Fundamentals of Marketing 1

Unit 02 (Part 2)
AGM4307 – Economics & Marketing for Engineers

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 Marketing Vs. sales
Marketing Selling
Try to satisfy consumers according to their Try to convince the customer to sell what a
needs and wants. company produce.

Much broad and dynamic process. A narrow process

Revolves around needs and wants of Revolves around needs and wants of
customer sellers.

An outside-in strategy. An inside- out strategy.

Creates pull the consumers based on their Try to push the consumers according to
needs and wants. sellers’ desire.

Marketing is a process from the concept to Selling is a result of marketing.

customer satisfaction.

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Marketing Mix
• Marketing mix is the set of marketing tools.
• It describing the strategic position of a product in the market place,
and used by the firm to pursue its marketing objectives in the target
market.
• 4 Ps are variables that marketing managers can control in order to
best satisfy customers in the target market.
• Product
• Price
• Place
• Promotion

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 Components of 4Ps
Marketing Mix Component Description
Product Functionality The purpose of the product
Appearance The impression of consumers by seeing
Quality The capacity to meet consumer need
Packaging The science, art and technology of enclosing or protecting products for
distribution, storage, sale, and usage.
Brand Creating a name, symbol or design that identifies and differentiates a product
from other products.
Warranty The promise given to consumers to stand behind the product
Service/ support The delivery of the product and after sale services
Price List price The retail selling price recommended by the manufacturer
Discounts A price which is lower than the original price
Allowances a reduction in the price charged by a seller, due to a problem with the sold
product or service
Financing/Leasing A contract by which an owner grants a second party the right to use for a
particular period under specified conditions 4
Marketing Mix Component Description
Place Channel members The persons involved in the process of getting products or services to the end
users
Channel Motivation of channel members to stock and marketing of a product or service
motivation
Market coverage How wide and varied a product should be distributed
Logistics The planning, delivering and controlling the flow of goods and services to the
market
Promotion Advertising Bringing products or services to the attention of current and potential customers.
Personal selling Using people to sell their product after summit in the flesh with the customer.
Public relations Carrying out publicity of information about a firm’s products and services by a
third party
Message A clear message targeted to a certain audience done through appropriate
channels
Media Any kind of media used promotion
Budget A special amount of money set aside for promotion

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• To achieve marketing objectives, need to have a strategy that includes different elements
of the various parts of the marketing mix.
• We have to get the balance between the different elements.
• When one part of the mix gets wrong, in fact the others also get wrong.
• For example, if the service of a newly-priced commodity is poor
• change the service, or
• deliver it in a way that is more convenient to the user, or
• improve the quality of the promotion rather than to cut the price

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 Product
• The term product refers to tangible physical products or services that offer to the
customer.
• Characteristics of product or service is to meet the customers’ needs and wants.
• The product has intangible components too which will be an added value to the product.
• Ex: brand name, functionality, etc....
• There are three levels of a product.
• Ex: A car, the external appearance or the body shape, colour, or maker, which satisfy you
is not tangible, and this level of product is called the core product.
• Then the tangible level of product, the car you buy, and use is the actual product.
• It should meet safety, the safety standards and should get the approval for producing and
releasing to the market. this level of the product is called augmented product.

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 Price

• Price decisions should take in to account profit margins and the probable
pricing response of competitors.
• Price decides on a pricing strategy.
• Even if you decide not to charge for a service, it is useful to realize that this is
still a pricing strategy.
• There are four major strategies of pricing a product.

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• Premium pricing is used when a substantial competitive
advantage exists and there is a uniqueness about the
product or service.
• luxury products or services.
• Penetration pricing is adopted when there is a need of
market penetration of a new product.
• Set the price artificially low, in order to gain market share.
• In economy pricing, the cost of marketing and manufacture
are kept at a minimum.
• Supermarkets often have economy brands for some food
products.
• Price skimming is adopted when there is a high price and
low-quality products, because you have a substantial
competitive advantage.
• The high price tends to attract new competitors into the
market, and the price inevitably falls due to increased supply.

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 Promotion
• This represents the various aspects or tools available for marketing communication.
• The goal is to generate a positive response from the customer.
• Marketing promotion includes promotional strategy, advertising, etc......
• The marketing communication refers to the strategies adopted by the producers to
convey messages about the products and the brands they sell (directly or indirectly) to
the customers.
• Marketing communication has its own “promotion mix”.

