase discomfort. Because every major purchase involves
some compromise, consumers feel a little uneasy about acquiring the chosen brand (for
example, a Honda motor vehicle) and losing the benefits of a brand not purchased, (say a
BMW).
Cognitive Dissonance occurs when a consumer has made an expensive, infrequently

purchased, high involvement buying decision, where there is post purchase dissonance. This
means that after the purchase, the consumer starts to have second thoughts about the
purchase and feels some discomfort. To counter this dissonance the consumer could find out
more about the product from the salesperson, and reinforce the main reasons why he/she made
the original buying decision.
ACTIVITY:
Critically analyse the various stages of the consumer buying decision making process.
Support your answer with reference to theories and examples on consumer behaviour
*For this question you will be required to include all the stages in the consumer buying decision
making process from problem/need recognition to post purchase behaviour. Make sure to
include Freud‟s theory as well as Maslow‟s theory and analyse it in detail for each stage of the
consumer buying decision. Also include other the factors and examples that influence consumer
behaviour these may include motivation, perception, learning ability, attitude, personality and
lifestyle
SUMMARY
The buying behaviour of ultimate consumers is influenced by various factors such as cultural,
social, personal and psychological factors. Social and group forces are composed of culture,
subculture, social class, reference groups, family and households. Culture has the broadest and
most general influence on buying behaviour, whereas other household occupants have the most
specific and immediate impact on an individual. Social and group forces have a direct impact
on individual purchase decisions as well as a person‟s psychological makeup.
Psychological forces that impact on buying decisions are motivation, perception, learning,
personality and attitudes. All behaviour is motivated by some aroused need. Perception is the
way we interpret the world around us and is subject to three types of selectivity: attention,
distortion, and retention.

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Learning is a change in behaviour as a result of experience. Stimulus-response learning

involves drives, cues, responses, and reinforcement. Continued positive reinforcement leads to
habitual buying and brand loyalty.
The stages in the buying-decision process are need recognition, information search and
identification of alternatives, evaluation of alternatives, purchase and related decisions, and
post- purchase behaviour. Buying decisions are either high or low involvement. Low-
involvement decisions include fewer stages while high-involvement decisions consist of all five
stages. The former occurs when the consumer views the decision as relatively minor, there is
brand and store loyalty, or in impulse buying.
REVIEW QUESTIONS (with suggested answers)
1. Name the four major factors that influence consumer buyer behaviour.
Cultural
Social
Personal
Psychological
2. List and discuss the major types of buying decision behaviour and stages in the buyer
decision process.
Buying behaviour may vary greatly across different types of products and buying decisions.
Consumers undertake complex buying behaviour when they are highly involved in a purchase
and perceive significant differences among brands. Dissonance-reducing behaviour occurs
when consumers are more highly involved but see little difference among brands. Habitual
buying behaviour occurs under conditions of low involvement and little significant brand
difference. In situations characterized by low involvement but significant perceived brand
differences, consumers engage in variety-seeking buying behaviour.
When making a purchase, the buyer goes through a decision process consisting of need
recognition, information search, evaluation of alternatives, purchase decision, and post
purchase behaviour. The marketer‟s job is to understand the buyer‟s behaviour at each stage
and the influences that are operating. During need recognition, the consumer recognizes a
problem or need that could be satisfied by a product or service in the market. Once the need is
recognized, the consumer is aroused to seek more information and moves into the information
search stage. With information in hand, the consumer proceeds to alternative evaluation, during
which the information is used to evaluate brands in the choice set. From there, the consumer

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makes a purchase decision and actually buys the product. In the final stage of the buyer
decision process, post purchase behaviour, the consumer takes action based on satisfaction or
dissatisfaction.
CHAPTER 1
MARKET SEGMENTATION,
TARGETING AND
POSITIONING

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CHAPTER 4
MARKET SEGMENTATION, TARGETING AND POSITIONING
Chapter Outcomes:
After working through this section the learner should be able to:
Understand the concepts: segmentation, targeting and positioning
Explain the role of marketing research in segmenting markets
Describe some of the commonest methods of segmenting markets
Explain the role of targeting
Explain the potential strategic issues in targeting
Explain what positioning implies for customers
Understand the key features of successful positioning
INTRODUCTION
The overall market comprises consumers and customers who have a wide variety of differing
needs. As no company can satisfy every single need of every single customer, marketers have
to select a specific group or groups of people, whom they can satisfy with a product or service
offering. This separating of the overall market into groups of customers with similar needs is
called Segmentation. The selection of a particular group or groups to target with a specific
product offering is called Targeting. Marketers then need to communicate their offering relative
to competitors in the minds of their target audience. This is known as Positioning.
4.1 WHAT IS MARKET SEGMENTATION?

The purpose of segmenting the market is to ensure that a company‟s limited resources are
directed at those groups of people or organizations likely to yield the best returns. Segmentation
operates at four levels:
Mass marketing: This is based on the premise that one product fits all. Example: Coca
Cola‟s one drink “Coke” for everybody. The purpose behind this is to mass- produce large
volumes at low cost.

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Segmented markets: A company seeks to identify substantial groups of individuals with

similar needs, and aims to satisfy those needs.
Niche Marketing: The focus is on small sub-groups within larger segments. Niche
products command a premium price. Example: BMW‟s 7 series targets a narrowly defined
exclusive audience.
Micro-marketing: This is customizing and tailoring products to suit the individual needs of
its customers. The advent of technology has made micro-marketing on a mass scale
possible.
Successful segmentation hinges on good market research. Understanding the need of
customers and their characteristics is of paramount importance in deciding how to meet those
needs.
Grouping people into segments can be carried out in the following ways:
4.1.1 Behavioural segmentation:
The main bases for segmentation are as follows:
 Benefits sought
 Purchase occasion
 Purchase behaviour
 Usage
 Buyer readiness stage
 Attitude towards the product
4.1.2 Geographic Segmentation:

This involves dividing the market into geographical units such as states, regions, countries,
cities, or neighbourhoods. People in cold countries need to spend more on warm clothing,
home insulation, and heating products than do people in warm countries and vice versa.
4.1.3 Demographic Segmentation:

This is concerned with factors such as:
 Age
 Gender
 Sexual orientation
 Family size
 Family life-cycle stage
 Income

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 Occupation
 Education
 Religion, ethnicity, and nationality
These factors are more widely used than any other for segmentation purposes.
4.1.4 Psychographic segmentation

According to Etzal et al, (2005:153) psychographic segmentation involves examining attributes
related to how a person thinks, feels and behaves. This relates to personality dimensions,
lifestyle characteristics and consumer values.
 Personality characteristics:
Psychologists have developed many ways of grouping people according to personality
types. Some examples are:
Extrovert/introvert
Sensing/intuitive
Thinking/feeling
Judging/perceptive
 Lifestyle and values
Lifestyle relates to activities, interests, and opinions. This reflects how a person spends
their time, and what their beliefs on various social, economic, and political issues are.
Lifestyle segmentation has a major advantage in that it relates directly to purchasing
behaviour. People‟s lifestyle undoubtedly affects what products they buy and what brands
they prefer.
4.1.5 Behavioural Segmentation

Some marketers attempt to segment their markets on the basis of product-related behaviour,
i.e. the benefits desired from a product and the rate at which the consumer uses the product.
 Benefits Desired
The ideal method for segmenting a market is on the basis of a customer‟s desired benefits.
A company should market the benefits of products and not just the physical characteristics.
For example, a carpenter would want a smooth surface (benefit) not just a Black & Decker
sander.
 Usage Rate
Users can be categorized as nonusers, light users, medium users, and heavy users.
Normally a company is most interested in the heavy users. However, a marketer may

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select to target a light user or even non-user, with the intention of converting him into a
heavy user.
ACTIVITY:
Assume that you are the marketing manager of a company that plans to market an imported
shoe into the African market. Explain how you would use the geographic, demographic and
psychographic segmentation variables to identify market segments for the product.
RESPONSE TO ACTIVITY
First you would have to describe the product. What kind of shoe is it, a casual shoe, or a court shoe. Is it
for male or females? What are the features of the shoe? Is it reasonably priced? Let us assume it is for
the youth market (teenagers aged between 13- 19).
In order to identify the market segments that would be interested in the shoe, you will need to have to
research the market. Your research must include information with regards to geographic, demographic
and psychographic bases:
Geographic segmentation – According to geographical segmentation, consumers are grouped in terms of
their location. The following potential consumers were identified:
Teenagers in the large cities with a high population density, namely,
Cape Town (size +60 000)
Gauteng (size +100 000)
Durban (Size +40 000)
Botswana (size +40 000)
No segments were identified in the rural areas. Climate was not relevant for the study.
Demographic segmentation
Demographic characteristics are closely linked to consumer‟s needs and purchasing behaviour and
include age, gender, income, education and race. The following potential consumers were identified:
Age: 13 -19; 16 -24 years.
Gender: Boys and Girls
Income: Parents of teenagers. Parent income R7500 + per month.
Education: Parents – Professional, business people
Psychographic segmentation
The potential consumers are further classified in terms of social class, lifestyle and personality. The
research revealed the following potential consumers:
The social classes identified for potential buyers of shoes were teenagers from middle to upper classes.
The lifestyles included those that were interested in sport, outdoor life, going to movies, mainly the non
conformists and progressives, as well as those who want to impress with their individuality.

