KYAMBOGO UNIVERSITY

SCHOOL OF MANAGEMENT AND ENTREPRENEURSHIP

Course Name : MMS 2103: MARKETING MANAGEMENT
Course Credit : 3 CU

Course description
The course is aimed at enabling the students acquire the skills in managing
marketing activities, ethics and growth of businesses. This course is to re-
orientate the students in application of marketing to both profit and non-profit
making organization
Course objectives
 Highlight the essential concepts and techniques in marketing
 To enable the students to appreciate the role played by marketing creating
and retaining customers.
The course content
A. DEFINING MARKETING AND MARKETING PROCESS
 Marketing management defined & analyzed
 The marketing process
 Understanding the marketplace and customer needs and wants
 Design customer driven strategy
 Construct marketing program that delivers superior value
 Build relationships and create customer delight
 Capture value from customers to create profits and customer quality

B. UNDERSTANDING THE MARKET PLACE AND CONSUMERS

Analyzing Marketing environment
 Micro-environment (company, suppliers, marketing intermediaries,
customers, competitors and publics)
 Macro environment (demography, economic, natural, technological, political
& cultural)

Managing Marketing Information and research

 Definition and meaning of marketing research
 Role of marketing information in marketing planning
 Developing marketing information (internal data and marketing
intelligence).
 Marketing research process
 The database and CRM
 Challenges in marketing research
Consumer markets and Consumer Buyer behavior
 Definition and rationale of consumer buyer behavior

1
  Factors/characteristics affecting consumer behavior (cultural, social,
personal and psychological factors)
 Types of buying decision behavior
 The buyer decision process
 The buyer decision process for new products (stages in the adoption
process, individual differences in innovativeness and influences on the rate
of adoption)
 Importance of understanding the behavior of a consumer

C. DESIGNING A CUSTOMER-DRIVEN MARKETING STRATEGY AND

MARKETING MIX

Segmentation, Targeting, and Positioning: Building the Right Relationships

with the right customers;
 Market segmentation
 Definition and benefits of segmentation
 Segmenting consumer markets
 Requirements for effective segmentation
 Target marketing
 Definition and Meaning
 Strategies of target marketing
 Market positioning
 Definition and meaning
 Choosing positioning strategy
Product Strategy
 Definition of a product
 Levels of a products and services
 Classification of marketing products
 New product development, types of new products, reason for new product
planning process
 Growth of products - product life cycle (PLC) - extending the lives of mature
product and strategic product deletion
 Branding, labeling, packaging and their importance
 Services marketing
 Nature and characteristics of a service
 Marketing strategies for service firms
Pricing Products
 Nature and meaning of pricing
 Factors consider when setting prices
 General Pricing Approaches
 New-product pricing strategies
Product distribution (place)
 Development and structure of distributive outlets
 Wholesaling and retailing functions
 Relationships between producers, distributors and customers
 Changes in the distribution
 Physical distribution, management and logistics, role of agents

2
  Factors affecting channel choice
 Distribution costs
 The significance of integration distribution channels
Product promotion (Marketing communication)
 Element of the promotional mix
 Promotion planning
 Importance of promotion
Other four P’s of marketing that apply to services
 People
 Process
 Physical evidence
 Performance and quality

Mode of delivery
Lectures, group discussion and tutorials

Assessment

Course Work and Tests……………………………………….………………………...40%

Final Examination……………………………………………..…………………………60%

References
1. Relnart & Werner (2002), Mgt of customer loyalty, Harvard college, USA
2. Dibb Sally et al (2011) Marketing Management, Pitman, London
3. Kotler & Armstrong (2006), Principles of Mgt. 11 th Edition, McGrawhill,
Minnesota.
4. Journal articles in marketing
5. Housden Mathew (2010), Market information and Research, Elsevier Ltd,
London

3
 MARKETING MANAGEMENT
Marketing is typically the task or function of creating, promoting, and delivering
goods and services to consumers and businesses. Marketers are skilled in
stimulating demand for a company’s products, but this is too limited a view of the
tasks marketers perform. Just as production and logistics professionals are
responsible for supply management, marketers are responsible for demand
management. Marketing managers seek to influence the level, timing, and
composition of demand to meet the organization’s objectives. Marketers today are
involved in marketing ten (10) types of entities which goods, services, experiences,
events, persons, places, properties, organizations, information, and ideas. Goods
and services contribute to the bulk of most countries’ production and marketing
efforts

DEFINITIONS OF MARKETING
Marketing primarily refers to a total system of business activities designed to
plan, price, promote and distribute goods and services to the present and
potential customers. Thus, it covers the functions of product planning and
development, pricing, advertising and distribution.

According to Kotler & Armstrong (2006), Marketing broadly is defined as a

social and managerial process by which individuals and groups obtain what they
need and want through creating and exchanging products and services of value
with others.
In a narrow sense marketing is defined as a process by which companies create
value for customers and build strong customer relationships in order to capture
value from customers in return.

The American Marketing Association offers the following definition: an

organizational function and a set of process for creating, communicating and
delivering value to customers and managing customer relationships in ways that
benefit the organization and its stakeholders

The Marketing Society (2008) defines marketing as’ The creation of customer
demand, which is the only sustainable form of growth in business’.

Chartered Institute of Marketing (2010)……Marketing is the strategic business

function that creates value by stimulating, facilitating and fulfilling customer
demand. It does this by building brands, nurturing innovation, developing
relationships, creating good customer service communicating benefits. By
operating customer-centrically, marketing brings positive return on investment,
satisfies shareholders and stakeholders from business and the community, and
contributes to positive behavioral change and a sustainable business future.

According to Peter Drucker; a U S Management guru provides that the main role
of marketing is to make selling superfluous. The aim is to know and to
understand the customer so well that the product or service fits him/her and
sells itself! With an understanding of these aspects of the market place, a

4
business must then develop a marketing strategy. This means that each group of
customers may then be offered a specifically tailored product or service
proposition and a marketing mix program.

Marketing can also be looked at in terms of managing business relationships that

should be long-term and sustainable. Other scholars define marketing as a
management process that identifies, anticipates, and satisfies customers’ needs
profitably. Hence, business organizations cannot exist if there are no human
needs and wants to satisfy.

There are many definitions of marketing, since it is not a pure science. However,
certain core ingredients of the various definitions collectively indicate the basic
priorities of marketing.
 Presence of needs, wants and demands;
 Satisfying customers
 Identifying/maximizing and marketing opportunities
 Targeting the “right” customers
 Facilitating exchange relationships
 Staying ahead in dynamic environments
 Endeavoring to beat or pre-empt competitors
 Utilizing resources/assets effectively
 Increasing market share
 Enhancing profitability
 Presence of products (goods, services, ideas);
 Presence of value, costs and satisfaction;
 Presence of relationships and networks;
 Presence of markets (sets of actual and potential customers of products;
and
 Presence of marketers and prospects/potential buyers.

Functions of marketing:
These include:
i. Satisfying customer expectations: We work constantly towards identifying
and satisfying customer needs. Our success is based on thorough
research of the range of products/services that our customers need. The
knowledge which we gain is translated into our range of quality
products/services which satisfy these needs better than any of our
competitors.
ii. Generating income/profit: Marketing is responsible for identifying
opportunities which enable goods/services to be sold in order to bring
income into organizations and to enable them to make profits. Without
profits an organization cannot afford to modernize itself, install new
technologies or take commercial ventures that will offer a new range of
products/services. Profit is a measure of how good a business is, how
well-run and how effectively it meets its responsibilities to the owners,
customers, staff and the community.
iii. Maximizing benefit to the organization: Marketing sets out to enable an
organization to be successful. Success brings a host/number of benefits to
5
 the organization. The organization that is successful develops a good
public image, people are keen to work for such organization, the
organization can afford to give better rewards to employees, it can afford to
undertake research and development and finally the organization is able to
make a contribution to the wider society.
iv. Managing effects of change and competition: Marketing in any
organization must constantly seek to enable the organization to manage
the effects of change and competition by coming up with new
products/services, advertising campaigns, price alterations, special offers
etc. From time to time new products will arrive in the market which is
different from existing brands. If such products are successful this will
lead to a number of business activities as existing producers try to come
up with rival versions, all this requires careful marketing management.
v. Coordinating activities to achieve marketing aims: Every organization
needs to have clear goals and a major plan to achieving organizational
goals and this is done through a strategy. Marketing can be seen as the
process of developing and implementing a strategy to plan and coordinate
ways of identifying, anticipating and satisfying consumer demands, in
such a way as to make profits. Putting a marketing policy into practice
and coordinating it can be viewed as an ongoing cycle of activities.
vi. Ensuring the survival of the business: No business can survive for any
length of time without successful marketing. That is why marketing is
looked at as a focal point of business i.e. the function which has
responsibility for directing and securing the long-term viability of an
organization. All this will be possible if there is customer satisfaction and
customers appreciate your product/service offer.

From the figure above, the marketing process involves the steps, thus;

1) Understanding the marketplace and customer needs and wants

2) Design a customer-driven marketing strategy
3) Construct a marketing program that delivers superior value
4) Building profitable relationships and create customer delight
6
 5) Capture value from customers to create profits and customer quality.

1) UNDERSTANDING THE MARKET PLACE AND CUSTOMER NEEDS AND

WANTS
As a first step, marketers need to understand customer’s needs and wants and
the market place with in which they operate. We now examine core customer and
marketplace concepts

I. Needs
A human need is a state of felt deprivation; a special want that we must have to
survive. These needs fall in different categories which range from basic needs
such as food, clothing, and shelter to needs for survival, needs for belongingness
and self-actualization needs. These needs are not created by marketers; they are
basic part of the human makeup.
II. Wants
These are objects or items that customers would like to have, that will satisfy the
needs e.g. a thirsty person is deprived to drink, which is water, tea, milk, etc
Wants are shaped by one’s society and are described in terms of objects that will
satisfy the needs. Outstanding companies go to great lengths to learn about and
understand their customers’ needs and wants. They conduct consumer research
and analyze mountains of customer data. For example, top managers of Tuskeys
Supermarket; spend at least two days a week at different branches mingling with
customers.
III. Demand
They are wants backed by willingness and ability to pay for them. The marketing
function does not consider how many people may want a given product but also
how many will be able to buy.
Iv. Product
Anything that can be offered to a market to satisfy a need or want. It covers both
physical products which are goods and non-physical products which are services
and experiences. Goods and services are not determined for their own sake but
because of benefits they provide to the consumer.
V. Service
This is an offer made that is essentially intangible and does not result in the
ownership of anything. Examples include; banking, airline, hotel and home
repairs. A service is characterized by;
 Non-ownership
 Inseparability with provider
 Highly perishable
 Variability according to service provider
Many sellers make mistakes of paying more attention to the specific products
they offer than the benefits and experiences offered to a market to satisfy a need
or a want. These sellers will have trouble if a new product comes a long that
serves the customer’s need better or less expensively. The customer will have the
same need but will want the new product. What consumers really want (are
offers) that dazzle their senses, touch their hearts, and stimulate their minds.
vi. Customer Value

7
This is the difference between the values a customer gains from owning and using
a product and the cost of obtaining the product.
vii. Customer Satisfaction
This depends on a products perceived performance in delivering value relating to
these perceptions to the buyers expectations. If the products performance falls
short of customer expectations, the buyer is dissatisfied and vise-versa.
Marketers must be careful to set the right level of expectations. If they set
expectations too low, they may satisfy those who buy but fail to attract enough
buyers. If they raise expectations to high, buyers will be disappointed. Customer
value and customer satisfaction are key building blocks for developing and
managing customer relationships.
viii. Exchange
It is the act of obtaining a desired product from someone by offering something in
return. A marketer tries to bring about response to some marketing offer. For
example, a political candidate wants votes; church wants membership, civil
society group wants idea acceptance.
ix. Transaction
It consists of trade of values between two or more parties one giving and one
receiving.
Marketing consists of actions taken to build and maintain desirable exchange
relationships with target audiences involving product, service, idea or other
object. Beyond attracting new customers and creating transactions, the goal is to
retain customers and grow their businesses with a company.
x. Market
It is a collection of actual and potential buyers having similar needs and they
share common wants. Sellers must search for buyers, identify their needs, design
good marketing offers, set prices for them, promote them, and store and deliver
them. Activities such as product development, research, communication,
distribution, pricing, and service are core marketing activities.
xi. Marketing Mix
The tactical “tool kit’’ of product, distribution/place, price, promotion, physical
evidence, process, performance quality and people that an organization can
control in order to facilitate satisfying exchange.

2) DESIGN A CUSTOMER-DRIVEN MARKETING STRATEGY

To design a winning marketing strategy, the marketing manager must answer two
important questions;
i. What customers will we serve (what is our target market?)
ii. How can we serve these customers best (what is our value proposition?)

I. Selecting customers to serve.

The company must first decide who it intends serve. It does this by dividing the
market into segments of customers (market segmentation) and selecting which
segments it will go after (target marketing). The company will select customers
that it can serve well and profitably. For example, Kampala Casino targets
affluent rich Kampala patrons, Kampala Parents P/S targets children from rich
families, Mukwano products targets customers from modest families.

8
Some markers may seek fewer customers and reduced demand. For, example
UMEME have trouble meeting demand during evenings of working days. In these
periods, they practice de-marketing to reduce the number of customers through
load-shedding.

II. Choosing a value proposition/benefits

The company must also decide how it will serve targeted customers, i.e. How it
will differentiate and position itself in the market place. A company’s value
proposition is the set of benefits or values it promises to deliver to consumers to
satisfy their needs. Geisha promises long lasting like mothers love, Orange
Telecom promises good network in making calls. Such value propositions will
differentiate one brand from one another.

III. Marketing concepts/philosophies/theories/orientations

Marketing management wants to design strategies that will build profitable
relationships with target consumers. But what philosophy should guide these
marketing strategies? What weight should be given to interests of customers, the
organization, and society? Very often, these interests conflict.
There are various philosophies for which an organization can conduct their
marketing strategies. The business philosophies/concepts include the following:
i. Production concept (mass output)
ii. Product concept (quality product)
iii. Selling concept (sales volume)
iv. Marketing concept (customer satisfaction)
v. Customer concept (individualized/customized service); and
vi. Societal marketing concept (society welfare).

The Production Concept

The production concept holds that consumers/customers will favour those
products that are available and highly affordable. Thus, management should
focus on improving production and distribution efficiency. This concept is one of
the oldest philosophies that guided sellers. It was used in late 1800. The concept
emphasizes mass production and low cost per unit.