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 Promotion mix
• Personal selling
• This is an effective way to manage personal customer relationship.
• The sales person acts on behalf of the organization.
• They are well trained to the approaches and techniques of personal selling.
• It is very costly.
• Sales promotion
• Promote something with “buy one and get one free” strategy, money-off promotions,
competitions, free accessories (such as free spoon with a packet of milk powder)
• The promotion strategy selected should be carefully analyzed and compared with the next
best alternative/opportunity cost.
• Public relation (PR)
• PR is defined by many professionals as a deliberate, planned and sustained effort to
establish and maintain mutual understanding between an organization and its publics.
• It is relatively cheap.
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• Direct mail
• Creative agencies work with marketers to design a highly focused communication in
the form of the mailing.
• The mailing is sent to the potential consumers and responses are carefully
monitored.
• Ex. If you market medical text books, you would use a database of Doctors.
• Trade fairs and exhibitions
• Such approaches are very good for making new contacts and renewing old ones.
Although there will not be much sales at these events, companies get involved in
that to increase awareness.
• Advertising
• Its “paid communication”.
• It is used to develop attitudes, create awareness and transmit information in-order
to gain response from the target audience.
• advertising media are; newspapers, magazines, journals, television, outdoor
advertising
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 Place
• This explains the distribution or looking at the places, where a service is delivered and the channels of
distribution.
• Ex: a vegetable producer should think about the places such as super markets, retail shops, or selling in to
individual houses
• In distribution, should be more considerations on,
• distribution channel member, inventory management, warehousing, description, order processing,
transportation, reverse logistics.
• Channel intermediaries play a vital role in providing place utility of products by providing important facilities.
• Whole sellers mainly provide storage facilities and breakdown the bulk into smaller packages for resale.
• Agents will secure orders from producers and they are helpful in international marketing.
• Retailers have a better relationship with the consumers and they will display several brands and products for
the consumer to select.
• The e-commerce technology is used here for payments and shopping. It is direct marketing channel and
without involving an intermediates.

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The extended marketing mix
• There is another classification with seven P’s to include people, Physical evidence (such as uniforms,
facilities or livery) and Process (the whole customer experience).

People
• People are the most important element of any service.
• People buy products from people that they like.
• The staff needs to be trained and delivered to maintain a good quality service.
• There are different kinds of sales persons.
• Internal sales persons - takes the orders by telephone, email or over a counter
• External sales persons - in the field.
• Missionary sales persons - promote faith. They builds goodwill with customers.
• Technical sales person - Their in-depth knowledge supports them
• creative sellers

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Physical evidence
• This is the material part of a service and when the customer has no way to rely on
physical attributes of the services.
• EX: packaging, Internet/Web Pages, paper work such as invoices

Process
• It is the way in which the user gets hold of the service.
• EX; Booking a flight on the Internet - the process begins with you visiting an airline's website. You
enter details of your flights and book them. Your ticket/booking reference arrives by e-mail or
post. You catch your flight on time and arrive refreshed at your destination. This is all part of the
marketing process.
• marketing has a number of processes that integrate together to create an overall marketing
process.
Ex: telemarketing and Internet marketing can be integrated.

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Four “C’s
• The newest way of explaining marketing mix.
• Place becomes Convenience
• Price becomes Cost to the user
• Promotion becomes Communication
• Product becomes Customer needs and wants
• These C's reflect a more client-oriented marketing philosophy.

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Fundamentals of Marketing II

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The Product Life Cycle (PLC)

• It is a normative and descriptive model for the life of products in general.

• Each individual product will experience its own variation.
• The PLC goes through many phases and involves many professional disciplines and
requires many skills, tools and processes.
• From a management point of view, the product life cycle concept is useful in that it
focuses our attention on future sales pattern to take corrective action.

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Stages in the Product Life Cycle
Introduction stage
• Product life cycle follows a period of many years of
research and product development by one or more
organizations.
• Other competitors may enter during the
introduction phase and jointly share the market
development task.
• If the product price is high relative to alternatives,
then the introduction phases may be long.
• Specific characters of market introduction stage:
• High cost
• Low sales volume
• No/little competition
• Demand has to be created
• Customers have to be encouraged to try the
product
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Early growth stage
• In this phase increasing sales and increasing rate of growth of sales.
• This phase tends to attract competitors and by their marketing efforts help to increase the
sales growth.
• The early growth phase is not a period of intense competition.
Late growth stage
• While sales continue to rise in that phase, the rate of growth decreases and by the end of the
period sales growth has dropped to near zero.
• In this phase the stronger competitors tend to initiate tough competitive actions to retain their
sales growth.
• Specific characters of growth stage:
• costs reduced due to economies of scale
• sales volume increases significantly
• Profitability
• public awareness
• competition begins to increase with a few new players in establishing market
• prices to maximize market share