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(Adapted from Brink, 200 :36)
4.1 WHAT IS TARGETING?

According to Blythe (2006:200) targeting is a process of choosing a segment or segments,
deciding on a tactical approach to marketing the products to that segment, and developing the
tactics into practical actions. For a segment to be viable it must have the following
characteristics:
 It must be definable, or measurable

 It must be accessible
 It must be substantial
 It must be congruent
 It must be stable
Freytag and Clarke (2001) cited in Blythe, (2006:201) offer a segment selection process which
is illustrated in the Figure 5.1 below:

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ACTIVITY:
Provide two examples of goods or services whose market demand would be particularly
affected by each of the following population factors:
a) Marital Status
b) Gender
c) Age
d) Income
What demographic characteristics would you think are likely to describe heavy users of the
following?
a) Ready to eat cereal
b) Online investment advice and stock trading
c) Laptop computers

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5.3 WHAT IS POSITIONING?

Positioning refers to distinguishing the firm‟s offering relative to the competition, so that it
occupies a distinctive position in the mind of the consumer. There are generally eight generic
factors, which are used in positioning products:
 Top of the range

 Service
 Value for money
 Reliability
 Attractiveness
 Country of origin
 Brand name
 Selectivity
These factors are not mutually exclusive. A firm may choose any one or more of these factors to
position its product in relation to its competitors. Choosing the right positioning strategy is the
culmination of all market segmentation and targeting work conducted through intensive market
research. After the marketer has decided on a particular positioning method, it must be
communicated to the target market (Brink, 2001:40).
SUMMARY
Choosing the right customers for the right reasons, and presenting the product in the right way
is how competitive advantage is achieved, no matter what the industry. Segmenting markets is
key to allocating marketing resources effectively. Understanding which customer characteristics
are most relevant in predicting their propensity to buy the firm‟s offering is a matter of executive
judgment, based on clear market research.
No company can please all people at all times, hence targeting is the process of choosing which
segments of the market will be most helpful to the company in achieving its strategic objectives.
Positioning the brand in the consumers‟ minds is the final stage in establishing a presence in the
market. Correct positioning ensures that customers are not disappointed when they buy the
product, and also ensures that the target customers will prefer the product over rival firms‟
products, ensuring long-term success for the company.

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REVIEW QUESTIONS
1. Define the three steps of target marketing: market segmentation, target marketing and
market positioning.
2. List and discuss the major bases for segmenting the market
3. Explain how companies identify attractive market segments and choose a target marketing
strategy.
SUGGESTED RESPONSES TO REVIEW QUESTIONS

1. Target marketing involves designing strategies to build the right relationships with the right
customers. Market segmentation is the act of dividing a market into distinct groups of buyers
with different needs, characteristics, or behaviours who might require separate products or
marketing mixes. Once the groups have been identified, target marketing evaluates each
market segment‟s attractiveness and selecting one or more segments to serve. Market
positioning consists of deciding how to best serve target customers – setting the competitive
positioning for the product and creating a detailed marketing plan.
2. There is no single way to segment a market. Therefore, the marketer tries different variables
to see which give the best segmentation opportunities. For consumer marketing, the major
segmentation variables are geographic, demographic, psychographic, and behavioural. In
geographic segmentation, the market is divided into different geographical units such as
nations, regions, states, countries, cities, or neighbourhooods. In demographic segmentation,
the market is divided into groups based on demographic variables including age, gender, family
size, family life cycle, income, occupation, education, religion, race, generation, and nationality.
In psychographic segmentation, the market is divided into different groups based on social
class, lifestyle, or personality characteristics. In behavioural segmentation, the market is divided
into groups based on consumer‟s knowledge, attitudes, uses, or responses to a product.
3. To target the best market segments, the company first evaluates each segment‟s size and
growth characteristics, structural attractiveness, and compatibility with company objectives and
resources. It then chooses one of four target marketing strategies – ranging from very broad to
very narrow targeting. The seller can ignore segment differences and target broadly using
undifferentiated (or mass) marketing or the seller can adopt differentiated marketing –

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developing different market offers for several segments. Niche marketing involves focusing on
only one or a few market segments. Finally, micro-marketing is the practice of tailoring products
and marketing programs to suit the tastes of specific individuals and locations. Micro-marketing
includes local marketing and individual marketing. Which targeting strategy is best depends on
company resources, product variability, product life-cycle stage, market variability, and
competitive marketing strategies.

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CHAPTER 5

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MARKET INFORMATION
AND RESEARCH
CHAPTER 5
MARKET INFORMATION AND RESEARCH
Chapter Outcomes
Explain the role of marketing research in decision-making
Describe the different subdivisions of marketing research
Outline the steps involved in conducting marketing research
Explain the difference between secondary research and primary research
Describe what is meant by qualitative and quantitative research and identify the
differences between them
Describe the most common techniques and approaches of marketing research
Explain some of the ethical issues raised in carrying out marketing research

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Marketing research is needed before a product is introduced to the market, and on a regular
basis throughout its life. Research is not limited to products; it is conducted to answer questions
about potential market segments, entire stores, brand names, advertising, prices, and every
other aspect of marketing. The challenges in every research project are to correctly define the
issue to be studied, gather the appropriate data, and transform the raw data into useful
information.
5.1 WHAT IS MARKETING RESEARCH?

Etzel et al (2005:175) define marketing research as the “development, interpretation, and
communication of decision-oriented information to be used in all phases of the marketing
process.
According to Kotler and Armstrong (2006:105) marketing research is the systematic design,
collection, analysis, and reporting of data relevant to a specific marketing situation facing an
organization.
All business decisions involve an element of risk. The purpose of marketing research is to
minimize the risk.
5.2 TYPES OF MARKETING RESEARCH

Marketing research can be divided into six broad groupings.
Customer research
Advertising research
Product research
Distribution research
Sales research
Marketing environment
5.3 THE MARKETING RESEARCH PROCESS

Kotler and Keller (2006:103-115) depict six steps in the Marketing Research process as outlined
below

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Source: Adapted from Kotler (2003:181)
5.4 TYPES OF DATA

Data can be categorized into the following broad groups:
Primary Data:
Data collected from an original source for the specific purpose on hand. The following table
summarizes the planning of primary data collection.
Table 5.1: Source: Kotler and Armstrong (2006:109)
Secondary Data:
This refers to data that already exists somewhere, having been collected for another purpose.
Examples of secondary data include the company‟s internal database, online databases,
external information sources such as commercial data services and government sources.
Primary and secondary data could be further classified as either being qualitative or
quantitative.
Quantitative Data: Data which can be expressed numerically. Effective for sales forecasts

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Qualitative Data: Data which cannot be expressed in numbers. This type of research is
effective for finding out why people behave in ways they do.
The following table differentiates between qualitative and quantitative, primary and secondary
data.
Table 9.2 Source: Blythe (2006:217)
ACTIVITY:
1. Suppose that a summer camp director had prepared the following questionnaire to interview
the parents of prospective campers. How would you assess each question.
a) What is your monthly income to the nearest hundred rand?
b) Are you a strong or weak supporter of overnight summer camping for your children?
c) Do your children behave themselves well at a summer camp? Yes ( ) No ( )
d) How many camps mailed literature to you last year?
e) What are the most salient and determinant attributes in your evaluation of summer camps?
f) Do you think it is right to deprive your child of the opportunity to grow into a mature person
through the experience of summer camping?
RESPONSE:
a) People don‟t usually know their income to the nearest hundred rand, nor do they want to
reveal their income that closely. A researcher should never begin a questionnaire with