The concept bases on economies of scale, with the assumption that if products
are available everywhere and are cheap, their availability and cheapness will sell
them. However, you should know that this does not always hold truth due to
changes in the marketing environment. Nevertheless, the production concept can
be useful in two ways:
(a). When demand for a product exceeds the supply, in which case,
management uses the production concept to increase output to meet the
excess demand.
(b). When product costs are too high, in which case, all the customers want is
product availability and affordability.

An example is that of Mukwano Soap industries which follow the same

philosophy; hence, the soap is available and cheap in almost all parts of Uganda,
Nonetheless, this concept does not always apply, as some consumers do not base
their purchases on product availability.
9
The Product Concept
Unlike the production concept that emphasizes mass output, the product concept
holds that consumers will desire products that offer the best quality performance
and innovative features. It emphasizes that business organizations should
devote/dedicate their energy to making continuous product improvements. This
concept was mainly used in early 1900s.

The product philosophy assumes that if the quality of the product is high, its
quality will sell it. You will realize that this too is not always upheld as
consumers/customers have other variables to consider such as the price. This
concept can lead to marketing myopia/shortsightedness, as it tends to overlook
some vital marketing variables such as life style.

You will discover that some manufacturers think that if they can produce better
quality products, all consumers will buy from them. However, many are
sometimes shocked when they see nobody visit them. Consumers behave like this
because they, in addition, need good packaging, fair prices, and conveniently
placed and promoted products. The manufacturers should know that consumers
do not buy products their quality per se, but rather for the solutions they expect
from the products. This leads us to the third concept.

The Selling Concept

This concept holds that consumers will not buy enough of the organization’s
products unless it undertakes a large-scale selling and promotion effort. It was
used mainly between 1920s and 1950s. The philosophy assumes that if the
organization carries out aggressive sales promotion activities, consumers will buy
more of their products. This concept emphasizes sales’ volume regardless of
customer satisfaction.

For example, the sellers of funeral coffins use this concept, since nobody is
satisfied with the death of a relative or friend. Another example of people who use
this concept is that of the sellers of “Always pads” for ladies because they take
advantage of biological nature. The concept is used to sell products regardless of
their quality. Such organizations must be good at tracking down prospects and
convincing them on product benefits.

You will note that the selling concept is also practiced in unprofitable areas like
political party activities. For example, a political party will sell its candidate to the
voters as a fantastic person for the job. The candidate’s flaws/faults/weaknesses
will be hidden from the public because the aim is to have candidate acceptance,
but not to worry about voters’ satisfaction afterwards.

The Marketing Concept

The marketing concept hold that achieving organizational goals depends on
determining the needs and wants of the target markets, by delivering the desired
satisfaction more efficiently and effectively than competitors do. The concept is
one of the most followed at present.
The marketing concept emphasizes consumer satisfaction. This should however,
be done at a profit though profit is not emphasized. The concept begins with
10
finding consumer needs and wants, designing, producing and delivering products
to satisfy the identified needs and wants. The concept assumes that once
products are produced according to previously identified needs and wants, this
alone will sell the products. If other environmental variables are held constant,
this should hold truth for most organizations.

The marketers’ argument for the companies to embrace the marketing concept is
simply as follows:
1. The company’s assets have little value without the existence of customers.
2. The key company task therefore is to attract and retain customers.
3. Customers are attracted through competitively superior offerings and
retained through satisfaction.
4. Marketers’ task is to develop a superior offering and achieve customer
satisfaction.
5. Customer satisfaction is affected by the performance of other departments.
6. Marketing needs to influence these other departments to cooperate in
attaining customer satisfaction.

You will realize that the marketing concept emphasizes customer retention more
than customer attraction as it usually costs more to attract new customers than
to retain current ones. The concept does not mean that a company should try to
give all customers everything they want. However, the company should try to
balance between creating more value for customers against making profits for the
company. Marketing briefly means, “Meeting needs profitably”.

The Customer Concept

Today many companies are moving beyond the marketing Concept to the
customer concept. Whereas companies practicing the marketing concept work at
the level of customer segments, a growing number of today’s companies are now
shaping separate offers, services, and messages to individual customers. Such
companies collect information on each past customer’s transactions,
demographics (age, sex, income, education etc), psychographics (lifestyles, etc.),
and media and distribution preferences. They hope to achieve profitable growth
through capturing a larger share of each customer’s expenditures by building
high customer loyalty and focusing on customer lifetime value.

The ability of the company to deal with customers one at a time has become
practical as a result of advances in factory customization, computers, the
Internet, and database marketing software. Yet the practicing of a one-to-one
marketing concept is not for every company. The required investment in
information collection, hardware, and software may exceed the payout. It works
best for companies that normally collect a greater deal of individual customer
information, carry a lot of products that can be cross-sold, carry products that
need periodic replacement or upgrading and sell products of high value e.g.;
Uganda Breweries Ltd.

The Societal Marketing Concept

Some people have questioned whether the marketing concept is an important
philosophy in an age of environmental deterioration, resource shortages,
11
explosive population growth, world hunger and poverty, and neglected social
services. Are companies that do an excellent job of satisfying customer wants
necessarily acting in the best long-run interests of consumers and society? The
marketing concept sidesteps the potential conflicts among consumer wants,
consumer interests, and long-run societal welfare.

Therefore, the societal concept holds that the organization should determine the
needs, wants and interests of target markets, and then deliver the desired
satisfaction more effectively and efficiently than the competitors to maintain or
improve consumer and society well-being. This is one of the most recent
marketing management philosophies that questions even the marketing concept.
The societal concept emphasizes societal interests rather than consumer
satisfaction alone. For example, the societal marketing concept questions the
adequacy of the pure marketing concept in an age of environmental problems,
resource shortages, rapid population growth, worldwide economic problems and
neglected societal services. The pure marketing concept overlooks possible
conflicts between short-run consumer wants and long-run consumer welfare. For
example, Coca Cola has managed to produce fine soft drinks that satisfy
consumer tastes.
However, certain consumers and environmental groups have voiced concerns that
coke has little nutritional value, contains caffeine and adds to the litter problem
with disposable bottles and cans. The societal marketing concept calls upon
marketers to balance three considerations in setting their marketing concept
policies:
 Company profits;
 Consumer wants; and
 Societal interests.

The Societal marketing concept has made many companies begin thinking of
society’s interests when making their marketing decisions. Considerations for
societal marketing concept may look as follows;

Considerations for Societal Marketing Concept

12
Customer-Oriented Classification of Concepts
Concept Emphasis
Production - Mass output
Concept - Product availability
- Product affordability
- No emphasis on quality
- Reasonably customer-oriented
Product - Product quality for customers
Concept - No emphasis on mass output
- Usually expensive product e.g. Benz
- Reasonably customer-oriented for the rich
Selling - Sales volume
Concept - No or little emphasis on Customer Satisfaction
- Not customer-oriented
Marketing - Emphasizes Customer satisfaction
Concept - Mostly Customer-oriented
Customer - Individualized service
Concept - Customer Needs and Wants
- One-to-one marketing
- Customer share, loyalty and Lifetime value
Societal Marketing - Emphasizes Societal welfare
Concept - Reasonably Customer-oriented

3) PREPARING A MARKETING PLAN AND PROGRAM

The company’s marketing strategy outlines which customers the company will
serve and how it will create value for customers. Next, the marketer constructs a
marketing program that will actually deliver the intended value to target
customers. The marketing program builds customer relationships by
transforming the marketing strategy into action. It consists of the firms marketing
mix. The major marketing tools are classified into eight P’s. These P’s (Product,
Price, Place and Promotion, etc.) will be explored in marketing mix.

4) BUILDING CUSTOMER RELATIONSHIPS

13
Customer relationship management (CRM) is perhaps the most important concept
of modern marketing. CRM is defined as overall process of building and
maintaining profitable customer relationships by delivering superior customer
value and satisfaction. It deals with all aspects of acquiring, keeping, and growing
customers.

Relationship building blocks

(i) Customer value: This is the perception of what a product or service is worth to
a customer versus the possible alternatives. A customer buys from the firm that
offers the highest customer perceived value. For example, DHL customers gain a
number of benefits that includes being fast, and reliable packaging delivery. DHL
package makes both sender and receiver feel more important.
(ii) Customer satisfaction
This is a measure of how a company’s products/services meet or surpass
customer expectations. Outstanding companies go out of their way to keep
important customers satisfied. Highly satisfied customers make repeat
purchases and tell others about their good experiences with the product. The key
is to match customer expectations with company performance. Smart companies
aim to delight customers by promising only what they can deliver, then delivering
more than they promise.

Customer relationship tools

Today, most leading companies are developing customer loyalty and retention
programs. Beyond offering consistently high value and satisfaction, marketers
can use specific marketing tools to develop stronger bonds with customers. These
include;
i. Frequency marketing programs: E.g. consider rewarding customers who
buy frequently or in large amounts. Hotels give room upgrades to their
frequent guests.
ii. Utilize partners inside the firm: Today, marketing department no longer has
sole ownership of customer interactions. Every functional area can interact
with customers, especially electronically. Rather than assigning only sales
and marketing people to customers, they are forming cross-functional
customer teams to deliver more value to customers.
iii. Marketing partners outside the firm: Most companies today are networked
companies, relying heavily on partnerships with other firms along their
supply chain. They include suppliers, channel partners and even
competitors.
iv. Relating directly/Direct marketing: Direct marketing is booming,
consumers can now buy virtually any product without going to a store or
shop – by telephone, mail-order catalogs, kiosks, and online. Examples
include Sony that sells PlayStation consoles and games online, Amazon
sells books on line, etc.

5) CAPTURING VALUE FROM CUSTOMERS

The first four steps in marketing process involve building customer relationships
by creating and delivering superior customer value. The final step involves
capturing value in return, in the form of current and future sales, market share

14
and profits. By creating superior customer value, the firm creates highly satisfied
customers who stay loyal and buy more.

Consequences of creating customer value

 Creating customer loyalty and retention – good customer relationship
management creates customer delight, in turn, delighted customers remain
loyal and talk favorably to others about the company and its products.
Companies are realizing that losing a customer means losing more than a
single sale. It means losing the entire stream of purchases that a customer
would make over a lifetime of patronage. This is what is known as customer
lifetime value.
 Growing share of customer – Share of customer refers to the portion of the
customers purchasing that a company gets in its product categories.
Beyond simply retaining good customers to capture customer lifetime
value, good customer relationship management can help marketers to
increase their share of customer. Many marketers are now spending less
time figuring out how to increase share of market and more time trying to
grow share of customer. Thus banks want to increase ‘share of wallet’,
supermarkets and restaurants wants to get more ‘stomach’, car companies
want to increase ‘share of garage, and airlines want greater ‘share of travel’.
Firms achieve this through offering greater variety to current customers.
 Building customer equity – Customer Equity refers to the total combined
discounted customer lifetime values of all of the company’s current and
potential customers. The ultimate aim of customer relationship
management is to produce high customer equity. Clearly, the more loyal
the firms profitable customers, the higher the firm’s customer equity.
Whereas sales and market share reflect the past, customer equity suggests
the future.
Customer relationship groups (Harvard customer loyalty management
strategy)

15
Strangers: They show low profitability and little projected loyalty. There is little fit
between the company’s offerings and their needs.
The strategy is that a company should not invest anything in them.
Butterflies: They are profitable but not loyal. There is good fit between company’s
offerings and their needs. However, like butterflies, we can only enjoy them for
only a short while and then they are gone.
The company should use promotional blitzes to attract them, create satisfying
and profitable transactions with them, and then cease investing in them until the
next time around.
True Friends: They are profitable and loyal. There is strong fit between their
needs and the company offerings. The firm wants to make continuous
relationship investments to delight these customers and nurture, retain, and
grow them. It wants to turn true friends into true believers, who come back
regularly and tell others about their good experiences with the company.
Barnacles: These customers are highly loyal but not very profitable. There is
limited fit between the company’s offerings and their needs. Barnacles are the
most problematic customers. The company might be able to improve their
profitability by selling them more, raising their fees, or reducing service to them.
If not made profitable, they should be ‘fired’.
Conclusion
Different types of customers require different relationship management strategies.
The goal is to build the right relationships with the right customers.

ASSIGNMENT:
Discuss how working with other departments; (Human Resource, Accounting &
Finance, ICT, and Production & Operations, etc.) in an organization may bring
greater value to customers.
UNDERSTANDING THE MARKET PLACE AND CONSUMERS

A. MARKETING ENVIRONMENT
The marketing environment is the interface between the organization and the
outside world and the company has to balance internal capabilities and resources
with the opportunities offered externally.
Marketing environment consists of the actors and forces that affect a company’s
capability to operate effectively in providing products and services to its
customers.

Types of marketing environment

16
Internal Environment: This refers to all actors that are internal to the company
that affects its ability to serve its customers. They are called the five Ms, which
are Men, money, machinery, materials and markets. These are important for
managing change and we call the process of managing internal change internal
marketing. These are;

i. Men: these are human resources of the company, both men & women,
along with their different skills, experiences and capabilities.
ii. Money: these are financial resources/wealth of the company. It may
include physical assets, cash in banks and bonds etc.
iii. Machinery: this includes the equipment that are used in the organization
e.g. computers, tools etc it can also be a combination of processes,
systems.
iv. Materials: this refers to the inputs or raw materials to be used by the
company so as to produce goods/services.
v. Markets: this refers to consumers/customers of the company’s
products/services. These should be attractive to consumers in terms of
value.

MICRO-ENVIRONMENT
This refers to influences that affect the company’s daily operation directly and
tend to be specific to a company. Micro describes the relationship between
companies and the driving forces that control this relationship. It is a more local
relationship and the company may exercise a degree of control for example
suppliers, marketing intermediaries, customers, competitors and publics;

Suppliers:
Suppliers form an important link in the company’s overall customer value
delivery system. They provide the resources needed by the company to produce
its goods and services. Supplier problems can seriously affect marketing.
Marketing managers must watch supply availability-supply shortages or delays,
17
labor strikes, and other events can cost sales in the short run and damage
customer satisfaction in the long-run. Marketing managers also monitor the price
trends of their inputs. Rising supply costs may force price increases that can
harm the company’s sales volume.
Most marketers today treat their suppliers as partners in creating and delivering
customer value. Some companies help suppliers to test new products in its stores
or showrooms.

