GLOSSARY OF MARKETING TERMS

Added value. Value is said to be added when the utility of a product or service is increased.

Administered prices. Where prices are imposed on one or more levels of the marketing chain by
some external body.

Advertising. A form of communication which a sponsor pays to have transmitted via mass media
such as television, radio, cinema screens, newspapers, magazines and/or direct mail. It is
intended to both inform and persuade.

Agricultural commodity. Agricultural products whose production methods, postharvest

treatments and/or primary processing have not imparted any distinguishing characteristics or
attributes. Within a particular grade, and with respect to a given variety, commodities coming
from different suppliers, and even different countries or continents, are ready subsitutes for
one another.

Auction. A system of trade in commodities in which prospective buyers and sellers are brought
together under the auspices of an independent auctioneer who invites bids for the products
or produce offered for sale.

Audits. Used in the context of marketing research, audits are systematic counts of the amount of
product which has passed through a warehouse (warehouse withdrawal audit) or retailer
(retail audit).

Augmented Product. The services and benefits which are added to the basic physical product to
enhance its value to the prospective customer.

Boston Consulting Group (BCG) product portfolio analysis. An approach to portfolio analysis
based on the premise that a positive relationship exists between market share and
profitability. These two variable are used to classify products as rising stars, cash cows, sick
dogs and problem children.

Brand. A name, term, symbol, or design or combination of these which is intended to differentiate
products or services from those of competitors.

Brand image. The set of attributes, characteristics and benefits which a brand is perceived to
possess.

Brand loyalty. The tendency to repeatedly buy a particular brand on a high percentage of
possible purchase ocassions..

Breakeven point. The point at which, at a given selling price, sales volumes are just sufficient to
cover the organisations fixed and variable costs.

Brokers. Individuals or organisations which do not take title to goods but facilitate distribution by
bringing buyers and sellers together. Brokers earn a commission for informing buyers of
possible sellers; and informing sellers of possible buyers. Clients use the services of a
broker intermittently since their supply of the product to the market is intermittent.

Business policy. A coherent set of rules established to guide managers in their decision making
by prescribing the boundaries of the alternative courses of action leaves open to him/her
within a defined set of circumstances.
Cannibalization. Where the sales of a new product are gained at the expense of the marketing
organisations existing products.

Cash cows. Products which enjoy a high market share, in a low growth market and that generate
large cash inflows. The owner of the product milks the revenues from this cash generator to
finance other products within its portfolio.

Change agent. An individual who purposively seeks to bring about a change in the behaviour of
a target group of people in a direction deemed desirable by a change agency.

Channel of distribution. The set of individuals and organisations which facilitate the transferring
title to goods or services as these pass from the producer to the user.

Cognitive dissonance. An uncomfortable psychological state resulting from differences between

expectations and experience. In the context of product marketing, cognitive dissonance
arises when a buyer's experience of the performance of a product fails to match up to prior
expectations of the performance of that product.

Commodities. (See agricultural commodities).

Competitive parity method. A system of setting budgets for marketing communications in which
the strategy is to match the expenditures of immediate competitors.

Connotative brand names. Brand names designed to conjure up certain images in the mind of
the prospective customer. An example would be ‘Tropical Paradise Fruit Juice’, which might
conjure up images of sun drenched, exotic places as well as fun, luxury, exclusivity etc.

Core benefit. The need which a product fulfills or the problem which it solves.

Corporate strategy. An articulation of an organisation's overall objectives and the means by

which these are to be met. Corporate strategy is usually stated in such a way as to convey
the reason for an organisation's existence i.e. its mission and the business it is in or wishes
to be in.

Cost per thousand (CPM). The cost of reaching one thousand members of the target market
with a particular advertisement or promotional activity, this measurement is commonly used
in the selection of appropriate media.

Culture. The mechanism by which each society evolves its distinctive behavioural patterns and
values and transmits these to subsequent generations.

Dairy panel. A sample of households or individuals who agree to maintain a written record of
product/service consumption and/or usage for a prescribed period of time. The diaries are
periodically inspected by marketing researchers.

Demographics. Objective characteristics used to describe populations, such as age, income,

education and geographical location. Demographic variables are commonly used in
marketing for the purposes of market segmentation.

Denotative brand names. Brand names which are literal and explicit in conveying some tangible
characteristic of the product. An example would be ‘Sweet Cure Bacon’ which denotes a
bacon with a sweet taste.
Differentiated marketing. The strategy of pursuing several market segments with particular
marketing mixes tailored to the needs of each segment.