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such personal question.

b) “Strong” and “weak” are very subjective terms, as there are varying degrees of strength
and weakness. This question would be better answered by using a scale of 1-10 for
example.
c) “Behave” is a relative term “Yes” and “No” are also not the best response options for this
question.
d) Who can remember this?
e) What are salient and determinant attributes? Avoid the use of verbosity. Use simple
language that would not confuse the respondent.
f) This is a loaded question. Given the bias, how can any parent answer yes?
5.5 ETHICS IN MARKETING RESEARCH
By its very nature, marketing research seeks to elicit people‟s private thoughts and behaviour
depending heavily on trust and honesty between the researcher and the respondent.
Unfortunately abuse of this trust can occur either deliberately or accidentally. Managers must
ensure that they guard against this as it has serious implications for the company‟s reputation in
the long run.
The following are some of the ethical issues arising in marketing research:
Intrusion of privacy
Misuse of research findings
Competitive information gathering
Sugging (selling under the guise of marketing research)
5.6 MARKET RESEARCH MEASUREMENT CONCEPTS
When large business organizations such as SA Breweries conduct marketing research, they
need to obtain various types of information about their clients, such as their gender, marital
status and educational level, as well as information about their attitudes to specific issues.
These characteristics which need to be studied by the researcher are known as research
variables. Measurement is essential to draw sound conclusions about research variables.
This study unit will focus on measurement concepts and fixed alternative-response format questions, as
well as a discussion of the decisions regarding itemized rating scales.

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5.6.1 MEASUREMENT CONCEPTS

Measurement in marketing research occurs when researchers determine or gain information
from characteristics of objects. These objects can be consumers, brands, stores and even
advertisements, for example, when you stand in the queue to buy take-aways and are asked by
the sales assistants to fill in questionnaires / cards to indicate how satisfied you are with the
service, quality of the food, et cetera. You will have noticed from these cards that you are asked
to rate the service, food and factors such as shop interiors in levels / scales from excellent to
poor.
This measurement is essential to draw conclusions about these research variables or objects.
(Note that some characteristics of an object are measured and not the object itself) Also note
that to understand their markets, researchers must measure both objective (such as number of
products consumed) and subjective (such as attitudes) matters of their respondents. When
measuring these objective and subjective matters, researchers need to assign „values or
ratings„ to the results for statistical purposes. This is done by means of measurement scales.
The various levels or scales used in questionnaires are very important as they dictate what kind
of statistical analysis can be used by the researcher.
There are four measurement scales:
Nominal scales, where descriptive responses provide a description in the form of a
scale. Any numbers used are employed merely to identify classes and not to rank
responses Examples of the responses used in these scales include ‗strongly agree„ and
strongly disagree„.
Ordinal scales, which give a certain order to the responses of respondents, thus
enabling respondents to rank their responses. Ordinal scales indicate relative sizes and
examples of responses include words or phrases such as ‗less than„ and ‗smaller than„.
Interval scales, where the distance between descriptors is known and equal. The
distance between points is equal, but there is no determinable point of zero.
Ratio scales, where a true point of zero exists. This could be possible, for example,
where a certain number of kilometers travelled or years of education undergone is being
determined.
5.6.2 FIXED ALTERNATIVE-RESPONSE FORMATS

Various types of fixed alternative-response formats exist, namely non-comparative and
comparative scales.

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Comparative Scales
When these scales are used, respondents are asked to compare one item against another.
Types of comparative scales include the following:
Rank order scales, where the respondent is required to compare or judge one aspect
with another. A respondent might be given a list of ten restaurants in Pretoria to rank in
order from one to ten.
Paired comparison, where respondents are asked to choose between two options. For
example, a respondent might be given a list of beers (such as Castle and Lion) and be
asked to indicate which beer„s packaging he or she likes best.
Constant sum scales, where constant sums are used to measure several aspects in one
question or statement.
Non-Comparative Scales: Continuous rating scales

These scales offer respondents a continuum with two extreme points. Respondents must
indicate their preferences somewhere on this continuum. Note that the continuum may have no
markings on it, except at its extreme points, and may sometimes be marked with scale positions
that are described.
Non-Comparative Scales: Itemized Rating Scales

Here respondents have to select alternatives from a limited number of ordered categories.
Itemized rating scales include the following:
The Likert Scale, where respondents are given statements concerning a certain issue.
These statements can be positively or negatively phrased and are mutually exclusive.
The Semantic Differential Scale, where respondents indicate their choices between two
extreme points. Bipolar words are used to determine the respondents„responses and
between the two bipolar words are ordered categories ranging from one to seven.
Staple scales provide respondents with a phrase or word which they have to evaluate.
These scales help to determine the direction and intensity of the respondents„opinions.
ACTIVITY
You have recently been appointed by ABC Motors to investigate the attitudes of South African
motorists to their newly launched vehicle, ‗The Razzrover„. Explain which measurement scales
you would consider in order to carry out your investigation. Provide an example to illustrate your

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choice.
Response
You could have selected a non-comparative scale, such as a Likert Scale to investigate the
attitudes of South African motorists to „The Razzrover„.
For example:
1. I like the appearance of the „The Razzrover„
2. The Razzrover„ is supported by reliable after-sales service.
You could also have selected a comparative scale, such as a paired comparison, to investigate
the attitudes of South African motorists to ‗The Razzrover„. For example:
1. Which of the following motorcars do you prefer?
„The Razzrover„ or the „The Playo„ ………………………………………………….
2. Which of the following motorcars has the most stylish appearance?
„The Razzrover„ or the „The Chica„ ………………………………………………….
5.7 QUESTIONNAIRE DESIGN
Suppose we are interested in some aspect of a person„s behaviour, knowledge, personal

characteristics or attitude. How can we obtain this information? We might ask a person to
provide information on any of the wide range of topics. Thus anyone might ask a total stranger
the time or how to get to a particular address. People regard such questions as normal and
respond by answering as accurately as possible.
But there are other questions that strangers may be hesitant to answer, for instance if they are
asked how much money they have on them. And if they were to answer honestly that they have
left their money at home, the answer may be regarded suspiciously. When marketers want to
gather information, they need to formulate their questions so that respondents give honest
answers. The design of a questionnaire is therefore very important.
5.7.1 Considerations When Designing Questionnaires

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A questionnaire is a key instrument for data collection. The easier way to measure the market is
to construct a carefully considered questionnaire. A properly constructed questionnaire permits
the collection of standardised, uniform data. A badly designed questionnaire can ruin any
research project, irrespective of good sampling, training of interviewers and application of
statistical techniques.
The following aspects have to be considered when designing a questionnaire:
Specifying the information required and the type of interview
The information required will become more obvious as the research process starts. The
questionnaire designed for personal survey can be long and more complex compared with the
questionnaire designed for telephone and mail. For example, if the interview is face-to face with
the respondent, there is a chance of explaining everything to each other very clearly, which
cannot happen with the mail and the telephone interview.
Question content
Researchers must ask questions that will provide the desired information to achieve the
research objectives. For example, if the research is about the crime rate in Gauteng, it will be
inappropriate to ask a question about the Western Cape.
Question structure
Researchers should remember that collecting quantitative research may call for types of
question structures that differ from those used in qualitative research when structuring
questions. There are three types of question structures that researchers should keep in mind
when designing a questionnaire. These are the following:
- Open-ended (unstructured), where respondents are encouraged to improvise their own
responses, thus providing the reason for certain opinions or attitudes. An example is that
of customers being asked to justify why they buy at a specific retailer. The customers can
then give their own responses.
- Closed (structured), where the questions have specific, mutually exclusive response
categories that best match respondents„ views. Dichotomous questions or multiple-choice
questions may be used. An example here would be to give the customer a few alternatives
to select from, for example low prices, good quality, good location, excellent service, et
cetera.
- Scale-response questions, where these questions are aimed at determining attitudes.
Question wording, where simple questions are asked. Complex wording and language should
be avoided as these can be very confusing. Leading questions, unspecific wording, questions