Marketing intermediaries:
They help the company to promote, sell, and distribute its goods to final buyers.
They include resellers, physical distributors, marketing services agencies, and
financial intermediaries.
Resellers are distribution channel firms that help the company find customers or
make sales to them. They include wholesalers and retailers, who buy and resell
merchandise. Selecting and partnering with resellers is not easy. No longer do
manufacturers have many small, independent resellers from which to choose.
They now face large and growing reseller organizations such as Shorprite, Game
stores, Capital Shoppers, Quality Supermarkets, Tuskeys Supermarkets, Kenjoy
Supermarkets; among others. These organizations frequently have enough power
to dictate terms or even shut the manufacturer out of large markets.
Physical distribution organizations help the company to stock and move goods
from their points of origin to their destinations. Working with warehouse and
transportation firms, a company must determine the best ways to store and ship
goods, balancing factors such as cost, delivery, speed and safety.
Marketing services agencies are the marketing research firms, advertising
agencies, media firms, and marketing consulting firms that help the company
target and promote its products to the right markets. When a company decides to
use one of these, it must choose carefully because these firms vary in creativity,
quality, service and price.
Financial intermediaries include banks, credit companies, insurance
companies, and other businesses that help finance transactions or insure against
the risks associated with buying and selling goods. Most firms and customers
depend on financial intermediaries to finance their transactions. For example
Brewery companies and Soft drinks manufacturers in Uganda like Coca Cola
provide cooling equipment (refrigerators) to its distributors.
In its quest to create satisfying customer relationships, the company must do
more than just optimize its own performance. It must partner effectively with
marketing intermediaries to optimize the performance of entire system.

Customers:
The company needs to study five types of customer markets closely;
Consumer market: consist of individuals and households that buy goods and
services for personal consumption
Business markets; buy goods and services for further processing or for use in
their production process.
Reseller markets buy goods and services to resell at a profit.

18
Government markets are made up of government agencies that buy goods and
services to produce public services to produce public services or transfer the
goods or services to others who need them.
Internal markets consist of these buyers in other countries, including
consumers, producers, resellers and governments.
Each market type has special characteristics that call careful study by the seller.

Competitors
The marketing concept states that to be successful, a company must provide
greater customer value and satisfaction than its competitors do. Thus, markets
must do more than simply adapt to the needs of target customers. They also
must gain strategic advantage by positioning their offerings strongly against
competitor’s offerings in the minds of customers.
No single competitive marketing strategy is best for all companies. Each firm
should consider its own size and industry position compared with these of
competitors.

Publics;
A public is any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives. These publics include; financial
publics, media publics, government publics, citizen action publics, local publics,
general public and internal publics.

MACRO-ENVIRONMENT
This refers to the wider influences that affect the company and are outside the
direct control of the company. For example government laws, aggressive
competition, technology, political activities, threat of substitute products etc. This
environment is continuously changing and the company needs to be flexible to
adapt. This relates directly to the wider business environment.

These are external forces that directly or indirectly influence an organizations

acquisition of inputs and generation of outputs.
All businesses operate within an environment which directly or indirectly affects
the way in which they function, just as we consumer live in social and cultural
environment which to a greater or lesser degree determines the way we behave as
individuals.
The responsibility of identifying the significant changes in the environment is with
the marketing department.
Marketing manager should understand the different elements in the environment
and the nature of interrelationships of these elements and also the ways in which
the environment is changing and how changes are likely to affect the marketing
decisions or practices.

MACRO – ENVIRONMENTAL FACTORS (PELTS)

Political and regulatory environmental forces;

19
The political force of marketing environment has the potential to influence
marketing decisions and strategies. Governments have a great influence on the
character of the general business environment through their policies and the
resultant legislation.
Marketing organizations need to maintain good relations with elected political
officials for several reasons. When political officials are well disposed towards
particular firms or industries, they are less likely to create or enforce laws and
regulations unfavorable to these companies.

Political, legal and regulatory environmental forces affect marketing decisions in

variety of ways as below;

20
  Legislative structure
 Political and government stabilities (change)
 Political ideologies
 Taxation policies
 Non-governmental regulatory forces like churches
 Regulatory forces like NEEMA
 Local authorities like KCC
 Foreign trade regulations
 Consumer protection laws
 Sales promotion and advertising policies/laws
 Pricing policies or laws
 Environmental protection laws
 Pressure groups e.g. trade unions
 Societal /green forces (social responsibility decisions)
 Interpreting laws

Technological forces
No organization can afford to ignore the technological environment and its trends.
Even if your organization doesn’t have the inclination or resources to adapt new
technology, understanding it is important because competitors will exploit it
sooner or later with implications for your products and their markets.
Organizations must invest in research and development, recognizing that they will
be left behind if they do not and they are optimistic that they will come up with
something with unbeatable differentiated advantage that will be worthwhile.
The technological environment is a fast changing one, with far reaching effects on
organizations and their products.
Technological advances can affect the materials, components and products and
the processes by which products are made, administration and distribution
systems, products marketing and the interface between the organization and the
customers.

Technology is changing rapidly. Abraham Lincoln did not know about

automobiles, airplanes, radios, or the electric light. Woodrow Wilson did not know
about television, automatic dishwashers, air conditioners, antibiotics, or
computers. Franklin Roosevelt did not know about xerography, synthetic
detergents, tape, recorders, birth control pills, or earth satellites.
New technologies create new markets and opportunities. However, every new
technology replaces an older technology.

The Legal environment

All organizations operate under a government-controlled environment. This gives
confidence to private and public sector entrepreneurs, so that they can use their
management skills and capital to their best. However, sometimes there are
conflicts between different laws and unnecessary restrictions that are detrimental
to businesses. All organizations must conform to the country’s general legal
principles and government policies so as to stay in business.
21
Economic, physical and competitive forces
Organizations and consumers feel the effects of the economic and competitive
environment alike and it has a profound effect on their behavior. The economic
environment provides the basis against which marketing activities take place. We
consider issues of national interest such as the effects of government policy on
commerce and business generally.
Marketing focuses on consumers but the organization cannot be successful
unless consumers have got effective purchasing power so as to purchase
whatever is produced. The purchasing power depends on consumer demand and
spending behavior like;

i. Taxation: taxes may be direct or indirect. Direct taxation such as income

tax, NSSF, PAYE etc reduce the amount of money or disposable income
that households have available to spend on goods/services that
organizations provide
ii. Government spending: government like any other organizations are
purchasers of goods & services but on a large scale. Governments invest in
defence, road construction, civil engineering projects, social and health
services and many other areas. Such large purchasing power can be used
to stimulate or depress economic development, but if the government
decide as a matter of policy to cut back on its spending, then marketing
and business activities will be badly affected.
iii. Interest rates: government economic policy affects interest rates, which has
an impact on both consumers and businesses. For many consumers, the
most serious effect of a rise in interest rates is on their monthly loans and
mortgages repayments.
iv. International trading blocs: government also negotiates membership of
international/ regional trading blocs and the scope, terms and conditions of
international trading agreements. Local companies that meet the trading
requirements of these blocs can join and enjoy the benefits offered. E.g.
COMESA, PTA, EAC etc.
v. Market Structures: these affect or influence what sort of competition the
organization is up against, what scope the organization has to manipulate
the 4ps and how broad an impact the organization’s marketing activities
could have on the market as a whole. Market structures include monopoly,
oligopoly, monopolistic competition and perfect competition.
vi. Debts, Willingness to spend, spending patterns, Buying power, Income,
Wealth, Comprehensive spending patterns, Product specific spending
patterns etc.
The above influences both marketers and consumers decisions and activities.

Marketing manager should respond to physical environment, which includes the

natural environment. Most societies are concerned about the use of natural
resources.
The concern about interference with nature also affects marketing practices. This
is because the products are made and there packages comes from the natural
resources e.g. cotton clothes
22
The marketing manager also needs to assess competitive forces. Attention should
be paid to firms marketing products that are similar to, or can be substituted for
given business products in the same geographical area. Thus a textile manager
views all other garments manufactures as competitors. This can be counteracted
through competitor monitoring and crafting ideal strategies in order to develop a
competitive advantage.

Socio - Cultural Environment

This refers to a set of rules, values, ideas and attitudes that are transmitted from
one generation to next. The societies in which people grow shape their culture.
Organizations must understand the socio- cultural environment since these
factors influence the customer’s needs and wants. The basic differences in
language, income levels, spending habits, culture, women’s role in society and
religion are important. We consider the following;

Demographic factors: this includes the study of measurable aspects of the

population structures and profiles which refers to factors such as age, gender,
occupation, location, birthrate and life expectancy e.g. if the birth rate is falling in
a particular geographic market, then the marketer might interpret this to mean
that that people are having children later in life when they are better established
economically. This also means that the parents have much more money to spend
per child.

Socio-cultural influences: these factors involve much more qualitative assessment

and can be harder to measure and interpret than demographic factors. Consumer
lifestyle expectations evolve over time. Products that one time were considered
luxuries such as TVs and fridges are now considered necessities. Turning a
luxury into a necessity obviously broadens the potential market and widens the
marketers scope for creating a variety of products and offerings to suit
consumers’ income levels and usage needs e.g. in case of a television which
comes in a variety of shapes, sizes, colors and prices.

China’s one child policy has resulted into Chinese children –known as little
emperors and empresses – are being showered with attention and luxuries under
what is known as the ‘six pocket syndrome’.
In China’s increasingly competitive society, parents these days are desperate to
give junior an early edge. Today’s moms and dads are looking to supplement a
kids’ education starting from zero day. That’s creating opportunities for
companies peddling educational offerings aimed at kids.

Environmental issues: today consumers think critically about the origins,

content and manufacturing processes of products they buy e.g. consumers want
products made with the minimum of pollution

Cultural changes may provide opportunity or threats for market for example
change in attitude in favour of cotton textiles, local art crafts means more
opportunity for market.
23
 The demographic factor describes the characteristics of the population in terms of
size, geographical location, age, sex, education levels.

The world population is showing an explosive trend. Population increase means

growing needs or demand although it does not necessarily mean growing market.
The marketing manager should draw attention to the following;
i. Population age structure;
 Pre-school 0 -4 years
 School age 5 – 12 years
 Teens 13 – 19 years
 Young adults 20 – 34 years
 Middle age 35 – 55 years
 Older adults 56+ years
Age group enables the marketing managers to identify the needs of each category.

Kotler (2008), identified three largest age groups in this world that have shaped
marketing;

The baby boomers (1946-1964): These were people born during World War II
during the baby boom. They are more educated, mobile and wealthy segments.
They approach life with new stability and reasonableness in the way they eat, live,
think and spend. They constitute a lucrative market for new housing and home
remodeling, financial services, travel and entertainment, eating out, health and
fitness products and high priced cars and other luxuries

Generation X (1965-1976); They are young, individualistic and freedom minded

few and they have cautious economic outlook. They care about environment and
respond favorably to socially responsible companies. They are less materialistic
and they prize experience, and not acquisition. They are poised to displace the
lifestyles, culture, and materialistic values of the baby boomers

Generation Y (1977-1994): They have a lot of disposable income from parents,

they have bust markets for teens toys and games, clothes, furniture, and food.
Designers and retailers have created new lines, new products and even new
stores devoted to children and teens. People have started new editions for kids
and teens. Banks have offered banking and investment services for young people,
including investment camps. They utter fluency and comfort with computer,
digital, and internet technology. About 9 out of 10 teens have a home computer,
50% have internet access, and more that 50% of teens 12 out of 17 own mobile
phone. In all they are impatient, now-oriented bunch. Generation Y represents an
attractive target for marketers. Even the automobile industry is aggressively
targeting this generation of future car buyers

II. Ethnic groups

Countries vary in their ethnic make-up for example Uganda society ethnic groups
maintain their tribal groups and each tribe has specific wants for example
Baganda dress in Kanzu and Busuuti for important occasions, although
24
 changing; whereas Karamojongs dress in wrappers made out of silk and nylon
cloth.
III. Educational groups
For example illiterates, school dropouts, graduates; provide marketers with some
information on how to satisfy their needs. Graduates generally are keen on
buying textiles i.e. they are fashion oriented than illiterates.
IV. House hold pattern e.g.
 Single parent home or family
 Family house hold
Each group has distinctive set of needs and buying habits e.g. single persons
prefer fashionable dressed whereas illiterates are vice versa. The marketer must
consider special needs for each category.

V. shifts in secondary cultural values

Consider the impact of popular music groups, movie personalities, and other
celebrities on young people’s hair-styling and clothing norms. Marketers want to
predict new shifts in order to spot new opportunities or threats. Several firms
offer future forecasts in this connection.
The major cultural values of a society are expressed in people’s views of
themselves and others, as well as in their views of organizations, society, nature,
and universe.
People’s views of themselves…people vary in their emphasis on serving
themselves versus serving others. Some people seek personal pleasure, wanting
fun, change, and escape. Others seek self-realization through religion, recreation,
or the avid pursuit of careers or other life goals. People use products, brands, and
services as a means of self-expression, and they buy products and services that
match their views of themselves. For example people buy products based on their
duty and fun.
Peoples views of others;
Recently, observers have noted a shift from a ‘me society’ to a ‘we society’ in
which more people want to be with and serve others.
More and more, people are wanting to get out of the house and be with others.
This trend suggests a greater demand for ‘social support’ products and services
that improve direct communication between people, such as health clubs and
family vacations.
Peoples views of organizations;
People vary in their attitudes toward corporations, government agencies, trade
unions, universities, and other organizations. By and large, people are willing to
work for major organizations and expect them, in turn, to carry out society’s
work. In work place there has been decline in organizational loyalty. Many people
today see work not as a source of satisfaction but as a required chore to earn
money to enjoy their non-work hours. This trend suggests that organizations
need to find new ways to win consumer and employee confidence.
Peoples views of society;
People vary in their views to society; patriots defend it, reformers change it,
malcontents want to live it. People’s orientation to their society influences their
consumption patterns and attitudes toward the market place. For example today

25
we see many Uganda patriots supporting Uganda Cranes, buying locally made
products and favoring fellow Ugandans in business.
Peoples views on nature;
People vary in their attitudes toward the natural world. Some feel ruled by it,
others feel in harmony with it, and still others seek to master it. A long-term
trend has been people’s growing masterly over nature through technology and
belief that nature is bountiful. However, people have recognized that nature is
finite and fragile, that it can be destroyed by human activities.

This has renewed love of things natural has created a sizeable ‘lifestyles of health
and sustainability’ market for everything from natural, organic, and nutritional
products to renewable energy and alternative medicine. Business has responded
by offering more products and services catering for these interests.