Direct product profitability. The allocation of all distribution costs to specific products then
comparing these against standard costs with a view to identifying and eradicating
inefficiencies within the distribution system. In addition, since DPP has the potential to
pinpoint the costs of delivering specific products to specific customers, it also has the
potential to help in devising cost effective marketing strategies.

Distribution Requirement Planning. The application of the techniques of Manufacturing

Resource Planning to warehousing and transportation activities.

Distribution intensity. See intensity of distribution.

Economic efficiency. The product of allocational and operational efficiency. Allocating resources
on the bases of opportunity cost increases the value of current output. Operational efficiency
is increased when unit costs of production are minimised through efficient management and
the adoption of the appropriate technology

Economic order quantity (EOQ). The optimal size of order to place at which the sum of the
order processing costs plus inventory carrying costs result in the minimum total inventory
costs.

Economic stabilisation programmes. See stabilisation programmes.

Economic structural adjustment programmes (ESAPs). See structural adjustment

programmes.

Economies of scale. Increased efficiency of operations and the multiple use of resources lowers
average variable costs and, in consequence, average total costs.

Elasticity of demand. Price elasticity of demand is a measure of the responsiveness of buyers to

price changes. Income elasticity of demand reflects the extent to which demand is affected
by changes in income levels. Cross-elasticities indicate the impact of a change in the price
of good A on the demand for good B.

Elasticity of supply. A measure of the responsiveness of producers to price changes. Cross-

elasticities indicate the impact of a change in the price of good A on the supply of good B.

Elevator. (See grain elevator).

Equilibrium point. The price at which the quantity supplied by sellers equates to the quantity
demanded by buyers.

Exclusive distribution. An extreme form of selective distribution in which intermediaries are

granted the exclusive right distribute a product within in a geographic region.

Extensive distribution. Making the product or service available in as many distributive outlets as

an organisation's resources will allow.

Family brands. The assignment of the same or similar names to several products made by the
same enterprise in which the name of the enterprise is often employed.
Fixed Costs. Those costs whose level is wholly independent of the level of production.

Fixed-sum-per-unit method. A method of setting marketing communications budgets as a

specified sum of money per unit sold or produced.

General electric product portfolio analysis. An approach to product portfolio analysis which
includes variables such as ease of competitive entry, production efficiencies, ability to exploit
market opportunities and market attractiveness.

Generic products. Unbranded products.

Grain elevator. A granary, equipped to handle and store grain. Many grain elevators are also
equipped to clean and grade the grain.

Harvesting strategy. An attempt to reap short-term profits, from a product, by reducing its
marketing and production costs to a minimum before withdrawing it from the market.

Hierarchy of effects. That sequence of cognitive, affective and connotative psychological states

through which a potential buyer is said to proceed before purchasing.

Horizontal marketing systems. Systems in which two or more unrelated companies, at the

same channel level, combine resources and expertise in order that the partners can achieve
some goal that individually they could not.

Impulse purchase. Purchases which have not been pre-planned but are made as an immediate
response to exposure to the product or service.

Industrial marketing. The marketing of goods and services that are used as inputs to a
production process. Thus, demand for industrial goods and services is derived from the
demand for the goods or services which they are used to produce.

Intensity of distribution. That proportion of all available distributive outlets through which an

enterprise actually distributes its product(s) or services. The distribution of a product or
service may be extensive, intensive or selective.

Inventory carrying costs. Those costs wholly due to carrying a given amount of stock, including:
storage charges, interest on capital invested in stocks, insurance, taxes, shrinkage and
opportunity costs

Just-In-Time (JIT). A system of materials management intended to ensures that components

and raw materials arrive at the manufacturer's or processor's factory at the precise time they
are required for production or processing. JIT can also be applied to the control of finished
products ensuring that they arrive at a sales outlet close to the time when they are expected
to be sold.

Life style. (See psychographics).

Load planning. A systematic approach to matching customer orders to the available transport
facilities with a view to controlling costs whilst achieving an acceptable level of customer
service.

Logistics. Marketing logistics relate to the cost effective, physical distribution of goods and
services to intermediaries, final buyers and end-users.
Marketing audit. A periodic and rigorous review of marketing policies, strategies and tactics with
a view to assessing their appropriateness to the prevailing and future marketing conditions
and opportunities.

Marketing board. A grower organisation, government agency and/or statutory organisation

having the function of intervening in the marketing process with a view to serving the cause
of efficient and orderly marketing.

Marketing concept. A business philosophy which places emphasis on achieving organizational

goals through the identification and satisfaction of customer needs.

Market niche. A small homogenous segment of the market with special needs or characteristics
that can be profitably met by organisations who have limited resources and cannot directly
challenge market leaders.