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that imply alternatives and questions that delve too far back in the respondent„s memory should
be avoided. For example, asking a respondent, ―Do you like rugby and cricket?‖ is a confusing
question as he or she might like rugby but not cricket. Therefore, the researcher should rather
ask ―Do you like rugby?‖ and ―Do you like cricket?‖
Question sequence, where the first question in the questionnaire should be interesting and
easy to answer. The researcher should first ask the general questions and then the specific
questions. This helps to reduce biased responses. Basic questions concerning the research
should be asked first and then the more personal information should be dealt with later on in the
questionnaire.
Questionnaire layout, where the questionnaire should have a professional layout and there
should be enough space for the respondent to complete the questionnaire. The questionnaire
should be designed to be as short as possible.
When conducting research, the researcher should make sure that the designed questionnaire
measures what it is supposed to measure and that the questions are well structured and simple
to understand.
SUMMARY
Marketing research supplies the information managers need to make decisions. Knowledge is
power: without a continuous, timely and accurate flow of information about the external and
internal environment, marketing managers would be clueless and working in the dark.
Marketing research is ultimately directed at meeting consumer needs better. Research will
identify consumer wants and needs, what competitors are offering and how present needs are
being met. Ultimately the purpose of marketing research is to minimize risk in making business
decisions and marketing managers can utilize this research to ensure the best possible basis on
which to plan and forge ahead.
This chapter focused on measurement concepts and fixed alternative-response format

questions. It„s clear from the material in the study unit that the choice of which type of
measurement scale to use depends on the problem that is being researched, as well as on the
questions that need to be answered.

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REVIEW QUESTIONS
1. Explain the importance of marketing information and its understanding of the market-place
to a company.
2. Explain how companies analyze and distribute marketing research.
3. Discuss the special issues some marketing researchers face, including public policy and
ethical issues.
SUGGESTED RESPONSE
1. The marketing process starts with a complete understanding of the market place and
consumer needs and wants. Thus the company needs sound information in order to
produce superior value and satisfaction for customers. The company also requires
information on competition, resellers, and other actors and forces in the marketplace.
Increasingly marketers are viewing information not only as an input for making better
decisions but also as an important strategic asset and marketing tool.
2. Information gathered in internal databases and through marketing research usually requires
more analysis. This may include advanced statistical analysis or the application of
analytical models that will help marketers make better decisions. To analyze individual
customer data, many companies have now acquired or developed special software and
analysis techniques – called customer relationship management (CRM) – that analyze and
apply the mountains of individual customer data contained in their databases.

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Marketing research has no value until it is used to make better marketing decisions. This
means providing regular reports and updates, in other cases it means making non-routine
information available for special situations and on-the spot decisions. Many firms use
company intranets and extranets to facilitate this process. Thanks to modern technology,
today‟s marketing managers can gain direct access to the information system at any time
and from virtually any location.
3. Some marketers face special marketing research situations, such as those conducting
research in small business, nonprofit, or international situations. Marketing research can be
conducted effectively by small businesses and nonprofit organizations with limited budgets.
International marketing researchers follow the same steps as domestic researchers but
often face more and different problems. All organizations need to respond responsibly to
major public policy and ethical issues surrounding marketing research, including issues of
intrusions on consumer privacy and misuse of research findings.
CHAPTER 6

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THE MARKETING MIX
CHAPTER 6
THE MARKETING MIX
Chapter Outcomes
Understand the dimensions to a product
Classify products into the various categories
Discuss branding and the decisions companies make in building and managing their brands
i.e. branding strategies
Discuss the stages a product goes through between launch and withdrawal from the market
Explain the relationship between price and other elements of the marketing mix
Identify and define the internal factors affecting a firm‟s pricing decisions
Identify and define the external factors affecting pricing decisions, including the impact of
consumer perceptions of price and value

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Contrast the three general approaches to setting prices

The various forms that promotion can take i.e. the promotional mix
Understand the need for integrated marketing communications
Identify the factors that need to be considered in determining the promotional mix
Understand the need for regulation and legislation of promotion
Explain the role of distribution channels
Distinguish between the different number of levels of channels to distribute goods and
services
Describe the various types of marketing distribution systems
6.1 INTRODUCTION
A firm can best serve its customers by producing and marketing want-satisfying goods or
services. In order to manage a firm‟s offering, marketers must understand the full meaning of
“product” which stresses that customers are buying want-satisfaction rather than mere physical
goods or services. Successful product planning and development require long-term commitment
and strong support from top management.
THE PRODUCT
6.2 WHAT IS A PRODUCT?

According to Kotler and Armstrong (2006:232) a product is anything that can be offered to a
market for attention, acquisition, use or consumption that might satisfy a want or need. Products
include physical objects, services, experiences, events, persons, places, properties,
organizations, information and ideas.
Etzal et al (2005:208) re-iterate that a product is much more than a set of physical attributes.
They define a product as shown in Figure 3.1 as a set of tangible and intangible attributes,
which may include packaging, colour, price, quality and brand, plus the seller‟s services and
reputation. In essence, they contend that customers are buying want-satisfaction in the form of
benefits they expect to receive from the product.

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Figure 3.1 Source: Etzel et al (2005:209)
6.3 DIMENSIONS TO PRODUCTS

Product managers need to think about their merchandise range on three levels:
Core products: The core products stand at the centre of the total product. In Ritz-Carlton Hotels
know that they offer their guests more than simply rooms for rent – they provide “memorable travel
experiences”.
Actual Product: Actual products may have as many as five characteristics:
A quality level
Features
Design
A brand name
Packaging
Augmented Products: The augmented product, offers additional customer services and
benefits. These may include the warranty on parts and workmanship, instructions on how to use
technical products, quick repair services when required, toll free numbers for assistance etc.

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6.4 CLASSIFICATION OF PRODUCTS

Products and services can be grouped into two broad categories based on the type of
consumers that use them, i.e. Consumer products and Industrial Products:
6.4.1 Consumer products:

These products are bought by the final consumer for personal consumption. Consumer
products can be further classified into:
Convenience products: These products are usually purchased frequently, immediately
and with a minimum of comparison and buying effort. Examples
include soaps, newspapers, bread, etc.
Shopping goods: Goods that customer‟s compare carefully on suitability, style,

quality and price e.g. furniture, cars, major appliances, etc.
Specialty goods: Products with unique characteristics or brand identification for

which a significant group of buyers is willing to make a special
purchase effort e.g. specific brand of vehicles and branded
products such as Nike and Reebok.
Unsought products: Are products the consumer knows nothing about or does not
even think of buying e.g. Life insurance
6.4.2 Industrial products/goods

These are products bought by individuals and organizations for further processing or for use in
conducting a business.
The three groups of industrial products are:
 Raw Materials e.g. Land, fruits, livestock, cotton
 Fabricating materials and parts e.g. zips in clothing, micro chips in computers
 Installations e.g. Diesel engines for a railroad, generators for dams
 Operating Supplies e.g. Lubricating oils, pens and stationery
 Accessory equipment eg, office desks, small power tools, fork lift trucks
6.5 BRANDING OF PRODUCTS

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The most distinctive skill of professional marketers is their ability to build and manage unique
brands. Consumers view a brand as an important part of a product and today hardly anything
goes unbranded.
6.5.1 What is a brand?

According to Kotler and Keller (2006:243) a brand is a name, term, sign, symbol, or design, or a
combination of these intended to identify the goods or service of one seller or group of sellers
and to differentiate them from those of competitors.
A brand is complex and can deliver up to six levels of meaning. For example let us examine the
meaning of the Mercedes brand.
 Attributes: Mercedes suggests expensive, durable, well-built, high resale value

 Benefits: Long life span “I do not need to buy a car another car for several years”
 Values: Mercedes stands for high performance, safety and prestige.
 Culture: Represents German culture: organized, efficient and of high quality.
 Personality: Mercedes may suggest a no-nonsense boss (person) or a reigning lion
 User: One would expect a 50-year executive behind the wheel of a Mercedes
6.5.2 Brand Strategy

Branding poses challenging decisions to marketers. Figure 3.2 depicts that the major brand
strategy decisions involve brand positioning, brand name selection, brand sponsorship, and
brand development. Source: Kotler & Armstrong (2006:250)
Brand Positioning: This refers to positioning the brand clearly in the target customers‟
minds, based on attributes, benefits, beliefs and values.
Brand Name Selection: A good name greatly adds to the product‟s success hence a name
should be carefully selected and protected.