Peoples views of the universe;

Finally, people vary in their beliefs about the origin of the universe and their place
in it. Although most Ugandans practice religion, religious conviction and practice
have been dropping off gradually through years. Some futurists, however, have
noted a renewed interest in spirituality, perhaps as part of a broader search for a
new inner purpose. People have been moving away from materialism ambition to
seek more permanent values; family, earth, faith, - and more certain grasp of
right and wrong. For the last decade Ugandans have been more spiritual and are
looking up to religion; Christianity, Islam and others – as a source of comfort in a
chaotic world.
This new spiritualism affects consumers in everything from the television shows
they watch and books they read to the products and services they buy.

26
B. MANAGING MARKETING INFORMATION
(MARKETING RESEARCH).
Marketers must understand customers, competitors, market trends and aspects
of marketing environment. To this, they require information and marketing
intelligence.

Marketing research is the systematic design, collection, interpretation and

reporting of information to help solve specific marketing problems or take
advantage of marketing opportunities. Companies use marketing research for a
variety of reasons; for example it can help a firm to understand customer
satisfaction and purchase behavior, assessing market potentials and share, or to
measure the effectiveness of pricing, product, distribution, and promotional
activities.

Alan Wilson (2006) defines marketing research as … the collection, analysis and
communication of information undertaken to assist decision-making in
marketing.

It is the process of gathering information not currently available to decision

makers. Marketing research is conducted on special projects basis and research
methods are adapted both to the problems being studied and to changes in the
environment.

Wilson (2006) identified four key characteristics of marketing research. These

are follows;
i. Generates information to aid marketing decision-making.
ii. Involves the collection of information
iii. Involves the analysis of information
iv. Involves the communications and dissemination of information

Sources of marketing information

 Internal data sources; these are electronic collections of information obtained
from data sources within the company. These include; financial statements,
sales records, costs, cash flows, production schedules, shipments and
inventories, customer demographics, psychographics, buying behavior,
customer satisfaction records, among others.
 Marketing intelligence: It is a systematic collection and analysis of publicly
available information about competitors and developments in the market
place. The goal of market intelligence is to improve strategic decision making,
assess and track competitor’s actions, provide early warning of opportunities
and threats. Much intelligence can be collected people inside the company
like; executives, engineers, scientists, purchasing agents and sales force.
Information can also be obtained from; suppliers, resellers, and key
customers. Or it can buy and analyze competitor’s products, monitor their
sales, check for new patents, and examine various types of physical evidence.
Some companies have even rifled their competitor’s garbage, which is legally
considered abandoned property once it leaves premises.
27
 Marketing research
ROLE OF MARKET INFORMATION
A. Corporate planning
Information is used in corporate planning in order to make decisions about what
goals the organization, as a whole, should have in both the short and long term;
 Forecasting the size of future demand and trends for the organizations
products
 Identifying marketers to be served
 Assessing the strengths and weaknesses of the organization both absolutely
and relative to its competitors
 Measuring dissatisfaction and needs in relevant market segments
 Industry/market structure and composition
 Competitor, market share and profitability analysis
 Highlighting significant marketing problems
 Stimulating research for new or exploitation of existing products and
markets by planned policies
 Evaluating corporate identity and image
 Selecting companies for acquisition of disinvestment.
Customer research
 Identifying, measuring and describing key market segments behavior and
attitudes
 Assessing relative profitability of markets over time.
 Analysis and interpretation of general data
 Pacing individual customer transactions, perhaps recorded on a database,
in the broader market context.
 Analyzing business potential of new market areas
 Identifying and evaluating markets for products and new products for
markets
 Measuring consumer preferences
 Identifying changes in competitive activity
 Sales forecasting
Product planning ((including packaging and service levels)
Research and database may be used in making and adapting products to fulfill
customer wants more accurately and profitability.
 Generating and screening new product ideas and modifications
 Concept testing
 Product testing and re-testing for acceptance and improvement
 Testing formulation and presentation preferences
 Packaging tests
 Product name tests
 Test marketing
 Comparative testing against competitive products
 Product elimination or product line simplification
 Evaluating perceived service quality.
Promotional planning
 Developing sustainable brand positioning
 Message design and context
 Development of the creative proposition
28
  Developing effective multimedia communications strategies online and off-
line
 Pre-testing adverts
 post testing ads, for example awareness, compensation, recall, attitude
shifts, brand-switching effects
 media planning: evaluation, selection and scheduling
 advertising effectiveness
 exhibition effectiveness research
 direct marketing effectiveness research
 assessing the impact of integration
 developing the optimum communication mix
Sales force planning
 determining sales areas
 testing alternative selling techniques and messages
 setting sales targets
 evaluating sales performance
 evaluating sales compensation system
 Making selling operations more productive.
Distribution planning
Research and the database may concerned with the formulation and effectiveness
of distribution policy;
 Channel selection online versus off-line
 Distribution cost analysis
 Wholesaler/retailer margin
 Incentive policy
 Dealer sales levels
 Distribution achievement
 Penetration levels
 Stock checks
 Inventory policy.

Classification of marketing research

Primary research- what you collect yourself characterized by;
 Firsthand information
 Expensive to collect, analyze and evaluate
 Can be highly focused with approach and methodology to ensure accuracy
 Types of question – closed-limited information gained; open-useful
information but difficult to analyze
Secondary research
What others have collected for you from;
 Company accounts
 Stock analysis
 Retail data
 Government statistics
 UN data base
 Trade publications
 Magazines surveys
29
  Research documents- publication

Types of marketing research

There are broadly two types of marketing research;
 Quantitative and
 Qualitative
Quantitative marketing research
These are techniques or sample sizes that lead to the collection of data that can
be statistically analyzed and whose results can be expressed numerically. It is
based on numbers-56% of 18 year olds drink alcohol at least four times a week-
does not tell you why, when, how
Characteristics of quantitative marketing research
 Data gathering is more structured
 Research involves larger samples
 Data gathered can provide quantitative behavior motivations and attitudes
in population under study.
 Studies can be more easily replicated or compared with past researches
 Analysis is statistical in nature and thus can be done with the help of
computer software
Examples of quantitative marketing research include;
 Interviews or face-face interviews; and results are recorded
 Street interviews; It is the most visible form of research, respondents
describe their mixed feelings on seeing the smiling face of the interviewer
approaching them.
 Executive interviewing (depth interview); it involves interviewing business
people at their place of work. (B2B).
 Computer assisted personal interviews (CAPI); use of PC’s, Laptops,
internet, websites, telephones, sms (mobile). Data entry is much simpler
and analyses can be produced quickly.
 Telephone interviews; this involves interviewing respondents over the
telephone.
 Surveys; It’s a collection of information by means of sampling and
interviews with selecting individuals.
Qualitative marketing research
Alan Wilson (2006), defines qualitative research as “Research that is undertaken
using an unstructured research approach with a small number of carefully
selected individuals to produce non quantifiable insights into behavior
motivations and attitudes”. It is more detailed – tells why, when and how!

Dibb (2007) defines qualitative research as “Research that deals with information
too difficult or expensive to quantify, such as subjective opinions and value
judgments, typically unearthed during interviews or discussion groups”

Characteristics of Qualitative marketing research

 Unquantifiable and not representative larger populations
 Data collection techniques are unstructured
 Involves small samples of individuals or groups of people
30
  It seeks to reveal opinions, motivations and attitudes
 It’s a bout insight and depth of understanding
 It is subject to high degree of interpretation by skilled researchers
 Usually follows the quantitative work

Methods of qualitative research

Other sources of primary data include:
1. Interviews
2. Mystery shopping
3. Focus groups
4. Product tests
5. Diaries
6. Omni-bus studies

1. Interviews: There are several types of interviews such as:

A. Telephone interviews: Telephone ownership is very common in developed
countries so it is ideal for collecting data:
Advantages:
1. It can be geographically dispersed/spread
2. It can be set up and conducted relatively cheaply
3. Random samples can easily be selected
4. Cheaper than face to face interviews
Disadvantages:
1. Respondents can simply hang up
2. Interviews tend to be much shorter
3. Visual aids cannot be used
4. Researchers cannot observe and interpret behavior or body language
B. Face to face interviews: These are conducted between a market researcher
and a respondent. Data is collected on a survey and some questions may be very
rigid, structured and may use closed questions. Data is easily compared and
interviews are more detailed and depend upon a more open form of questioning.
Advantages:
1. They allow more detailed discussions
2. Physical items such as products and pictures can be used
3. Body language can emphasize responses
4. Respondents can be observed at the same time
Disadvantages:
1. Interviews can be expensive
2. It can take a long period of time to arrange and conduct
3. Some respondents will give biased responses when face to face with a
researcher

C. The internet: The internet can be used in a number of ways to collect primary
data. Visitors to sites can be asked to complete electronic questionnaires and
then guidelines will be offered as to how to obtain information:
Advantages:
1. It is relatively inexpensive
2. It uses graphics and visual aids
31
 3. Random samples can be selected
4. Visitors tend to be loyal to particular sites and are willing to spend time to
complete the electronic forms.
Disadvantages:
1. It only surveys current customers and not potential customers
2. It needs knowledge of software to setup questionnaires and methods of
processing data
3. It may deter visitors from other websites.

D. Mail survey: In many countries, the mail survey is the most appropriate way
to gather primary data. Lists are collected/made and a pre-designed
questionnaire is mailed to a sample of respondents.
Advantages:
1. Relatively cheap to conduct
2. It covers a big number of respondents
Disadvantages:
1. The response rate is poor
2. It is becoming less popular with the introduction of new technologies e.g.
internet, call centers etc.

2. Mystery shopping: Companies will setup mystery-shopping campaigns on the

company’s behalf. It is often used in banking, retailing, airlines, restaurants and
much other customer-focused organizations. Mystery shoppers will enter the
premises posing as real customers. They collect data on customer service and
customer experiences. Findings are reported to the management responsible.

Advantages:
o Firsthand information is obtained
o Practical experiences of events is observed
Disadvantages:
o It is seen as unethical
o Results/findings may be exaggerated

3. Focus groups: These are made up from a number of selected respondents

based together in the same room. The researcher works with the focus group to
gather detailed and qualitative data.
Advantages:
o Participants are few
o Discussion is open and free expression of opinions and beliefs is
encouraged
o The research will probe into specific areas of interest.
Disadvantages:
o There is difficulty in obtaining the right participants
o Limited expression of ideas for fear of disclosing any information
o Much time is spent in the exercise.
o Expensive and complex to organize in comparison with other
methods
32
4. Product tests: These are often conducted as part of the test marketing
process. Products are displayed in a shopping center. Potential customers are
asked to visit the center and then their purchase behavior is observed.
Researchers will record how products are handled and how the packaging is read
and how much time the consumer spends with the product etc.
Advantages:
o Direct observation is possible
o Interaction with consumers is possible
Disadvantages:
o They are difficult to organize
o It is expensive to conduct because it involves a lot of activities.

5. Diaries: These are used by a number of specially chosen customers. They are
asked to complete a diary that lists and records their purchasing behavior over a
period of time e.g. a week, a month, a year etc.
Advantages:
o Gives accurate information
o Comparisons can be made between customers
Disadvantages:
o Respondents may lack commitment
o There is difficulty in analyzing the information.

6. Omni-bus studies: This is where a company employs a number of researchers

to carry out a joint study of a specific research e.g. using health care specialists,
sociologists, economists, and lawyers etc to study tobacco effects on consumers.

Advantages
o It provides a comprehensive study of a specific research
o Expertise and objectivity enriches the findings and implications
Disadvantages:
o It is difficult and expensive to organize
o Disagreements between the parties is common

Marketing research process

The differences between good and bad research depends on the quality of input,
which includes effective control over the entire marketing research process. Basic
steps of the marketing research process include;
 Defining and locating problem;
The first sign of a problem is usually a departure from some normal function
such as; conflicts between or failures in attaining objectives; e.g. a company
objective is to get 12% return on investment and actual is 6%, then there is need
to investigate the discrepancy. Problems can be identified through Delphi
technique or a collective brainstorming by all workers.
 Setting Objectives
This step answers the “why” question. The purpose of research must be clear. The
precise statement of the objectives gives direction to the researcher. It guides
him/her to follow the right research methods, or pursue a clear goal with no or
33
less deviations. The objectives give a clue to the type of data needed to solve the
identified problem.
 Developing hypotheses
Determining the hypotheses to be used in collecting data. This is based on
previous research and expected findings. A hypothesis is an informed guess or
assumption about a certain problem or set of circumstances. It is based on the
insight and knowledge available about the problem from previous research
studies and other sources. At the end of research a hypothesis can be accepted
or rejected.
 Collecting data
Exploratory studies are carried out to discover the general nature of a problem
and the factors that relate to it. The design is deliberately flexible. It involves
questioning relevant people inside and outside the organization. These may yield
new insights into a problem. Other studies like descriptive studies (accurate
description of variables), causal studies (variable X causes variable Y), can be
carried out. Collection of data can be on primary or secondary sources.
 Analysis and interpreting research findings;
Tabulation of data, statistical interpretation, and carefully interpretation
 Reporting research findings
It is the process of reporting research findings. It is extremely doubtful that a
study can provide everything needed to answer the research question. The report
is usually formal or written one. It also involves recommendations for the action

Limitations of marketing research

 Information only as good as the methodology
 Can be inaccurate and unreliable
 Results may not be what the business wants to hear
 May stifle initiative and gut feeling
 Always a problem that we may never know enough to be sure

MARKETING INFORMATION SYSTEMS

It is the framework for the day-to-day management and structuring of
information gathered regularly from sources both inside and outside an
organization.
As such, an MIS provides a continuous flow of information about prices,
advertising expenditure, sales, and competition and distribution expenses.

When information systems are strategically created and then institutionalized

throughout an organization, their value is enhanced.
The inputs of MIS include information sources inside and outside the firm
assumed to be useful for future decision making.

Regular reports of sales by product/market categories, data on inventory levels

and records of sales people’s activities are examples of information useful in
making decisions

34
The main difference between marketing research and marketing information
systems is that; the former is an information gathering process for specific
situations, whereas the latter provides continuous data input for an organization.

Data brought into the organization through marketing research become part of its
marketing Databank. Marketing databank is a file of data collected through the
MIS and marketing research projects.