Marketing environment. Forces which impinge upon an organisation's business activities that
are outwith the direct control of that organisation (e.g. macroeconomic trends, political
initiatives, regulatory frameworks, demographic patterns and cultural norms).

Marketing information system. The bringing together of people, technology and procedures

with the purpose of collecting data from the marketing environment, as well as from within
the organisation itself, and converting this into information to improve marketing decisions.

Market segmentation. The process of subdividing large heterogeneous populations, with

disparate needs, into smaller more homogenous groups with similar needs in order that
market offerings can be closely matched to these needs. Those segments which an
enterprise elects to serve are termed ‘target markets’.

Marketing mix. The combining of those marketing variables over which an organisation has
control in such a way as to achieve its business objectives within a target market.

Marketing planning. That set of management activities involving the setting of marketing

objectives, designing and implementing a programme to achieve these objectives and a
monitoring and control mechanism to ascertain whether the planned programme is on track
or has achieved its desired objectives. Marketing planning is a principal component of
corporate strategy.

Market prices. Prices which have been determined by the unimpeded (free market) interactions
between supply and demand.

Markov chain models. A way of describing a phenomenon moving from one state to another.
These probabilistic models are used by marketers to describe and predict the movement of
buyers from one brand to another.

Mark-on (or Margin). The per unit profit expressed as a percentage of the selling price of the
unit.

Mark-up. The per unit profit expressed as a percentage of the cost of the unit.

Marginal analysis. A technique used to determine the point at which marginal revenues equal
marginal costs and give rise to maximum profits.
Marginal cost. The amount by which one additional unit of production increases total variable
cost and, therefore, total costs.

Marginal revenue. The additional revenue obtained from supplying one more unit of a product.

Materials management. Management of physical supply operations such as procurement, the

storage and movement of raw materials to and through processing and into a finished
product.

Materials requirement planning. A computerised inventory control system based on the

Japanese Kanban card system. It is intended to minimise the investment in
manufacturing/processing materials and components, consistent with matching production
levels to current demand.

Motive. An impulse to act in such a way as to bring about the meeting of a specific need.

Need. A perceived difference between an ideal state and some desired state which is sufficiently
large and important to stimulate a behavioral reaction.

Objective-and-task method. An approach to the setting of marketing communication budgets in

which the organisation begins by specifying its communication objectives and then
estimates how much it will cost to achieve those objectives.

Order processing costs. Those costs associated with the administration of placing orders,
shipping and good inward controls.

Penetrating the market. Profit objectives are achieved through gaining a sizeable sales volume
and a modest margin rather than having a large margin per unit.

Percentage-of-sales method. The practice of setting marketing communications budgets as a

percentage of either last year's sales or forecasted sales for next year.

Personal selling. Direct and personal approaches to potential customers with a view to

persuading the individual or organisation to purchase the product or service.

Physical distribution. That set of activities concerned with the efficient flow of raw materials, in-
process inventory, and finished goods from source to point-of-consumption in such a way as
to profitably meet customer needs.

Price spread. The price spread measures the gross percentage of the final retail price which
accrues to each category of participant in a marketing system in return for the marketing
services which they perform.

Primary research. Primary research is that which has been specifically designed to address
particular marketing problems or questions.

Product class. The collective set of brands of a product or service, available on the market to
met a particular basic need.

Product life cycle (PLC). The phases of a product's life span introduction, growth, maturity and
decline.
Product line. A group of products whose relationship is based on the similarity of their function,
target market, distribution channel(s) and/or their price range.

Product differentiation. The process of convincing the potential customer that a company's

product differs significantly and in some superior way to that of other products seeking to
meet customer needs within the same market segment.

Promotion. Promotion is the function of informing, persuading and influencing the customers'
purchase decision.

Psychographics. Variables such as social class, personality and life style (attitudes, interests
and opinions) which can be used to segment markets.

Public relations. Activities intended to create a favourable image of an organisation among its

publics and to foster mutual understanding between the two. An organisation's publics
includes any group having an actual or potential interest in, or impact upon, an
organisation's prospects of achieving its goals.

Pull Strategy. Where the majority of the marketing effort is directed at end users in the hope that
the resultant demand will be strong enough to pull the product through the channel of
distribution.

Push strategy. Where the greater part of the marketing effort is directed at intermediaries in an
attempt to persuaded channel members to push the product through the channel from
producers to end users.

Residual-sum method. The determination of marketing communications budgets on the basis of

what the organisation perceives itself to be able to afford after all other budgets have been
set.