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Brand Sponsorship: A manufacturer has four options viz. manufacturer‟s brand, private
brand, licensed brand or co-brand (two companies join).
Brand Development: A company has four options viz. line extensions (variations of
existing product), brand extensions (existing brand extended to
new products), multi-brands (new brands in the same product
category) and new brands.
ACTIVITY:
For many years there was one type of Coca Cola. Now we find Diet Coke, Vanilla Coke and
various other versions of this popular soft drink. It seems that almost every major brand has
been greatly extended. List some of the issues that such brand extensions raise for
manufacturers, retailers and consumers.
Brand extensions have become a very common way to launch a new product. For a
manufacturer, extending a successful brand has many advantages. It allows a new product to
capitalize on the success of an established brand, as in the case of Coca Cola. Both customers
and the trade are unaware of the new products image and heritage, so the manufacturer does
need to spend time to create brand awareness. Brand extensions are less attractive for retailers.
It may make shelf usage less efficient. Brand extensions offer interesting trade offs for
consumers. An established brand name like Coca Cola on a new product offers certain
assurances about quality, but also expectations that may be met or may not be met. New Coke
failed both as a product and line extension because it did not meet consumers‟ expectations of
what Coke should be.

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6.6 PRODUCT LIFE CYCLE
The Product Life Cycle is a useful concept for explaining what happens to a product from the
time it enters the market to its final withdrawal. Products move through a series of four distinct
phases: Introduction, Growth, Maturity and Decline. Kotler (2003:328-329 portrays the
product life cycle as depicted in the following figure:
Profit curve
(Source: CSDTT, 2004)
Introduction: When the product first enters the market, sales grow very slowly and profits
are virtually nonexistent. In the first half of the introduction phase, the
company normally makes a loss because of the higher marketing budgets
and the market is not yet aware of the product. The focus is on the firm‟s
promotion effort creating awareness and encouraging trial of the product.
Price is likely to be high, to recoup development costs since there are no
direct competitors.
Growth: This period is characterized by an increase in sales and acceptance of the

product. Sales and profits start to rise sharply, attracting competition. Prices
will be lower as competitors enter the market and development costs start
decreasing. There will be a shift in promotional effort from creating
awareness towards encouraging repeat purchases and brand preference.

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Distribution will be wider as distributors become more confident of selling the

product.
Maturity: This is characterised by the leveling off of industry sales revenue. Strategy
shifts to maintaining market share in the face of increased competition.
Promotional efforts are focused on maintaining brand loyalty.
Decline: Sales show a downward trend and profits begin to erode. Major decisions
about the product have to be made and at times become emotional decisions
because people have devoted their time and effort into making the product a
success.
The PLC may be short or they may take place over many years. It depends on the product. The
following table summarizes the characteristics and marketing strategy to be adopted for each
stage in the product life cycle.
Characteristics Introduction Growth Maturity Decline
Sales Low sales Rapidly rising sales Peak sales Declining sales
Costs High cost per Average cost per Low cost per Low cost per
customer customer customer customer
Profits Negative benefits Rising Profits High profits Declining profits
Customers Innovators Early Adopters Middle majority Laggards
Competitors Few competitors Growing number of Stable number Declining

competitors beginning to number of
decline competitors
Marketing Create product Maximize market Maximize profit Reduce

Objectives awareness and share while defending expenditure and
trail market share milk the brand
Strategies
Product Offer a basic Offer product Diversify brand and Phase out weak
product extensions, service, models items

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warranty
Price Use cost plus Price to penetrate Price to match or Cut price
pricing market beat competitors
Distribution Build selective Build intensive Build more Go selective:

distribution distribution comprehensive Phase out
distribution unprofitable
outlets
Advertising Build product Build awareness Stress brand Reduce

awareness and interest in the differences and advertising to
among early mass market benefits in level required to
adopters and advertising retail hardcore
dealers loyal
Sales Use heavy sales Reduce to take Increase sales Reduce sales
Promotion promotion to advantage of heavy promotion to promotion to
entice trial consumer demand encourage brand minimal level
switching
(Kotler, 2003:340)
ACTIVITY:
1. Where on the product life cycle do you think the each of the following products feature:
VCR‟s, DVD‟s, Maize, MBA‟s, Barbie
2. How would you advise the marketing manager of the above products with regard to the
marketing strategy for each?

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THE PRICE
Price is the only element in the marketing mix that directly relates to income. All the others
relate to costs. It also crosses over dramatically to the other elements in the marketing mix.
Promotional campaigns generally carry messages about price, for example, price discounts.
Price also conveys messages about the quality of the products, for example its features and
benefits.
Pricing is also used as a strategic tool in positioning the company‟s offering in relation to the
competition. Even a small increase in the price can generate a very substantial increase in
profits. For marketers, though, the challenge lies in finding ways to justify this price increase to
customers.
6.7 WHAT IS PRICE?

It is the amount of money a person is willing to pay for a product or service taking into account
its perceived value.
6.8 FACTORS AFFECTING PRICING DECISIONS

Both internal and external factors affect pricing decisions:
Internal factors eg. Marketing objectives, marketing mix strategy, costs and organizational
considerations
External factors include the nature of the market and demand, competition, and other
environmental elements
6.8.1 Internal factors

Marketing objectives:

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Blythe (2006:450) cites McCarthy and Perrault‟s (2002) division of the firm‟s objectives into
three major types:
 Profit orientated – to maximize profits
 Sales orientated – to maximize market share
 Status quo-oriented – same as competitor‟s pricing, to avoid price wars
Marketing mix strategy:

Price decisions are co-coordinated with product design, place (distribution) and promotion to
form a consistent and effective marketing program. For example, a decision to position the
product on high-performance and quality will mean charging a higher price to cover higher
costs.
Costs:
Costs set the floor for the price that a company can charge. Costs are an important element in
the pricing strategy.
Costs can be divided into:
 Fixed costs – costs that do not vary with production or sales level
 Variable costs – costs that vary with level of production
 Total costs – Sum of fixed and variable costs
Organizational considerations
Management must decide who should shoulder the burden of responsibility for setting the price.
It could be any one of the following:
 Top management
 Sales or marketing department
 Production managers
 Financial managers and accountants
6.8.2 External Factors

Nature of market and demand
A marketer must understand the relationship between price and the demand for its product.
According to Kotler (2003:475), price elasticity measures the sensitivity of demand to price

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changes. This is depicted in the figure below. Demand is said to be inelastic if it hardly changes
with a price increase. If the demand changes drastically with a small change in price, then
demand is said to be elastic.
Looking at graph (a), an increase in price from R10 to R15 led to a relatively small decline in
quantity demanded ie. from 105 to 100. However, in graph (b), the same price increase led to a
substantial drop in quantity demanded from 150 to 50.
Source: (Kotler, 2003:476)
Competition
A company cannot ignore competition in the market and may use competitors‟ pricing as a
benchmark for its own pricing.
Other Environmental Factors

Economic conditions such as boom or recession, inflation, and interest rates affect the firm‟s
pricing decisions. The government is another important factor that can influence pricing
decisions. Finally social concerns may have to be taken into account, in setting short-term
sales, market share and profit goals.
6.9 GENERAL PRICING APPROACHES

Pricing approaches can be divided into cost-based pricing, value based pricing and competition
based pricing.
6.9.1 Cost based pricing:

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 Cost-Plus pricing: This implies adding a standard markup to the cost of the
product. For example it cost a manufacturer R50 to manufacture a toaster. He
decides to add 20% as a profit mark-up on cost. He will then charge the customer
R60 (R50 + R10) for the toaster.
 Target profit pricing: Based on break-even pricing, which is, setting price to cover
costs (break even point) of making and marketing a product; or setting price to
make a target profit.
6.9.2 Value-based Pricing: This is based on setting prices on buyers‟ perceptions of value
rather than on seller‟s cost.
 Value pricing: Offering just the right combination of quality and good service at a
fair price
 Value added marketing: Here value is built at each stage of the marketing offer.
Most companies attach value-added services to differentiate their offers and thus
support higher margins.
6.9.3 Competition based pricing: Involves setting prices based on the prices that
competitors charge for similar products.
MARKETING SPOTLIGHT ON: NEXTEL

Last year consumers across the world bought more than 500 million cell phones.
Despite this, the market keeps growing both in the United States and abroad. The list of
companies competing for cellular customers has also grown during this period. In a
market full of competitors, Nextel differentiates itself by tailoring its services to the
needs of businesspeople. For example, Nextel offers easy conference calling, data
management solutions, and global positioning services, including access to instant
driving directions, programs to locate and deploy employees, and fleet and package
tracking – all through its cell phone service.
Despite the company‟s range of targeted services, Nextel, like many cellular service
providers, struggles to balance its marketing offers. In an industry so focused on pricing,
how can a company build brand value through product and service benefits while
offering competitive prices?
Source: Kotler and Armstrong (2006:327)
1. How does Nextel‟s target market, ie. business customers, affect its pricing
decisions? How might the company‟s emphasis on service benefits and price
differ if it targeted primarily leisure consumers.