WHAT DO WE DO WITH DATA?

i. Customer profiling: Working with our data can help a great deal in terms
of creating a more efficient and more effective marketing strategy. Profiling
customers can tell us the following;
 Who are most profitable customers and their characteristics
 Create smaller profitable segments
 Which are most likely to respond
 Who has the greatest potential
This means we can create
 More relevant sales message
 Smaller volume of activity with less wastage
 Better response levels and Return on investment
ii. Cluster analysis: Groups customers according to their general
characteristics. This can be used to create segments from the database.
iii. Regression analysis: Scoring individuals according to their characteristics.
For example, buyers of certain product may have certain other
characteristics;
 Live in certain areas
 Have certain income levels
 Have certain number of children
Based on the above data, we can predict those who can buy.
iv. CHAID- Chi-squared automatic interaction detection. It is an analysis
used to breakdown the customer base into segments based on certain key
variables. It is used to target sub-groups on the database more effectively.

CONSUMER BUYER BEHAVIOR

Introductory case:
Most married couples regard their wedding day as one of the most important in
their lives. Not surprisingly, then getting married is big business. Each year in
Uganda vast amounts of currency are spent on the trappings traditionally
associated with weddings; engagement rings and wedding bands for the bride and
groom, photographers and wedding bands for the bride and groom, photographers
and wedding cars, catering magazines and books. Family weddings not only
provide an event to remember for the couple, they also offer relatives and friends
the chance to meet up and socialize in happy circumstances.
For most bides-to-be, buying a wedding dress is a particularly important part of the
event. Though traditions vary widely depending on religion and culture, many
Ugandan brides traditionally, many dressed in white or ivory gowns. Whatever
culture, religion and nationality of the bride, it is common for the process of buying
35
the dress to begin many months before the wedding day. The uniqueness of the
purchase, its emotional significance, the length of time taken and the associated
risk all make this a high involvement decision.
The complex buying process often begins with the bride paying a visit to a number
of bridal wear retailers. Indeed, the significance of purchase is reflected in the wide
range of bridal wear retailers offering the latest range of fashionable gowns.
Usually, the bride will be accompanied by her mother or a close female friend or
relative as she visits her chosen store or shop. Often the search for the dress will
extend to several outlets, perhaps in more than one town. In some cases, the bride
may have identified a particular designer whose gowns she likes. Wedding
magazines and recommendations from friends and relatives may also be used to
generate ideas. Many designs and fabrics will be considered and several tried. It is
unlikely that a decision will be made on the first outing, as time is needed to think
carefully about the options, costs and accessories and schedules. Sometimes the
preferred store will be revisited several times before a final decision is reached.
Even after the bride has made her choice, the buying process is not over. Further
visits will be required, so that any required adjustments can be made to the dress,
and matching accessories selected. It is difficult to believe that all of this buying
activity leads to the purchase of an item that will probably be worn only once. Yet
for most brides the significance of the occasion is sufficient justification for the
effort involved.

Consumer behavior involves the psychological process that consumers go

through in recognizing needs, finding ways to solve these needs and making the
purchase decisions.
By understanding consumers, marketing managers can make informed decisions
and develop strategies that jointly maximize consumer welfare and company
profit.

They look for answers to the following questions:

 Who buys?
 How do they buy?
 When do they buy?
 Where do they buy?
 Why do they buy?

Definitions of consumer behavior:

1. This refers to actions/behavior consumer’s exhibit or display when making
purchases of goods and services.
2. These are decisions consumers take in connection with purchases that are
influenced by various factors e.g. income, status, preferences etc.
3. Consumer behavior is the process and activities people engage in when
searching for, selecting, purchasing, using, evaluating and disposing of
products and service so as to satisfy their needs and desires.

Types of buying situations:

These include:
36
 1. Routine-response behavior: This is the simplest type of buying behavior,
which occurs when consumers buy low-cost and frequently purchased items. In
this case consumers have very few decisions to make, they know a lot about the
product class and major brands available and they have clear preferences among
the brands. In general consumers do not give much thought, search or time to
the purchase of such products.
The products in this class are often called low-involvement goods e.g. you do
not spend much time and effort choosing your washing soap, toilet paper, box of
matches etc
Definition of low-involvement goods: These are items we buy with ease without
considering factors such as price, brand, colour etc.
2. Limited-problem solving: Buying is more complex when consumers meet an
unfamiliar brand in a familiar product class e.g. a person who thinks of buying a
new phone may be shown a new brand with additional functions e.g. with a
camera, internet connection, video coverage etc. The person may ask questions
and watch advertisements to learn more about the new brand. This is described
as limited problem solving because consumers are fully aware of the product type
but are not familiar with all the brands and their features.
3. Extensive-problem solving: Consumers sometimes face complex buying
decisions for more expensive, less frequently purchased products in a less
familiar product class. For these products consumers know about available
brands or what factors to consider when they evaluate different brands. In these
situations, consumers use extensive-problem solving e.g. suppose you want to
buy a new car. You would probably spend a lot of time visiting different agents,
collecting information, comparing various models and then you make the final
decision of making the purchase of your choice based on various factors.

THE CONSUMER DECISION-MAKING PROCESS:

The buyer decision process is expressed by the purchase model.

NEED INFORMATION EVALUATION PURCHASE POST-

RECOGNITION SEARCH AND CHOICE DECISION PURCHASE
BEHAVIOR

This model implies that consumers pass through all the five stages with every
purchase. But in more routine purchases, consumers often skip or reverse some
of these stages e.g. a person buying the regular brand of bathing soap, would
recognize the need and go right away to the purchase decision, skipping
information search and evaluation. However, we refer to the purchase model
because it shows all the considerations that arise when a consumer faces a new
and complex purchase situation.

1. Need recognition: This is the first stage of the buyer decision process in
which the consumer recognizes a problem or a need. This need can be
started/triggered by internal stimuli, when one of the person’s normal needs
37
 e.g. hunger, thirst etc, and rises to a level high enough to become a drive.
From past experience the person has learnt how to cope with this drive and is
motivated towards objects that he/she knows will satisfy this drive. A need
can also be triggered by external stimuli e.g. a person passing by a bakery
and the smell of freshly baked cakes/bread stimulates the hunger. Such a
person may actually buy the cake/bread as a result.
2. Information search: This is the stage of buyer decision process in which the
consumer is encouraged to search for more information. The consumer may
simply be increasing attention or may go into active information search. If the
consumer’s drive is strong and a satisfying product/service is nearby, the
consumer is likely to buy it e.g. a person interested in buying a phone may
look for information about the phone features, designs, type, color, etc. This
information can be obtained from friends, agents, internet, mass media etc.
3. Evaluation of alternatives: This is the stage of the buyer decision process in
which the consumer uses information to evaluate brand choices. When
looking for a product the consumer aims at satisfying some needs and is
therefore looking for some benefits that can be obtained by buying the
product/service e.g. in the case of a phone, the buyer might consider
attributes such as phone size, network coverage, battery life span etc. If one
phone is rated best on all attributes, then the consumer will choose that
phone. However some buyers may base their buying decision on only one
attribute and their choice will be easy to make.
4. Purchase decision: This is the stage in which the consumer actually buys
the product/service. During the evaluation stage the consumer ranks the
various product brands and forms a purchase intention. However the
purchase intention can be affected by:
A. The attitude of others: In the case of the phone, the husband, wife, a friend
etc, may not like the chosen phone for various reasons.
B. Unexpected situations e.g. change in income like loss of a job, change in price
of the phone, reported disappointment about the phone etc.
5. Post-purchase behavior: This is the stage in which the consumer takes
further action after purchase based on their satisfaction or dissatisfaction.
The marketer’s job does not end when the service/product is bought but they
have to obtain information from the consumers regarding their satisfaction or
not. What determines whether the consumer is satisfied or dissatisfied? The
answer lies in the relationship between the consumer expectations and the
product’s perceived performance. If the product falls short of expectations,
then the consumer is disappointed. If it meets expectations, the consumer is
satisfied and if it exceeds expectations, then the consumer is delighted.

Types of purchases:

I. Trial purchase: This is when a consumer purchases a product/brand for

the first time. This is the exploratory phase of purchase behavior in which
consumers attempt to evaluate a product through direct use e.g. when a
consumer purchases a new brand of a laundry detergent for which he/she
is uncertain, such a person is likely to purchase it in smaller trial quantities
and when it works out well, then the purchaser will buy larger quantities.
38
II. Repeat purchase: This usually signifies that the product/service meets the
consumer’s approval and that she/he is willing to use it again and in larger
quantities. This is usually the case when new brands in an established
product category e.g. tooth paste, washing soap, chewing gum etc is found
after trial to be more satisfactory or better than other brands. Consumers
then repeat the purchase and in bigger quantities.
III. Long-term commitment purchase (brand loyalty): It is generally observed
that consumers prefer products that are long lasting and also those which
offer personal satisfaction. They are not willing to change or substitute these
products e.g. preferred furniture set, car, pen etc. This can be influenced by
factors such as habit, pride, comfort, love and affection or empathy.

Definitions:
1. Drive: This is a strong internal stimulus that calls for action.
2. Stimulus:
a) These are incentives for consumers to buy a product/service.
b) This refers to factors designed to encourage consumers to buy a
product/Service.
Examples: components of an advertisement such as product display, verbal
Messages in the media, written or visual messages in the press.
3. Purchase intention: This refers to the consumer’s preoccupation or
determination to buy the product/service.

Factors affecting consumer behavior:

These include:
1. Cultural factors.
2. Social factors.
3. Personal factors.
4. Psychological factors

1. Cultural factors: The most fundamental determinant of a person’s wants and

behavior are naturally cultural factors and these include: a) culture b) sub-
culture and c) social class.

a) Culture: Definition: This is the set of basic values, perceptions, wants and
behavior learned by a member of society from the family and other important
institutions.
This is the most important basic cause of a person’s wants and behavior and
human behavior is normally learned. A child growing up in society learns basic
values, perceptions, wants and behavior from the family and other institutions
like the schools and the church among others e.g. a Karamojong child will grow
up walking naked and will be attached to the cows.

b) Sub-culture: Definition: It is a group of people with shared value systems

based on common life experiences and situations.
Each culture contains smaller sub-cultures or groups of people with shared value
systems based on common life experiences and situations.

39
Many of these sub-cultures make up important segments and marketers often
find it worthwhile to design products/services and marketing programs to suit
the needs of these sub-cultures e.g. Buganda is a unified culture but it has
several sub-cultures based on totems, religion and historical attachments.
Definition of a totem: It is a tribal badge, emblem or symbol.

c) Social class: Definition: These are relatively permanent and orderly divisions
in a society, whose members share similar values, interests and behaviors.
Almost every society has some form of a social class structure. Social class is not
determined by a single factor such as income but is measured as a combination
of occupation, income, education, wealth and other variables. Marketers are
interested in social class because people within a given social class tend to have a
certain buying behavior. Social classes show distinct product/service and brand
preferences in areas such as house furnishing e.g. the rich today build houses
with wooden floors and wooden ceilings etc. They will also have leisure activities
like going to the gym, clubs etc.

2. Social factors: A consumer’s behavior is also influenced by social factors

such as the consumer’s a) reference groups b) The family c) Social roles and
status.
a) Reference groups: Definition: These are groups that have a direct or
indirect influence on the person’s attitudes or behavior.
A person’s behavior is influenced by many reference groups. Reference groups
that have a direct influence and to which a person belongs are called membership
groups. Some are primary groups with whom there is regular informal interaction
such as family, friends, neighbors and co-workers.
Some are secondary groups, which are formal and have less regular interaction.
They include organizations such as religious groups, professional associations
and trade unions.
Reference groups influence a person in the following ways:
1. They expose the person to new behaviors and life styles.
2. They influence the person’s attitudes and self-concept because he/she wants
to “fit-in” that group.
3. They create pressures to conform that may affect the person’s
product/service and brand choices.
b) The family: Family members can strongly influence consumer behavior. A
buyer’s parents make up the family of orientation. From parents a person
acquires an orientation towards politics, religion, economics, and a sense of
personal ambition, love etc. Even if the buyer no longer interacts very much with
his/her parents, the parents can still influence the buyer’s behavior
unconsciously/unknowingly.
The family of procreation includes the buyer’s spouse and the children. These
have a more direct influence on everyday buying behavior. The family is the most
important consumer-buying organization in society e.g. the wife/women have
traditionally been the main purchasing agents for the family especially in the
areas of food, household products and clothing. But this is changing with the
increasing number of working wives/women, late marriages and changing
cultural norms e.g. women now buy 45% of all the cars.
40
 c) Social roles and status: A person belongs to many groups e.g. a family, a
club, an organization etc. The person’s position in each group can be defined in
terms of roles and status.
1. A role: Definition: This consists of the activities a person is expected to perform
according to people around him/her e.g. a manager will buy the kind of mobile
phone that reflects his/her role such as Samsung, Motorola etc.
2. Status: Definition: This is the general esteem given to a role by society.
People often choose products/services that show status in society e.g. a company
president will drive a Lexus or BMW and wear expensive clothes while an office
worker will drive a Toyota corona and wear less expensive clothes.
3. Personal factors: These include the buyer’s
a) Age and life-cycle
b) Occupation c) Economic situation
d) Life style e) Personality and self-concept.

a). Age and life-cycle: People change the goods and services they buy over their
life time. People’s tastes in clothes, furniture and recreation is also age related
e.g. the youth are interested in watching movies and attending discos while the
older people go to clubs and attend formal parties.
b). Occupation: A person’s occupation affects the products/services bought e.g. a
blue-collar worker will buy working clothes or tools and buy a Japanese car. A
company president will buy expensive clothes, travel by air and be a member in a
country club.

c). Economic situation: A person’s economic situation will greatly affect product
choice. A person’s economic characteristics consists of their level of spendable
income, savings, assets, borrowing power and attitudes towards spending and
savings e.g. a person can consider buying an expensive Nokia mobile phone if
he/she has enough spendable income, savings or borrowing power. If economic
indicators point to a boom or recession, marketers can take steps to redesign,
reposition and reprice their products/services to suit the situation.

d). Life-style: Definition: This is a person’s pattern of living as expressed in

his/her activities, interests and opinions.
People coming from the same sub-culture, social class and even occupation may
have quite different life styles. If we know a person’s social class, we can
conclude/infer many things about the likely behavior of the person in respect to
his/her activities, interests and opinions. People’s life styles affect their buying
behavior e.g. a person who is rich will want to act rich and will not want to be
part of the crowd. Such a person will buy designer clothes, use expensive jewelry
and drive a car with customized number plates.