Revenue pooling. Where the product is sold at market prices, but revenues are pooled before
being disbursed to producers, processors and/or middlemen. The system results in all
parties in the scheme receiving the same price.

Sales agents. Sales agents do not take title to the goods but bring buyers and sellers together.
Sales agents often have close, long term relations with particular clients and sell on their
behalf in return for a commission. The sales agent behaves as an extension of the client's
own sales organisation.

Sales promotion. Incentives intended to encourage immediate sales of a products or services.

The effects of promotion are characteristically short term and therefore sales promotion is a
tactical marketing instrument.

Selective distribution. The appointing of a limited number of specially selected retailers, or other
middlemen to distribute a product line.

Secondary research. This term describes data which has been collected by individuals or
agencies for purposes other than those of a given research study.

Shrinkage. Losses in the value of stocks held due to spoilage, deterioration, or pilfering during
storage and/or transportation.
Skimming the market. Profit objectives are achieved through a sizeable margin per unit rather
than by maximising sales volumes.

Social marketing. The process of identifying human needs in non-competitive economies and/or
sectors of society and determining the means of efficiently and effectively delivering
products and services to meet these needs.

Stabilisation programmes. IMF sponsored economic recovery programmes intended to

stimulate the demand side of the economy. Stabilisation policies work to reduce a country's
expenditure levels to match national income. They provide the economic stability necessary
before increased growth can be achieved. The policy instruments typically employed in the
pursuit of economic stabilisation are: exchange rate policy, fiscal policy and monetary policy.

Stakeholders. Those individuals or groups who affect and/or are affected by, the operations of
the organisation including, consumers, members of the channel of distribution channel,
suppliers, the general public, shareholders and government.

Stockouts. A failure to fulfill an order from inventory.

Strategic business units (SBUs). A business entity belonging to a larger commercial enterprise
but having its own defined business strategy and whose management has responsibility for
its profits and sales performance. The concept of a strategic business unit has its origins in
large and diversified commercial companies. It was developed as a means of retaining the
vitality of the entrepreneurial spirit by giving management a high degree of responsibility and
autonomy in decision making.

Structural adjustment programmes. A suite of macro-economic policies, sponsored by the

World Bank, designed to improve the structure of production by allocating resources in
accordance with their opportunity cost rather than on any other basis and thereby
maximising the efficiency of resource allocation, increasing the value of current output and
improving the prospects for the rate of growth over time and avoiding the need for subsidies
and taxes in support of the production structure. (Also termed ESAPs or Economic Structural
Adjustment Programmes).

Syndicated research. The collection of marketing data using standardised procedures which is
then sold to a number of different clients.

Tactics. The pursuance of a marketing plan to achieve short term objectives.

Tangible product. The physical features and characteristics perceived through the 5 senses -
touch, smell, taste, vision and hearing.

Target market. Those segments of a market which an organisation decides it will attempt to
serve. Each target group of customers has similar needs and/or characteristics and if
successfully penetrated will help the organisation achieve its marketing objectives. (see also
‘market segments’).

Test market. The trial launch of a new product or service into a confined geographical area or
market segment with the purpose of testing the performance of the proposed marketing mix
prior to the full scale market introduction.

Tied-agreements. Agreement whereby an intermediary wishing to become the exclusive dealer

for a given product must also carry others within the supplier's product line.
Trademark. A brand or part of a brand that to which a seller has a legally enforceable, exclusive,
right to use.

Trading up. The process of moving consumption to higher priced versions of a product.

Uniformed delivered pricing. Where all buyers pay the same price for the product irrespective
of differences in their physical distance from the source of supply

Universal Product Code (UPC). A set of numbered vertical bars appearing on the labels or
packs of goods and which can be read by scanner systems. These numbers and bars
constitute a code containing such information as country of origin, supplier, product
category, product size, pack type and price.

Variable costs. Those costs which vary directly with the level of production.

Vehicle scheduling models. Mathematical models which help management route transport
vehicles in such a way as to minimise both the time taken to make deliveries and total
transport costs of deliveries. Examples of mathematical models are; the savings method, the
simplified delivery service model and TRANSIT.

Vertical marketing systems. A system in which the producer(s), wholesaler(s) and retailer(s) act
as a unified system with a resultant increase in efficiency of the system through the removal
of duplicated services, economies of scale and reductions in potential conflicts of interest.

Wholesalers. Intermediaries acting to make marketing systems more efficient by buying a variety
of products, in fairly large quantities, and selling these items on to other businesses who
require relatively small quantities of a variety of goods.

Zone pricing. A pricing scheme which results in all customers within a defined geographical area
paying the same price with different prices being paid by customers located in other
geographical areas.