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2. If you have a cell phone, what factors led you to select your current provider?
How important was price? If you do not have a cell phone, how would you select
the service provider for landline?
3. Scan your local paper for advertisements offering cellular service. What
strategies are service providers using to attract customers? Do you think these
strategies are effective?
RESPONSE TO MARKETING SPOTLIGHT

1. Because Nextel‟s target market is a business customer, it offers much more in terms of
services such as conference calling, data management solutions, global positioning,
access to instant driving directions, programs to locate and deploy employees and fleet
and package tracking. Hence prices will inevitably be higher. However, if it targets leisure
consumers, there would be no need for such a wide variety of services, because this
segment of the market is not interested in conference calling, fleet and package tracking,
etc. Prices would be much lower and it could offer competitive pricing in line with other
service providers, if not lower.
2. Network coverage – does it cover the entire country? Can it be used overseas i.e.
international roaming? Is the network provider easily accessible in times of crisis?
3. Most service providers offer: - Cash back

- Vouchers to purchase appliances
- Free gifs
These strategies have been highly successful as people sign on contracts only if the
incentives are value for money.

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PROMOTION
Companies must do more than make good products – they must inform consumers about the
product benefits and carefully position their products in the minds of consumers. To do this, they
must skillfully use the various promotional tools available at their disposal.
The marketplace is generally characterized by incomplete information, product differentiation

and emotional buying behaviour. As a result, companies use promotion to provide information
for the decision makers in the buying-decision process, to assist in differentiating their products,
and to persuade potential buyers.
The role of promotion in economic terms is to change the location and shape of the demand
curve for a company‟s product, either shifting it to the right, or changing its shape to make
demand inelastic when prices increase, and elastic when prices decrease. Through promotion
a company strives to increase its product‟s sales volume at any given price, i.e. the firm seeks
to shift its demand curve to the right. From a marketing perspective the role of promotion is to
further the objectives of an organization by making use of various tools. Simply stated,
promotion is intended to make a product more attractive to prospective buyers.
6.10 WHAT IS PROMOTION?

It is that element in the marketing mix that serves to inform, persuade, and remind the market of a
product and/or the organization selling it in the hope of influencing the recipients‟ feelings, beliefs or
behaviour.

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Etzel et al (2005:486) define promotion as all personal and impersonal efforts by a seller or the
seller‟s representative to inform, persuade, or remind a target audience.
Promotion may take the form of advertising, sales promotion, personal selling, public relations,
or direct marketing. A firm may choose any one or more of the aforementioned ways of
promoting its offering.
6.11 THE PROMOTIONAL MIX

Also referred to as the marketing communications mix, marketers must choose the specific
blend of advertising, sales promotion, public relations, personal selling, and direct-marketing
tools to pursue the company‟s marketing objectives.
6.11.1 Advertising: Any paid form of non-personal presentation and promotion of ideas, goods
or services by an identified sponsor. Examples include TV, radio, newspapers, internet,
and billboards.
6.11.2 Sales promotion: Short term incentives to encourage the purchase or sale of a product or
service. Examples include samples, discounts, coupons, event sponsorships, trade shows,
and in-store displays.
6.11.3 Personal selling: Personal presentation by the firm‟s sales force (or sales rep) for the
purpose of making sales and building customer relationships. This may be face to face or
over the phone.
6.11.4 Public relations: Building good relations with various stakeholders by obtaining favourable
publicity, building up a good “corporate image” and handling or heading off unfavourable
rumours, stories, and events. It can take many forms such as support of charitable or civic
events, lobbying, annual reports, etc.
6.11.5 Direct marketing: Direct communications with carefully targeted individual consumers – the
use of telephone, mail, fax, e-mail, the Internet, and other tools to communicate directly with
specific consumers.
6.12 THE COMMUNICATION PROCESS AND PROMOTION

The communication process is the verbal or nonverbal transmission of information between
someone who wants to express an idea at one end and the recipient on the other. The four
basic elements are: a message, a source of the message, a communication channel and a

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receiver. The following figure illustrates the components of a communication process and
relates them to promotional activities.
Source: Etzel et al (2005:492)
6.12.1 Steps in developing effective communication

 Identify the target audience
 Determine the communication objectives taking into account buyer readiness stages
 Design the message paying careful attention to message content, structure and format
 Choose the media either personal or non-personal channels of communication
 Select the message source
 Collect feedback
6.13 THE NEED FOR INTEGRATED MARKETING COMMUNICATIONS (IMC)

Gone are the days when a company could just rely on mass-media advertising to dominate the
promotional mix. With the advent of technology, and market fragmentation, a company must
ensure that it integrates its promotional mix to reach its target audience. According to Kotler and
Armstrong (2006:430) IMC is the concept under which a company carefully integrates and co-
ordinates it‟s many communications channels to deliver a clear, consistent, and compelling
message about the organization and its products.

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6.13.1 Determining the promotional mix

An effective promotional mix is a critical part of virtually all-marketing strategies. Product
differentiation, positioning, trading up and trading down, and branding all require effective
promotion.
According to Etzel et al, (2005:494) designing an effective promotional mix involves a number of
strategic decisions around five factors:
 Target audience: use either push strategy, which targets middlemen, or pull strategy, which targets
consumers
 Objective of the promotion effort: to either create awareness, knowledge, liking, preference,
conviction, or purchase
 Nature of the product: centered around either unit value, degree of customization or service
requirements
 Stage in the product’s life cycle
 Amount of money available for promotion
6.13.2 Setting the Promotion Budget

One of the hardest marketing decisions facing a company is how much to spend on promotion.
The following methods are generally used in setting the promotional budget:
 Percentage-of-sales method
This method is used more widely because it is simple to use. It is calculated as a
percentage of current or forecasted sales or an average of both. Its limitation is, it can
prevent increased spending needed to turn around falling sales. Long run planning is also
difficult, because the sales budget varies from year to year.
 All available funds method

This usually occurs when a firm is introducing a new product for the first time. It ploughs all
available funds into its promotional program in order to build sales and market share as
rapidly as possible during those early critical years.
 Following competition method

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Here the promotional budget is set to match those of competitors. This can prove to be
disastrous as competitors may be just as much in the dark regarding how to set a
promotional budget.
 Task or Objective Method

The budget is developed by:
(1) defining specific objectives,
(2) determining the tasks that must be performed to achieve these objectives, and
(3) estimating the cost of performing each of these tasks.
The sum of these costs is the proposed promotion budget.
 The Affordable Method

Most small business often use this method, reasoning that the company cannot spend
more on advertising than it has. They start with total revenues, deduct operating expenses
and capital outlays, and then devote some portion of the remaining funds to advertising.
6.14 REGULATION OF PROMOTION

Because the primary objective of promotion is to sell something through persuasion, the
potential for abuse always exists. Consequently, firms must be discouraged or prevented from
intentional or unintentional misrepresentation. Furthermore, some consumers need protection
from being misled, because they lack particular knowledge or skills.
Hence government has instituted regulation in the form of legislation to discourage the
occurrence of abuses and to correct those that do occur. In addition, professional associations
and individual businesses have established promotional guidelines.
ACTIVITY
1. Discuss the pros and cons of the various methods of setting the promotional budget.
2. If you were the marketing manager, which method would you use in setting the
promotional budget? Discuss why you would choose this method.