3. Personality and self-concept:

1. Personality: Definition: It is the person’s distinguishing psychological
characteristics that lead to relatively consistent and lasting responses to his/her
environment.
An individual’s personality is usually described in terms of traits/characteristics
such as achievement, self-confidence, affiliation, autonomy etc. Personality can
41
be useful in analyzing consumer behavior for some products or brand choices e.g.
beer marketers have discovered that beer drinkers tend to be highly sociable.
There are many advertisements showing people relaxing and socializing over beer
bottles.
2. Self-concept: It is also called self-image and is closely related to personality.
Definition: It is a complex mental picture of ourselves e.g. a person may see
himself/herself as being rich, successful, creative, active, innovative etc, such a
person will look for products/services that will depict such qualities e.g. owning
an expensive phone, residing in a prime area and attending exclusive parties.

4. Psychological factors: A person’s buying choices are also influenced by four

major psychological factors and these are a) Motivation b) Perception c) Learning
d) Beliefs and attitudes.
A. Motivation (refer to definition of drive/motive). A person has many
needs at the same time. Some needs may not be strong enough to motivate a
person to act at a given point in time. A need becomes a motive when it is
aroused to a sufficient level of intensity. It is important to observe however that a
particular product may satisfy more than one need at the same time e.g. a
hamburger can satisfy not only hunger but also some social need. Marketing
managers should realize that consumers try to satisfy a set or a number of needs
rather than a single need.
B. Perception: Definition: It is a process by which people select,
organize and interpret information to form a meaningful picture of the situation.
A motivated person is ready to act. How the motivated person acts is influenced
by his/her perception of the situation. Two people with the same motivation and
in the same situation may act quite differently because they perceive the situation
differently. All of us learn about a stimulus by the flow of information through our
five senses i.e. sight, hearing, smell, touch and taste. However each of us receives
organizes and interprets this sensory information individually.
C. Learning: Definition: Learning describes changes in an individual’s
behavior arising from experience.
Learning occurs through the interaction of drives, cues, responses and
reinforcement.
Definitions:
1. Drive/motive: This is a need that is sufficiently pressing to direct a person to
seek/find satisfaction for the need.
2. Cues: These are minor stimuli that determine when, where and how the
person responds e.g. goods displayed in a shop window, signs and
advertisements are all cues.
3. Response: This is an effort to satisfy a drive/motive.
The specific response chosen depends on the cues and the persons past
experience.
4. Reinforcement: This is a situation which occurs when the response is
followed by satisfaction e.g. a person buys a Nokia phone and it satisfies
his/her communication needs, that person will always buy a Nokia phone
because of the past satisfaction obtained.

42
D. Beliefs and Attitudes: Through acting and learning people acquire their
beliefs and attitudes and these in turn influence their buying behavior.
1. Belief: Definitions: a) It is a descriptive thought that a person holds/has about
something. b) It is a person’s opinion about something.
Marketers are very interested in consumer beliefs about specific
products/services e.g. if some beliefs are wrong and prevent purchase of certain
products/services, then the marketer must launch a campaign to correct or
change these beliefs.
2. Attitudes: Definitions:
a) An attitude is a person’s perception towards something
b) Is a person’s consistently favorable or unfavorable evaluations, feelings and
tendencies towards an object or attitudes?
Attitudes are important for marketers because attitudes affect the selective
process, learning and eventually the buying decisions people make.

Note: We can now appreciate the many individual characteristics and forces
acting on consumer behavior; the person’s choice is the result of the complex
interaction of cultural, social, personal and psychological factors.

43
 MARKET SEGMENTATION, TARGETING & POSITIONING
The market consists of many types of customers, consumers, products, needs,
tastes, wants etc and the marketer has to determine which combination offers the
best chance to achieve company objectives. This allows the firm to better satisfy
the needs of its potential customers.
To get a product/service to the right consumers, marketers will first segment the
market, then target a single or a series of segments and finally position the
product within the segment.
Marketing involves:
1. Market segmentation.
2. Target marketing.
3. Market positioning

Market segmentation Target Marketing Market positioning

Market segmentation:
Definition of market segmentation:
1. It is the process of classifying customers into groups with similar needs
and buyer behavior.
2. It is dividing a market into distinct buyers who may call for separate
products/services or marketing mix.
Definition of market segment:
1. It is a relatively homogenous group of customers who will respond to a
marketing mix in a similar way.
2. It is a group of consumers who respond in a similar way to a given set of
marketing stimuli.
Other definitions:
A. Market niche:
1. It is a smaller part of a market segment.
2. It is a unit within a market segment.
3. It is a micro-segment
B. Customer profile: It refers to customer characteristics in terms of status,
age, income, occupation, buying habits etc.
C. Market map: It defines the distribution and value added chain between
the final user and the supplier of products/services included within the scope of
the market segmentation.
D. Segment attractiveness: It is a measure of the potential of a segment to
yield growth in sales and profit.

Market segmentation is based on the following questions:

1. Is the segment viable? Can we make a profit from it?
2. Is the segment accessible? How easy is it for us to get into the segment?
3. Is the segment measurable? Can we obtain realistic data to consider its
potential?
Benefits of market segmentation: These include
44
 1. Effective segmentation results in greater sales and profitability since the
market is well defined and served efficiently and effectively.
2. Market segmentation allows the producers to design products/services
and market plans, which suit the needs of the market.
3. Market segmentation results in greater consumer satisfaction in terms of
availability, variety and quality since the marketers meet all the
respective needs of consumers.
4. Market segmentation permits the marketing company to focus on those
smaller markets with the greatest potential, which boasts company
income and image.
5. Market segmentation permits greater differentiation and variety as
companies seek further market opportunities by developing new market
segments.
6. It results in a better competitive position for existing products/services
due to the fact that consumers consume the products/services of their
choice and taste.

The basis (variables) for segmenting consumer markets

These include:
1. Geographic segmentation: This involves dividing the market into different
geographic units such as nations, states, regions, cities etc. The company
decides to operate in one or a few geographic areas but pay attention to
geographic differences in needs and wants e.g. Nile Breweries Company
has discovered that the north and north-eastern Uganda has a dominant
share for its strong beer lagers like chairman, eagle etc as compared to
other parts of the country. Geographic segments are at least easy to
define and measure, and information is available from public sources.
2. Demographic segmentation: This includes dividing the market into
demographic variables such as age, family size, family life cycle, income,
occupation, education, religion, race etc. These demographics might
include classification of body size and shape e.g. the proportion of
overweight adults in Uganda has risen by 50%. So marketers of products
such as clothing must note this and be able to cope with the current
market demands.
3. Geo-demographic segmentation: It can be defined as the analysis of
people by where they live as it combines geographic information with
demographic data. This helps companies to understand where their
customers are, to develop more detailed profiles of how these customers
live and to locate and target similar potential customers elsewhere. This
segmentation will define types of neighbor-hoods according to their
characteristics and the marketers will supply the necessary
products/services.
4. Psychographic segmentation: This involves intangible variables of
potential consumers such as beliefs, attitudes and opinions. The idea is
that by defining the life style of the consumer, it allows the marketer to
sell the product/service not on superficial or functional features but on
benefits that can be seen to enhance that life style on a much more
emotional level.
45
 5. Behavior segmentation: This relates to an individual’s relationship with
the product/service. Different people with similar profiles may interact
with the product differently. Consumers can be grouped according to
occasions when they make a purchase or use a product/service e.g.
traveling by air is caused by occasions related to business, vacation or
visiting the family. An airline company can specialize in serving people
who are flying for one of these occasions. Also many families make a lot of
purchases during the Xmas period.
6. Multivariable segmentation: It is unlikely that only one variable will be
used. The multivariable segmentation defines a portfolio of relevant
segmentation variables some of which will be descriptive while others will
tend towards the psychographic, depending on the product/service and
market in question. The marketer will use a number of variables while
segmenting and this makes them come closer to the consumers.
7. Benefit segmentation: This refers to the benefits sought by consumers
when they acquire a product/service in order to satisfy their
explicit/specific needs e.g. a consumer may purchase a computer for
word processing activities. However this computer has a number of
functions such as scanning, CD writing, data analysis etc. The consumer
in this case will be seeking only the benefit of word processing. It is the
responsibility of the marketer to make sure that consumers get what they
want.

Segmentation is also determined by other factors such as:

1. Benefits sought: Consumers seek different benefits from
products/services e.g. in the case of a car we have:
A) Pleasure seekers: Driving can be pleasure, freedom and enjoyment.
B) Image seekers: Driving can be about self-image. The car may provide feelings
of power, prestige and status.
C) Functional seekers: In this case driving is only a means of getting from place
A to place C. The consumers enjoy the convenience offered by the car rather the
act of driving.
2. Purchase occasion: Consumers can be distinguished according to
occasions when they purchase a product/service e.g. products may be bought as
an emergency such as drugs during sickness or as a routine such as in the case
of consumer goods or as gifts during periods such as Easter and Xmas or special
occasions. These occasions may cause price increases and then the prices fall
after that.
3. Purchase behavior: Differences in purchase behavior can be based on the
time of purchase. When a new product is launched the main task is to identify
those people who are more likely to be willing to buy the product/service after
launch. Other consumers may need more time to assess the benefits and delay
purchase until the first consumers have taken the early risks of purchase.
4. Product service usage/function: Consumers can also be segmented on
the basis of using the product/service e.g. one person may buy a bicycle as a
mode of transport while another may buy it for exercise purposes. Also a family

46
head/leader may buy cheap wine for the family and buy expensive wine for a
diner party with friends.
Requirements for effective segmentation
To succeed the following conditions must prevail:
1. Distinctive: Any market segment has to be distinct. It must be different
from any other segment. The basis of that difference depends on the type
of product/service or the prevailing circumstances in the market at that
time. Without a significant difference, segment boundaries become too
similar and there is the risk that the company’s offerings will not be
sufficiently well tailored to attract the required customers.
2. Substantial: This refers to the sound commercial reasoning behind the
segment, which leads to efficiency and effectiveness. A defined segment
must therefore be of sufficient size to make it viable.
3. Accessible: A defined segment must be accessible and this is connected to
distribution and communication. A company has to find means of
delivering its goods and services to the customers and this can include
using the most efficient channel intermediary. As regards communication,
certain customers may be very difficult to make contact with and if the
promotional message cannot be communicated then the chances of
capturing those customers are much slimmer. The issue is to use the
media that is more likely to access all the customers.
4. Defendable: This is the degree to which programs can be designed to
attract and serve the segment. In defining and choosing segments, it is
important to consider whether the company can develop a sufficiently
strong differential advantage to defend its presence in that segment
against competitive companies.
Target marketing:
After the market has been separated into different segments, the marketer will
select a segment or a series of segments to target. Resources and effort will be
targeted at the segment.
Definitions of target marketing:
1. It is evaluating each market segments attractiveness and selecting one or
more segments to enter or serve.
2. This is deciding how many market segments to aim for and how to do it.
Other definitions:
1. Halo customers: These are customers that are not directly targeted but may
find the product/service attractive.
2. Target customers/audience: This is the group of people at which the direct
marketing campaign is aimed at.

Target marketing strategies:

These strategies include:
1. Undifferentiated marketing: Here the marketer ignores the various
differences in the market and all customers are considered to be the same.
There is absence of segmentation and the market is served as a total
market e.g. in the case of consumer goods like food items, soap, tooth
paste, toilet paper etc. It involves mass marketing, mass distribution, mass
advertising etc.
47
 Marketing Mix Whole Market

2. Differentiated marketing: In this case the marketer exploits the differences

between market segments by designing a specific marketing mix for each
market segment e.g. in the clothing industry where designers cater for
different sizes, ages, sex etc.

Marketing Mix I Segment I

Marketing Mix II Segment II

Marketing Mix III Segment III

3. Focused marketing: This is when a company develops a single marketing

mix aimed at various target markets or market (niche). The identification of
several segments does not imply that the company should serve all of
them. Some of them may be unattractive or out of line with business
strength. This is good for small companies with limited resources.
Kwiksave stores have used this strategy by operating up-country. Also
target marketing can be based on age groups e.g. the youth prefer to have
their meals in Nandos and Steers while the elders prefer places that serve
boiled food staff.

Segment I

Marketing Mix Segment II

Segment III

4. Customized marketing: This is common in services marketing where the

marketer designs a separate marketing mix for each customer. The service
provider attends to each customer differently based on his or her individual
demands. The service providers vary their offers on a customer-to-customer
basis. They will discuss face to face with each customer their requirements
and tailor their services accordingly. This is common in the hotel industry,
building industry, medical services, legal practice etc, where every
customer has different demands and it is hard to find customers with
identical requirements.

Marketing Mix I Customer I

Marketing Mix II Customer II

Marketing Mix III Customer III

48
Market positioning:
The marketer needs to ask; what is the position of the products in the mind of the
consumers. After segmenting the market and then targeting consumers, the
marketers proceed to position products within the market.
Positioning is about perception. As perceptions vary from one person to another,
so do the results of the positioning map e.g. what you perceive as quality and
value for money etc is different to my perception. However there will be
similarities in some cases.
Definitions:
1. Market positioning: This is arranging for a product to occupy a clear,
distinct and desirable place relative to competing products in the minds of
target consumers.
2. Product positioning: It refers to the way the product is defined by
consumers based on product attributes such as quality, price, design,
usage etc.
3. Positioning map:
A. This technique involves identifying perceived product characteristics
which may be used to classify consumer’s opinions about different
products.
B. This refers to comparing and contrasting products/services in
relation to each other.
4. Brand positioning: This is the same as product positioning but it is meant
for new brands for e.g. in the case of a new soft drink, positioning can be
done in terms of price, calorie and vitamin contents or packaging. In this
way distinctiveness is given to the new brand.
5. Repositioning: This is shifting the brand/product to a different market
segment by changing the product’s quality, pricing, packaging, advertising
etc. This happens when the product/brand is no longer positioned optimally
and it is necessary to determine alternatives.

This strategy seeks to differentiate a company’s products/brands from competing

brands/products in terms of product/service characteristics and image so as to
maximize the sales potential and profit
An example of a positioning map. We shall take the case of beer:
Type Attributes Perception
Bell Mild Good
Tusker Classic Fairly good
Club Ordinary Fair
Nile special Strong Bad

Questions for positioning:

1. What position do you currently own?
2. What position do you want to own?
3. Whom do you have to defeat so as to own the position?
4. Do you have the resources to do it?
49
 5. Can you persist until you get there?
6. Are your marketing tactics/strategies supporting the positioning
objectives?
NB: Remember that product positioning all depends on the perception of the
individual consumers.
Positioning strategies:
1. Product attributes e.g. product quality, price, design etc.
2. Product benefits
3. Usage occasion
4. Classes of users
5. Different product/service classes (substitutes).