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 Maturity stage

• The maturity phase commences with a termination of sales growth, and sales remain
relatively constant.
• Pricing tend to be competitive and market rely more on packaging and promotional
strategies than on basic product differentiation.
• It is difficult to enter a market in the maturity phase.
• Characters of maturity stage
• Costs are very low as you are well established in market & no need for publicity
• Sales volume peaks
• Increase in competitive offerings
• Prices tend to drop due to the proliferation of competing products
• Brand differentiation, feature diversification, as each player seeks to differentiate from
competition with "how much product" is offered
• Industrial profits go down

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Decline stage
• If the product is at the maturity stage, eventually sales begin to turn
downwards, and the product enters its decline phase.
• In general, marketing expenditure drops in the decline phase as competitors
reduce support for declining products.
• Advertising may move out of mass media towards more specialized media in
an effort to target more directly remaining consumers and reduce advertising
costs.
• Characters of decline stage
• costs become counter-optimal
• sales volume decline or stabilize
• prices, profitability diminish
• profit becomes more a challenge of production/distribution efficiency than increased sales

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• However, some products which come
to the maturity stage and after that
start declining.
• They fail to exist in the market and
then withdrew.

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New product development
• SWOT analysis is a useful way of auditing the overall state of affairs of the company.
Because any form of product or market development is increased the risk.
• SWOT - Strengths, Weaknesses, Opportunities and Threats
• These factors can be basically two, which are internal factors and external factors.
• Internal factors are the company’s basic Strengths and Weakness, which can be easily
predicted and managed by the managers.
• The external factors are the opportunities and threats facing the company coming from
the external environment.
• Ex: staff capacity and commitment, a good reputation in a market and high customer loyalty
can be seen as strength.
• large number of products in the decline stage of their product life cycles is a weakness.
• Possible under developed market, new markets, and a new method to distribute the product
can be considered as opportunities.
• Increasing competition, low growth rate of the market, competitors’ concentration on
achieving the market economics of scale can be seen as threats.
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The Ansoff Matrix

• The Ansoff matrix was first created and introduced by Igor Ansoff.
• It’s a marketing tool called Product-Market Growth Matrix.
• It has given small business leaders a quick and simple way to develop a
strategic approach to growth.
• The matrix allows marketers to consider ways to grow the business via existing
and/or new products, in existing and/or new markets – there are four possible
product/market combinations.
• This matrix helps companies decide what course of action should be taken
given current performance.

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 Market Penetration (Existing markets, Existing
products)
• It is focuses on selling existing products into
existing markets.
• Trying to sell more of the same things to the
same people.
• The best way to achieve this is by gaining
competitors' customers (Buy a competitor
company, particularly in mature markets) or part
of their market share.
• Other ways, attracting non-users of your product
or convincing current clients to use more of your
product/service.
• It is the least risky way for a company to grow.

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 Market Development (New markets, Existing products)

• Market development is seeks to sell its existing products into new markets.
• An established product in the market place can be targeted to a different customer
segment, as a strategy to earn more revenue for the firm.
• possible ways of approaching this strategy
• New geographical markets; for example, exporting the product to a new country
• New product dimensions or packaging
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
• Use different sales channels, such as online or direct sales if you are currently selling through
the trade
• Target different groups of people, perhaps different age groups, genders or demographic
profiles from your normal customers

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Product Development (Existing markets, New products)

• Business aims to introduce new products into existing markets

• Ex: McDonalds is always within the fast-food industry, but frequently produce new
burgers. when a firm creates new products, it can gain new customers for these
products. Hence, new product development can be a crucial business development
strategy for firms to stay competitive
• Extend your product by producing different variants, or packaging existing products it in
new ways
• Develop related products or services
• In a service industry, increase your time to market, customer service levels, or quality
Diversification (New markets, New products)
• This is an inherently more risk strategy because the business is moving into markets in
which it has little or no experience.

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The Nine Box Grid
• Some marketers use a nine-box grid for a
more sophisticated analysis.
• This adds “modified” products between
existing and new ones (for example, a
different flavor of your existing pasta
sauce rather than launching a soup), and
“expanded” markets between existing and
new ones (for example, opening another
store in a nearby town, rather than going
into online sales).

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