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1
Method Pros Cons
- Easy to implement - Budget is reduced when sales decline, just

when it is needed most.
Percentage - Shows the relationship between sales
and promotion spending - Long term planning is difficult because
of sale
budget varies from year to year
- Cannot spend more than they have - Uncertain annual promotion budget, which
makes long term planning difficult.
Affordable
- Places promotion last among priorities even
Method
when it is critical to a firm’s success.
- Competitor’s budget represent the - May be just as much in the dark as the firm.
collective wisdom of the industry.
Following - Company’s promotional goals may be quite
competition - Prevents promotion wars different.
- Logical budget setting method. - Difficult method
Objective-and- - Forces management to spell out - Difficult to figure what specific tasks will achieve
Task method assumptions between money spent stated objectives.
and promotion results.
2. The objective and task method is the best method as it forces management to
realistically define the goals of its promotional program and view them outside the confines
of a defined budgetary period.
REVIEW QUESTIONS
1. Name the tools of the marketing communications mix.

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2. Discuss the process and advantages of integrated marketing communications.

3. Outline the steps in developing effective marketing communications.
PLACE
The distribution of products is an essential part of the marketing mix, and getting the products to
the right place at the right time and in the right quantities is a pre-requisite for consumers to buy
the products.
Ownership of a product has to be transferred from the individual or organization that makes it to
the consumer who needs and buys it. Goods must also be transported from where they are
produced to where they are needed. Services on the other hand have to be consumed in the
same place as they are produced, because the service cannot be separated from the person
providing it.
Because of the widespread usage of the Internet, e-commerce and the competition and conflict
among channels and members of supply chains, the area of distribution is in a state of flux,
perhaps even transformation. Business owners and executives cannot ignore this dynamic
situation in distribution. Developing a new or unconventional channel of distribution can give the
company a competitive edge, which the product alone will not provide.
6.15 WHAT IS PLACE?

Place is the point at which an organization offers its product or service to its customers. In order
for a company to sell its product to its target market, various channels, sometimes referred to as
distribution channels, middlemen, or even intermediaries, have to be used.
6.16 THE ROLE OF DISTRIBUTION CHANNELS

Few producers sell their products directly to the final users. Most use intermediaries or
distribution channels to bring their products to the market. The role of the distribution channels
range from promoting the product, storing it, and assuming some of the financial risk during the
distribution process. A middleman either owns the product at some point or aids in the transfer
of ownership. Often, but not always, middlemen take physical possession of the product.

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Middlemen act as sales specialists for their suppliers. Conversely, they serve as purchasing
agents for their consumers.
6.17 NUMBER OF CHANNEL LEVELS

Companies can select from any number of the following levels of channels to distribute their
goods or services. The following figure shows the number of levels of channels a producer of
may select to market its goods and shows the channels of distribution for a producer of
services.
Figure A:
Figure B:
Source: Etzel et al (2005:395)

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6.17.1 Direct Marketing/Distribution

Here consumers purchase directly from producers. They are common in industrial markets,
especially when companies purchase major items (e.g. computer hardware). Direct distribution
systems are also common in consumer markets: door to door selling, direct marketing,
telephone selling or advertising response media (direct mail, press, radio and television,
internet) and in miscellaneous cases such as „pick your own strawberries‟.
Most service companies use direct distribution. For example, banks, building societies and
insurance companies are heavy users of direct response media and make direct sales from
their locations.
INTERNET MARKETING
With the advent of Internet shopping more and more stores have made available Internet
access to customers. This option has gained extensive popularity overseas and is growing
rapidly in South Africa.
E-business: the change of marketing practices

 E-Business describes the use of electronic means platforms to conduct a
company‟s business. Companies have set up extranets with major suppliers and
distributors to facilitate information exchange, orders, transactions and payments
(Kotler, 2003:40). Bill Gates of Microsoft claims that Microsoft is almost entirely run
electronically; there is hardly any paper flowing through the company because
everything is on the computer screen.
 E-commerce is more specific than e-business; it means that in addition to providing
information to visitors about the company, its history, policies, products and job
opportunities the company offers to transact or facilitate the selling of products and
services online. E-commerce has given rise in turn to e-marketing and e-purchasing.
 E-purchasing involves companies who decide to purchase goods, services and
information from various online suppliers.
 E-marketing describes company efforts to inform, communicate, promote and sell
its products and services over the internet.

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ACTIVITY:
1. What are the challenges facing online marketing?
Challenges facing online marketing
Some of the challenges facing online marketers:
 Limited consumer exposure and buying
 Security: internet fraud
 Clutter: The web offers a substantial amount of information. Navigation is sometimes
problematic.
 Ethic concerns: Marketers can track website visitors and participants provide personal
information which could be open to abuse.
 Privacy
6.17.2 Retailers:
Retailers are in the business of selling goods and services to consumers. In choosing retail
outlets, companies need to consider which offer the appropriate margin, coverage of market
image and service where relevant.
Kotler (2003:536) identifies the following main types of retailing outlets:
 Specialists concentrate on particular closely related lines. (eg. Exclusive Books
specializes in books)
 Department Stores display and manage several lines independently within the store (e.g.
Woolworth‟s)
 Superstores are large specialists (e.g. Hi-fi Corporation) normally with wider ranges and
out of town locations.
 Discount stores involve comparatively low prices as a major selling point combined with
low cost of doing business. (e.g. Games, Macro)
 Corporate Chains are centrally owned and centrally managed stores that generally handle
the same lines of products. (e.g. Baby & Co., Reggie‟s)
 Supermarkets are high volume, low margin, predominantly fast moving consumer goods
(e.g. Pick „n Pay and Checkers)
 Hypermarkets are larger than supermarkets. They have more lines and an image of low
prices with parking (e.g. Pick „n Pay Hyper, Checkers Hyper)
 Catalogue showrooms: selection is made via an in store catalogue with items available on
display only. (e.g. Grafton Everest)

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 Automatic vending machines distribute goods and services using an automated

exchange process (e.g. Soft drink/snack machines).
 Category killers are stores that specialize in a related product range. (e.g. Toys R Us and
Incredible connection)
6.17.3 Wholesalers
Kotler (2003: 547) defines wholesaling as all the activities involved at selling goods and services
to those who buy for resale or business use. This excludes manufacturers, farmers and
retailers.
Wholesalers differ from retailers in the following ways:

 Wholesalers pay less attention to promotion, store atmosphere, and location as they are
dealing with business customers rather than final users
 Transactions are normally larger than retail transactions
 The government deals with wholesalers and retailers differently in terms of legal regulations
and taxes
6.18 TYPES OF MARKETING DISTRIBUTION SYSTEMS

6.18.1 Conventional marketing system
This system comprises one or more independent producers, wholesalers, and retailers, each a
separate business seeking to maximize its own profits even at the expense of profits for the
system as a whole. There is no complete control or substantial control over other members.
6.18.2 Vertical Marketing System (VMS)

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This consists of producers, wholesalers, and retailers who act as a unified system. One channel
member owns the others, has contracts with them, or wields so much power that they all co-
operate as illustrated below.
Source: Kotler & Armstrong (2006:367)
Vertical marketing involves each member of a distributive chain bargaining in unity rather than
autonomously, with the advantage of consistency of policy, reduction of conflicts of interest and
possible economies of scale.
6.18.3 Horizontal marketing systems

Here two or more unrelated companies join together in terms of resources and in pursuit of a
new marketing opportunity. In doing so, companies can combine their capital, production
capabilities, and marketing resources to accomplish more than any one company could alone.
These companies might work together with each other on a temporary or permanent basis or
may create a joint venture. Coca Cola and Nestle formed a joint venture to market ready-to-
drink coffee and tea worldwide. Coke provides worldwide experience in marketing and
distributing beverages, and contributes two established brand names – Nescafe and Nestea.
(Kotler, 2003:536)
6.18.4 Multi-channel marketing system

This is a distribution system in which a single firm sets up two or more marketing channels to
reach one or more customer segments. It is also called a hybrid marketing channel. The
following figure illustrates a producer selling directly to consumer segment 1 using direct-mail