THE MARKETING MIX

The marketing mix is the set of marketing tools the firm uses to pursue its
marketing objectives in the target market. McCarthy classified these tools into
four broad groups that he called the eight Ps of marketing. The eight P’s
components of the marketing mix are indicated below;

THE PRODUCT (GOODS, SERVICES AND IDEAS)

Definition of a product
What is a product? A product is anything that can be offered to satisfy a need or
want.

50
It can also be defined as anything, favorable and unfavorable, tangible and
intangible, received in an exchange of an idea, service or a good.
Tangible attributes of a product include;
 Design
 Availability
 Performance
 Price
Intangible attributes include ;
 Image
 Value
 Perception

Product levels
A product comprises of a number of levels which form its marketing components.
They include;

Core product
It consists of the core benefits which the product or service provides for example,
in the case of a car this might be, say transport
Actual or basic product
This level comprises the features offered in a product. It includes; design of the
product, its packaging, quality levels etc
Expected product
This level of a product is asset of attributes that buyers normally accept and
agree to when they purchase the product. When these attributes are exceed the
buyers expectations; we have satisfied customers and, where they do not come up
to the customers’ expectations we have dissatisfied customers.
For example if one buys a car, he expects it to start, accelerate, steer, stop, etc;
psychological expectations such as status or credibility for the purchaser.
Augmented product

51
These are aspects or elements of a product which supports its marketability.
These include; customers service, delivery and credit, after sales support,
installation, colour beauty etc.
Product augmentation requires the marketer to look at buyers total consumption
system
Potential product
This encompasses all the augmentations and transformations that the product
might ultimately undergo in the future. This level is important because it raises
the possibility of future product improvement in order to keep the product
competitive.
For example, products which embody developing technologies where constant
improvements are made.

CLASSIFICATION OF PRODUCTS
Products can be broadly classified into;
Consumer products,
Industrial products

Consumer products;
These are products purchased to satisfy personal or family needs of consumers.
They include the following;
Convenience product
These are relatively inexpensive, frequently purchased and rapidly consumed
items on which buyers exert only minimal purchasing effort. They range from
bread, soft drinks and chewing gum to petrol and newspapers. The buyer spends
little time planning the purchase or comparing available brands or sellers. Even a
buyer who prefers who prefers a specific brand will readily choose a substitute if
the preferred brand is not conveniently available.
A convenient product is normally marketed through many retail outlets because
sellers experience high inventory turnover per unit, and gross margins can be
relatively low. Packaging also helps to market these products because many
convenient products are available only on self-service basis at the retail level.
Shopping products
These are items that are more carefully chosen than convenience products.
Buyers are willing to expend considerable effort in planning and purchasing these
items. They allocate time for comparing stores and brands with respect to prices,
credit, product features, qualities, services and guarantees. E.g. appliances,
furniture, bicycles, stereos, jewelry and cameras
Buyers of shopping products are not brand loyal because products are more
expensive.
To market shopping products a marketer require fewer retail outlets, because
they are purchased less frequently, inventory turnover is lower and middlemen
expect to receive higher gross margins.
Specialty products
These are products that possess one or more unique characteristics and for
which a significant group of buyers is willing to expend considerable effort to
obtain. Buyers actually plan the purchase of a specialty product; they know
52
exactly what they want and will not accept a substitute. E.g. painting, exclusive
hair dresser, wedding gowns etc. When searching for specialty products, buyers
do not compare alternatives; they are concerned primarily with finding an outlet
that has a pre-selected product available.
Specialty products are often distributed through a limited number of retail outlets
to enable consumers accentuate/emphasize the exclusivity of the product. The
products are purchased infrequently, causing lower inventory and thus requiring
relatively high gloss margins.

Unsought products
These are products that are purchased when a sudden problem must be solved or
when aggressive selling is used to obtain a sale that otherwise would not take
place. The consumer does not think of buying these products regularly e.g.
emergency car repairs, coffins, etc. The salesperson tries to make consumers
aware of the benefits that can be derived from buying such products

Industrial products
These are items purchased for use in a company’s operations or to make other
products. They are also called business to business products.

Raw materials
These are basic materials that become part of physical products and they include
minerals, chemicals, agricultural products and materials from forests and
oceans. They are usually bought and sold in large quantities according to grades
and specifications.

Major equipment
These are large tools and machines used for production purposes, such as cranes
and spray painting machinery. They are expensive and intended to be used in a
production process for a considerable length of time. Some are custom made to
perform specific functions for a particular organization; others are standardized
and perform similar tasks for many types of firms. Purchasing take long because
it is expensive, and because they are purchased infrequently, marketers provide
services of installation, training, repair and maintenance assistance and even
help in financing the purchase to maintain customers.
Accessory equipment
These are tools and equipment used in production or office activities that do not
become part of the final physical product e.g. typewriters, calculators and tools.
Most of accessory products are standardized that can be used in several
operations.

Component parts
These products become part or incorporated into the physical product and are
either finished items ready for assembly or products that need little processing
before assembly. Although they become part of a larger product, component parts
can often be easily identified and distinguished e.g. microchips, screws, and wires

Process materials
53
These are materials used directly in the production of other products, but not
readily identifiable e.g. chemicals. They are purchased according to industry
standards
Consumable supplies
These are supplies that facilitate production and operations but do not become
part of the finished product e.g. pencils, paper, oils, cleaning agents, etc. they are
sold through numerous outlets and are purchased routinely.
Industrial services
These are intangible products that many organizations use in their operations
which include financial, legal, marketing research, computer programming and
operation, printing services, etc.

THE PRODUCT LIFE CYCLE (PLC).

The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a
seed is planted (introduction); it begins to sprout (growth); it shoots out leaves
and puts down roots as it becomes an adult (maturity); after a long period as an
adult the plant begins to shrink and die out (decline).

The Product Life Cycle refers to the succession of stages a product goes through
from introduction upto withdraw/point of death

In theory it's the same for a product. After a period of development it is

introduced or launched into the market; it gains more and more customers as it
grows; eventually the market stabilizes and the product becomes mature; then
after a period of time the product is overtaken by development and the
introduction of superior competitors, it goes into decline and is eventually
withdrawn.
However, most products fail in the introduction phase. Others have very cyclical
maturity phases where declines see the product promoted to regain customers.

Strategies for the differing stages of the Product Life Cycle.

Introduction.
The need for immediate profit is not a pressure. The product is promoted to
create awareness. If the product has no or few competitors, a skimming price
54
strategy is employed. Limited numbers of product are available in few channels of
distribution.
Growth.
Competitors are attracted into the market with very similar offerings. Products
become more profitable and companies form alliances, joint ventures and take
each other over. Advertising spend is high and focuses upon building brand.
Market share tends to stabilize.
Maturity.
Those products that survive the earlier stages tend to spend longest in this phase.
Sales grow at a decreasing rate and then stabilize. Producers attempt to
differentiate products and brands are key to this. Price wars and intense
competition occur. At this point the market reaches saturation. Producers begin
to leave the market due to poor margins. Promotion becomes more widespread
and use a greater variety of media.
Decline.
At this point there is a downturn in the market. For example more innovative
products are introduced or consumer tastes have changed. There is intense price-
cutting and many more products are withdrawn from the market. Profits can be
improved by reducing marketing spend and cost cutting.

Problems with Product Life Cycle.

In reality very few products follow such a prescriptive cycle. The length of each
stage varies enormously. The decisions of marketers can change the stage, for
example from maturity to decline by price-cutting. Not all products go through
each stage. Some go from introduction to decline. It is not easy to tell which stage
the product is in. Remember that PLC is like all other tools.

Summary of characteristics at various stages

New product development stage
 very expensive
 no sales revenue
 losses
Market introduction stage
 cost high
 sales volume low
 no/little competition - competitive manufacturers watch for
acceptance/segment growth
 losses
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
Mature stage

55
  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
 very profitable
Decline or Stability 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

PRODUCT TERMS
Product item
It is a specific version of a product that can be designated as a distinct offering
among organizations products e.g. Colgate herbal
Product line.
It is a group of closely related items that are considered a unit because of
marketing, technical or end use considerations e.g. Colgate brands
Product mix
It is the composite, or total, group of products that an organization makes
available to customers e.g. Mukwano offers transport services, detergents, plastic,
edible oil etc
 Product depth: It refers to the number of different products offered in each
product line
 Product width: It refers to the number of product lines a company offers

PRODUCT BRANDING
Dibb et al (2003) defines branding as a name, term, term, design; symbol or any
other feature that identifies one seller’s good or service as a distinct from those of
other sellers. A brand may identify one item, a family of items or all items of that
seller

You need to know that branding is a procedure used by firms to research, develop
and implement the naming/branding of the product. It can be a name, sign,
symbol, design or a combination of them. The purpose is to identify a product
from others so that it assists in competition.

There are some terms used such as;

Brand mark – It is the element of a brand that cannot be spoken, often a symbol
e.g. a man on the packet of sportsman
Trademark which is that part of the brand, which is registered and is a legal
part, so no competitor can use it, for example, the bell on a bell beer bottle.
Trade name is full and legal name of the organization that uses the brand e.g.
MTN Uganda ltd.
56
Brand name- It that part of a brand that can be spoken, including letters, words
and numbers e.g. coca cola. Without brand names a firm could not identify its
products.
Brand recognition – It is the extent to which consumers are aware of a brand.
Brand awareness promote the product

Features of a Brand Name:

 It should suggest something about product benefit e.g. Doom suggests
death/destruction.
 It should tell us about the product quality e.g. Tyson Waragi.
 It should be distinctive- should not be easily confused with another brand,
e.g. Nescafe, Shell, Fido Dido.
 It should have a good meaning- should not offend other people (the brand
name should be well positioned in the minds of consumers).

Benefits of Branding
(a). Company benefits
 It is exclusive to the company, for example, the company may decide to
reduce on marketing costs through brand awareness. The company spends
less in advertising and promoting the product.
 It also enables a company to charge a higher price than competitors, thus
more revenue.
 A company can use a brand name for competitiveness.
 Branding offers a company some defense against competition.
 It assists a company to differentiate between the products.
 It helps a company to communicate its offerings.
 Branding also helps sellers by fostering brand loyalty. Brand loyalty is a
strongly motivated and long standing decision to purchase a product or
service. To the extent that buyers become loyal to a specific brand, the
company’s market share for that product achieves a certain level of
stability, allowing the firm to use its resources more efficiently.
 Helps facilitates promotional efforts because the promotion of each branded
product indirectly promotes all other products that are similarly branded
 It helps a firm to introduce new product that carries the name of one or
more of its existing products, because buyers are already familiar with the
firms existing brands

(b) Consumer benefits

 Branding helps us in shopping as you can easily identify one brand from
another e.g. Pepsi-cola vs. Coca-Cola.
 Gives customer psychological satisfaction especially those who want to be
identified with status, e.g. “You can tell who drinks bell”.
 It protects a consumer by giving assurance on quality, depending on the
brand you buy.
 Good brands facilitate quick purchases.
 It helps to reduce buyers perceived risk of purchase

57
  It helps buyers to evaluate quality of a product, especially when they are
unable to judge its characteristics

Types of brands
Manufacturers’ brands
Brands initiated by producers and ensure that they are identified with their
products at point of purchase. It normally requires a producer to participate in
distribution and to some extent pricing. Brand loyalty is encouraged by
promotion, quality control and guarantees; it is a valuable asset to a
manufacturer. The producer tries to stimulate demand for the product, which
tends to encourage middlemen to make the product available
Own label brands
These are brands initiated by resellers (wholesalers and retailers). The
manufacturer is not identified with the product; resellers use these brands to
develop more efficient promotion, to generate higher gross margins and to
improve market images. They help resellers to purchase products of specified
quality at the lowest cost without disclosing the identity of the manufacturer e.g.
marks and Spencer.
Generic brand
It is a brand that indicates only the product category and does not include the
company name or other identifying items. Usually generic brands are sold at
prices lower than those of comparable items.

Factors considered in choosing brand name/principles of branding;

 The name should be easy for customers, including foreign buyers, if the
firm intends to market it’s products in other countries i.e. spell and recall
short names like Tides, Bell and Benz
 The brand name should indicate the products major benefits
 The name should suggest a benefit.
 It should be distinct and socially acceptable.
 It should be pleasing when pronounced.
 It should be pronounced in one way.

Factors to consider in managing brands;

Research shows that to create successful brands a company must;
 Prioritize quality – the top brands are all “high” quality in their product
fields
 Offer “superior” service – less easily copied by competitors than pure
product attributes
 Get there first – not necessary technologically, but in the minds of targeted
customers, by; exploiting new technology, new positioning concepts, new
distribution channels, new market segments and using gaps resulting from
environmental change
 Differentiate its brands – so that consumers perceive the brands on offer as
being different

58
  Develop a unique positioning concept – making the brand and its
differentiating characteristic stand out with a clear image and positioning
message against rival brands
 Support the brand and its positioning with a strong communications
program- so that target consumers are aware of the brand and its
positioning proposition
 Deliver consistency and reliability over time – keeping the brands values
trustworthy as perceived by target consumers.

PRODUCT PACKAGING
A package is a container or wrapper meant to perform several activities/functions
for the product, the consumer and marketers.
A package can be a vital part of a product, making it more versatile, safer or
easier to use. Like a brand name, a package can influence customer’s attitudes
towards a product and thus affect their purchase decisions.

Packaging as a marketing tool/Importance of packaging

 It facilitates service; helps you to select the product you want. The package
guides consumers.
 Consumer affluence/wealth: Many consumers want better packages that
are attractive and associated with status. You should know that most of the
money we pay is for packaging.
 It promotes the company and the brand. It does this by contributing to the
image and brand of the company.
 It offers protection to the product.

Factors to consider as you package the product

1. Consumer Needs: e.g. product protection so that the consumer is
protected and the package should preserve the product. The consumer
needs to use the package to identify the product and the package should be
convenient for the consumer.
2. Re-seller/Distributor: The package should facilitate the distributor during
transportation, storage and handling. The package should also save space-
it should minimize broken storage; that is why square packs are preferred
to round ones. It should be easy to transfer by wholesalers (middlemen).
3. Cost of the Package: Costs should be quantified and should be within
reach of consumers. In other words, the packages should be affordable
since consumers indirectly pay for them.
4. Environmental Considerations: Packages should be environmentally
friendly and meet the sellers’ objectives. Biodegradable/recyclable/eco-
friendly packages should be used.