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catalogues, telemarketing, and the Internet and reaches consumer segment 2 through retailers.
It sells indirectly to business segment 1 through distributors and dealers and to business
segment 2 through its own sales force
Source: Kotler & Armstrong (2006:369)
ACTIVITY:
Give two examples where each of the following types of marketing systems may be applicable:
a) Vertical marketing system
b) Horizontal marketing system
c) Multichannel marketing system
6.19 DETERMINING THE INTENSITY OF DISTRIBUTION

There are varying degrees of intensity as shown below:
Source: Etzel et al ((2005:404)
6.19.1 Intensive Distribution: According to Etzel et al (2005:404), under intensive distribution,

a producer sells its products through every available outlet in a market where a

--------------------------------------------------------------------------------------------------------------------------------------------------------
consumer might reasonably look for it. Producers of convenience goods generally resort
to intensive distribution making use of every possible outlet in grocery stores,
supermarkets, convenience stores, hardware stores, etc.
6.19.2 Selective Distribution: Here a producer sells through multiple, but not all possible
outlets in the market. Selective distribution is appropriate for consumer shopping goods,
such as various types of clothing and appliances, and for business accessory equipment
such as office equipment and tools.
6.19.3 Exclusive Distribution: Retailers or Wholesalers are given the sole rights to sell the
product within their area. Producers often adopt an exclusive distribution strategy when it
is essential that the retailer carry a large inventory. Exclusive agreements can work both
ways: a retailer might seek the exclusive rights to a product, or the manufacturer might
want to prevent the retailer from stocking competing brands.
REVIEW QUESTIONS
1. Explain why companies use marketing channels and discuss the functions these channels
provide.
2. Identify the major channel alternatives open to a company.
3. Discuss the risks and limitations to be considered when selecting the intensity of the
distribution.
RESPONSE TO REVIEW QUESTIONS

1. Most producers use marketing channels or intermediaries to bring their products to the
market. Marketing channels perform the following key functions:
 They gather information about potential and current customers, competitors, and other
actors and forces in the marketing environment
 The develop and disseminate persuasive communications to stimulate purchasing
 They reach agreements on price and other terms so that transfer of ownership or
possession can be effected
 They place orders with manufacturers
 They acquire the funds to finance inventories at different levels of the marketing channel
 They assume risks connected with carrying out channel work
 They provide successive storage and movement of physical products

--------------------------------------------------------------------------------------------------------------------------------------------------------
 They provide the buyers’ payment of their bills through banks and other financial
institutions
 The oversee actual transfer of ownership from one organization or person to another
2. Available means vary from direct marketing to using one, two, three or more channel levels.
Marketing channels face continuous and sometimes dramatic change. Three of the most
important trends are the growth of vertical, horizontal, and multi-channel marketing systems.
3. Intensive distribution places much, and perhaps, most of the advertising and promotion
burden on the producer. The relative ease of online selling has prompted firms in many
industries to shift from selective to more intensive distribution. Intensive distribution usually
results in high costs or unsatisfactory performance of middlemen. Some middlemen may be
poor credit risks. When using exclusive distribution a middleman may become too
dependent on the manufacturer. If the manufacturer fails, the middleman also fails. Another
risk is that once sales volume has been built up in a market, the producer may add other
dealers or, worse yet, drop all dealers and establish its own sales force. A producer may
suffer if its exclusive middleman does not serve customers well.
SUMMARY
To manage its products effectively, a marketer must understand the full meaning of product,
which stresses that customers are buying want-satisfaction. Products can be classified into two
basic categories – consumer products and business products. Each category is further
subdivided as a different marketing program is required for each distinct group of products.
Effective product management involves developing and then monitoring the various features of
a product. A consumer‟s purchase decision may take into account not just the basic good or
service, but also the brand and perhaps one or more of the other want-satisfying product
features. A brand is a means of identifying and differentiating the products of an organization.
Branding aids sellers in managing their promotional and pricing activities.
All products generally follow a product life cycle. Each of the cycle‟s four stages – introduction,
growth, maturity, and decline – has distinctive characteristics that have implications for
marketing. Managing a product as it moves through its life cycle presents a number of
challenges and opportunities.

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Price may not be the most important decision in the marketing mix, however, getting it right is
essential because it is the customer‟s half of the exchange. Although most of a marketer‟s
attention is focused on the offer, the customer focuses on the cost of purchasing the product. In
addition, price colours expectations - people tend to assume that high price means high quality.
Price is one of the most flexible elements of the marketing mix. It can be quickly raised or
lowered. Before setting a product‟s base price, management should identify its pricing objective.
It could be either to earn a target return on investment or on net sales, maximize profits,
increase sales, hold or gain a target market share, stabilize prices or meet the competitor‟s
price. Besides the firm‟s pricing objective, other key factors that influence price setting are
demand for the product, competitive reactions, strategies planned for other marketing-mix
elements and the cost of the product.
In addition, management may select any of three major approaches to setting prices ie. cost
based pricing, value based pricing or competition based pricing.
The primary methods of promotion are personal selling, advertising, sales promotion, public
relations and direct marketing. An integrated marketing communication (IMC) describes a co-
coordinated promotional effort that includes planning, developing, executing and evaluating
communication with an organization‟s audience. Promotion is communication. Fundamentally,
the communication process consists of a source sending a message through a channel (TV,
radio, newspaper, website, salesperson, etc) to a receiver. The success of communication
depends on how well the message is encoded, how easily and clearly it can be decoded, and
whether any noise interferes with its transmission. Feedback is the measure of how effective the
communication has been.
When deciding on the promotional mix, management should consider the target audience, the
objective of the promotion effort, the nature of the product, the stage of the product‟s life cycle,
and the funds available for promotion.
Place is the location where exchange takes place. The role of distribution is getting a product to
its target market. A distribution channel is the set of people and firms involved in the flow of
goods as it moves from the producer to the ultimate consumer. A variety of channels may be
selected to distribute a firm‟s offering. Firms often employ multiple channels to achieve broader
market coverage.

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Distribution intensity refers to the number of wholesalers and retailers a producer uses in a
particular industry. Different degrees of intensity may be appropriate at successive levels of
distribution. A manufacturer can often achieve intensive retail coverage with selective, rather
than intensive, wholesale distribution. Or selective intensity at the retail level may be gained
through exclusive intensity at the wholesale level.

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BIBLIOGRAPHY

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BACHELOR OF COMMERCE

REGENT Business School

CHAPTER SECTION PAGE

1 Understanding Marketing Management 2

2 The Marketing Environment 17

4 Market Segmentation, Targeting and Positioning 39

5 Marketing Information and Research 49

6 The Marketing Mix 61

Regent Business School Page 1

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UNDERSTANDING MARKETING MANAGEMENT

1.1 WHAT IS MARKETING?

Etzel et al (2005:6) define marketing as follows:

Kotler (2003:9) defines marketing as:

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1.2 WHAT IS A MARKET?

1.3 EVOLUTION OF MARKETING

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Stages of Marketing Evolution

1.4 WHAT MARKETERS DO

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THE TASKS OF MARKETING MANAGEMENT

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1.5 WHAT IS MARKETED?

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experiential marketing. Customized experiences such as camp trips can also be

1.6 THE MARKETING CONCEPT

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Figure 1 – The Marketing Concept

According to Blythe (2005:12), customers have the following needs:

Maslow distinguishes between three types of needs:

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The marketing concept is based on three beliefs:

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1.7 HOW IS MARKETING DONE?

1.8 CORE CONCEPTS

Target Markets And Market Segments

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Needs, Wants and Demands

Product, Offering And Brand

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1.9 THE CHALLENGES FACING THE MARKETING FUNCTION

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THE MARKETING ENVIRONMENT

Understand and explain the concept of environmental monitoring.

2.1 WHAT IS ENVIRONMENTAL MONITORING?

According to Etzel et.al (2006:30) environmental monitoring – also called environmental

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2.2 MACRO ENVIRONMENT

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Social and Cultural Factors

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Political and Legal Factors

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2.3 MICRO ENVIRONMENT

Public (or Stakeholders)

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PORTER’S FIVE FORCES MODEL

(1) Barriers to entry (Threat of new entrants)

 It is concentrated or purchases in large volumes