Product Labeling
Labeling is part of packaging because it enables the marketer to display the
information about the product. You can use a Simple tag, Graphics and a Brand
name. The purpose of labeling is to provide information, identify one product from
another, give an indicator of the product, and promote the product.

59
NEW PRODUCT DEVELOPMENT (NPD)
This is the process a product goes through before introduction, involving phases.

Idea Generation:
This is the process by which business and other organizations seek product ideas
that will help them achieve their objectives. You can organize seminars and ask
attendants to brainstorm. You can also ask or look at consumer complaints or
requests. Ideas can also come from; marketing, researchers, sales personnel,
engineers or other organizational personnel; external sources; customers,
competitors, advertising agencies, management consultants, potential buyers and
private research organizations
Idea Screening:
You select which ideas to go with or avoid. It can be Go-error, where you accept
to adopt a wrong idea, or Drop-error, where you adopt a good idea when it is
good. It is important to drop all poor ideas.
Business Analysis:
A company evaluates a product idea to determine its potential contribution to the
firm’s sales, costs and profits.
Concept Development and Testing:
Ideas are now put in a written form or a conceptual model. Asking customers or
staff questions should test the conceptual/abstract/theoretical model. Here, you
get feedback.
Marketing Strategy Development:
You decide on which market to serve, sales forecasts, positioning size etc.
Product Development:
You test the prototypes/trial products on the market to see the reaction.
Depending on the reaction, you can adjust.
Market Testing:
You get samples and test them on the market. You get a group of consumers in
their localities and give them goods to test.
Commercialization:
This is the beginning of the Product Life Cycle (PLC) - the introduction stage. The
success factors under PLC include good timing, choosing the right geographical
location, choosing the right target market, and choosing good introductory
procedures.

PRODUCT PORTFOLIO ANALYSIS USING THE BOSTON CONSULTING GROUP

[BCG] MATRIX

This matrix can be used in forecasting the future market position of a product
and therefore strategy. It compares the relative worth of the product in terms of
the market share and market growth rate.

BCG MATRIX
60
 RELATIVE MARKETSHARE

High Low
PROBLEM CHILD
High OR QUESTION MARK
STAR Strategy: ‘Build’ or
Strategy: ’Build’ ‘Harvest’ or ‘Divest’

RELATIVE
MARKET
SHARE Low
CASH COW DOG
Strategy: ’Hold’ Strategy: ’Harvest’
Or ‘Divest’

The matrix has four categories of products as follows:

STARS
A product with a high market share in a high growth market. The star product
has potential for generating significant cash flows and profits, currently and in
the future. However, at this stage it may still require substantial marketing
expenditures [building strategy] to continue to grow and maintain this position,
but would be regarded as good investment for the future.

CASH COWS
A product that has a high market share in a comparatively mature and slower
growing market [i.e. low growth market rate].Typically, this is a well-established
product with a high degree of consumer loyalty, low operational costs and well
established marketing campaigns. The cash cow makes a substantial
contribution to overall profitability of the organization and generates cash to
support other products.
The appropriate strategy will be to “hold” if the market growth is reasonably
strong, but if growth and/or share are weakening “harvesting strategy” [cutting
back on marketing expenditures] may be more sensible in order to maximize
short-term cash flow.

PROBLEM CHILD/QUESTION MARK [Fledglings, Wild Cats]

A product with a small market share in a high growth industry. A small market
share implies that competitors are apparently in a strong position and that if the
product is to be successful it will require a substantial injection of funds [cash
guzzlers], particularly on the marketing side. It has the potential to become
tomorrow’s star, and likewise the potential to become tomorrow’s dog. The
appropriate strategy is ‘build’ [e.g. by way of aggressive marketing programs] to
increase market share if the market looks good and the product is viable.
However, if the future looks less promising the organization should consider the
possibility of withdrawing the product [i.e. “harvest” or “divest” strategy].

61
DOG
A dog is a product typified by low market share in a market with low growth rate.
They may generate enough cash to support themselves and yet they require
financial support from other activities. They are losing customer loyalty and may
have cost disadvantages. The organization has no cause for injecting more money
into the dog unless it is sure that by doing so it will effectively rejuvenate the
product and push it back to into cash cow or star product. The strategic choice is
to adopt either a “harvest strategy” [if its cash position is strong] or “divest
strategy” [if its cash position is weak]. Each strategy will enable the organization
utilize the money obtained [harvested] and resources set free [divested] for more
profitable products.

BCG MARKET STRATEGIES

BCG came up with four strategies to achieve and maintain or change the position
of these products:

1. The Build Strategy –This aims at developing and improving market position
and also providing financial support to move the stars to cash cows and
question marks to stars.
2. The Hold Strategy-It is designed to preserve the long-term market position of
an activity or product .It is used in the management of cash cows so that there
capacity to build large positive cash flows is prolonged.
3. The Harvest Strategy-It aims at achieving the maximum short term cash flow
especially those which have no future prospects e.g. cash flows in later stages
of the life cycle, dogs and question marks.
4. The Divest Strategy-It is based on selling off products and finance elsewhere.
It can be used to divest or finance question marks and stars.

CRITICISMS OF THE BCG GROWTH –SHARE MATRIX

Despite its usefulness, the BCG matrix suffers from the following criticisms:
 The categorization of products into only four groups is over-simplistic.
Further, the matrix identifies more than one strategy for each case without
specifying which one is most appropriate.
 It assumes that market growth and market share are good measures for
determining investment and cash flow, an assumption that is not
universally valid.
 Market share and market growth are not always easily and accurately
measured, signaling disaster if decisions are based on flawed assumptions.
 A high market share does not necessarily mean that the product is highly
profitable. Some dogs will be generating quiet significant returns, and some
stars will be making a loss. To benefit from the matrix the organization
should in addition, analyze other factors at play.
 The matrix ignores such factors as competition, which are important in
strategy formulation.

62
 It does not help managers compare products within the same market
situations e.g. stars or question marks both of which exist in a high growth
market.
 Dividing the matrix into four cells based on a high/low classification
scheme is somewhat simplistic. It does not recognize the markets with
average growth rates or the businesses with average market shares.
 The use of labels associated with this matrix deserves further comment. A
recent survey of numerous executives in large firms using portfolio
planning technique found widespread dislike of the dog, question mark,
cash cow, and star terminology. Use of the word dog creates motivational
problems. If you call a business, it will respond like one. It’s one thing to
know that you are an ugly duckling-much worse to be told explicitly that
you are.

63
 PRICING POLICIES AND STRATEGIES
Learning Objectives:

i. The strategic role and importance of price;

ii. The ways in which price can be used tactically;
iii. Factors that need to be taken into account when setting a price;
iv. The nature of pricing objectives;
v. Methods of pricing

Introduction:
For many organizations, price is potentially the most controllable and flexible
element of the marketing mix. It is also in many cases one of the most important
elements and, together with the product, a key component of an organization’s
marketing strategy. It will certainly be unthinkable for the firm to design a novel
product and then charge nothing and yet claim to be in business. How will it pay
its liabilities [bills, wages, rent, Interest, etc.] or purchase necessary resources
[people, machinery, premises, etc…] required to meet its objectives?

Price is the one element of the marketing mix that produces revenue; the other
elements [product, promotion and place] produce costs.

Price communicates to the market the company’s intended value positioning of its
product or brand.

What is pricing?
Pricing is the process of setting a price for a product.

What is Price?
 A measure of the value exchanged by the buyer for the value offered by the
seller.
 Everything that a consumer must surrender to obtain a product
 The amount of money charged for a product or service or the sum of values
consumers exchange for the benefits of having or using a product or service
[Kotler & Armstrong]

Different institutions use different terminologies [names] for price for example:
 Colleges/Universities -Tuition fees
 Transporters -Fare, freight
 Landlords/Real Estate -Rent
 Insurers -Premium
 Charities -Donation
 Associations -Subscription/contribution
 Companies -Shares
 Port Authorities -Wharfarge
 Hospitals/Clinics -Consultation fees
 Government -Tax/tariff/levy
 Banks -Interest
64
 Guest Lecturer -Honorarium
 Workers -Wage
 Sales people -Commission
 Utilities -Bills

THE ROLE AND IMPORTANCE OF PRICING

(a) The role of Price in the Marketing Mix:

If product is the most important single element in the marketing mix, then price
is usually the next. Price is important because of the following reasons:
i. It is the only element of the mix, which generates revenue; the others all
represent costs.
ii. Pricing is concerned with the determination of a price, which will produce
the desirable level of sales in order to meet the objectives of the overall
business strategy

(b) The commercial importance of Pricing:

i. Pricing and the Organizations Income - Pricing is the only element of an
organization marketing mix that generates income or revenue. Price paid by
customers generates income for the organization
ii. Pricing, Demand and Sales Volume -There is a relationship between price,
demand and sales volume. According to the economics law of demand, the
lower the price, the higher the demand and vice versa, other things being
equal.

At the same time a high demand for a product leads to a higher sales
volume and vice versa. This of course, implies that:
 The price charged by the organization will affect the demand for its
products and ultimately its sales volume.
 The magnitude of the sales volume will consequently affect profitability
of the organization.

Therefore pricing is critical in ensuring that “a profitable volume of sales” is

achieved by an organization. It is important to set a price, which will
stimulate a reasonable demand and sales for the product such that profit
objectives are achieved.
iii. Pricing and Profitability - Pricing affects profitability of an organization and
can be used to maximize it by:

 Increasing the existing customer base i.e. charging a price that attracts
non-customers;
 Maintaining the existing customer base, i.e. charging a price that enables
existing customers to buy more products;
 Using pricing tactfully e.g. in banks paying low interest on customer
deposits [i.e. borrowing low] and charging higher interest on loans
[lending high].

65
(c) The strategic importance of Pricing
Pricing has an important role to play as a competitive tool:
i. It can be used to differentiate a product and an organization and thus
exploit opportunities.
ii. It is perceived by consumers to reflect the degree of the product’s quality.
Thus it contributes to the overall image created for the product. No
organization is likely to offer a high quality product with a low price – the
price must be consistent with the overall product offer.

For example price can be used to:

 Attract customers and increase sales [penetration strategy];
 Reap profits from-non price sensitive customers [skimming pricing
strategy];
 Pull crowds of customers for cross-selling [loss-leader pricing strategy]
etc…

All these strategies will have strategic implications to other elements of the
marketing mix such as distribution, promotion, personal selling and so on.

APPROACHES TO PRICING DECISIONS

Selecting the right price is one of the most critical decisions to be undertaken by
the firm. The pricing decisions are important for two main reasons:
 It has an effect on revenue and profitability of the organization i.e.
Price x Quantity = Revenue
 Price directly affects the amount sold through its influence on demand. If price
is too high it drives away customers.

When are Pricing decisions desirable for an Organization?

A number of situations can be identified where pricing decisions have to be made

and include:
i. When an organization sets price for the first time, e.g. for a new product
that is being launched on the market, it sets the level of price and thus the
image of the product.
ii. When competition leads the organization to make price changes.
iii. When the organization produces several products with related demand or
costs
iv. Placing of existing products into new markets
v. Repositioning a product or move a product back in its lifecycle
vi. When an organization seeks to gain a large market share
vii. When the organization needs to generate more income

It is generally acknowledged that pricing decisions are among the potentially most
difficult that marketing managers are required to make. There are several reasons
for this, the most significant of which are:

66
1. The nature and complexity of the interaction that commonly exists between
three groups [Consumers, the trade and Competitors] and the need that exists
to take the interaction into account in setting price.
2. Decisions have often to be made quickly and without testing, but most
invariably have direct effect upon profit.
3. Pricing decisions are at times taken away from the marketing manager by
combination of related factors. Prominent among these is the presence of a
large and aggressive competitor who in effect determines price for the industry
as a whole and others firms are obliged to follow. The challenge for the
strategist therefore is to ensure that the costs are contained in such a way
that profits can still be made.

It is perhaps understandable why many marketing strategists treat pricing

decisions with extra degree of caution, which also helps to explain why setting
prices and dealing effectively with price competition is one of the biggest problems
faced by the Marketing strategist. The combination of these factors also goes
some way towards explaining why it has often been suggested that relatively few
organizations handle pricing well, and why a series of mistakes are commonly
made. The common of these are;
1. Pricing decisions are often too heavily biased towards cost structures and fail
to take sufficient account of either competitors’ or customers’ probable
response patterns
2. Prices are often set independently of other mix elements and without
sufficiently taking explicit account of e.g. advertising strategies and market
positioning
3. Too little account is taken of the opportunities to capitalize on differentiation.
4. The prices often do not vary sufficiently greatly between different segments of
the market
5. Prices often reflect a defensive rather than an offensive posture

The above taken together suggest that pricing decisions run the risk of emerging
largely as a result either of historical factors or of expediency, rather than detailed
strategic thinking. The likelihood of this risk is further increased by the often-
haphazard way in which the focus of responsibility for pricing is allocated. For
example, in many small firms, pricing decisions are often not made by sales and
marketing staff, but by senior management. In larger organizations, although the
responsibility for price setting is often developed downwards, senior management
typically retains an overseeing brief.
Perhaps the biggest single source of the problems that are typically associated
with pricing stems from the question of whether pricing should be the
responsibility of marketing or finance. Although writers on marketing have long
argued that price is a marketing variable, a substantial body of evidence exists to
suggest that in many organizations, price is still seen to be the responsibility of
the finance department, and the finance staff guard their possession of this with
a degree of jealousy that makes it difficult for marketing to do little more than
exert a minimal influence. This of course is a stance to which we, as scholars of
strategic marketing should not subscribe.

67
 FACTORS THAT INFLUENCE PRICING DECESIONS
Pricing decisions are affected by both internal and external factors. Internal
factors are those over which the firm has a high degree of control. External
factors are those over which the firm has little or no control.

Internal factors:
i. Marketing Objectives: Organizations have many objectives including
survival, current profit maximization, market share leadership, product
quality, loyalty, fighting or matching competitors, and so on. A different price
will have to be adopted for each one of these objectives. A firm may set a low
price in order to undercut key competitors, but high price to match its
superior product quality.
ii. Marketing –Mix Strategy: Price is only one of the marketing mix tools that a
firm uses to achieve its marketing objectives. This means pricing should
never be done in isolation with other marketing mix strategies that is product
design, distribution, and promotion, quality of service or degree of personal
selling.
iii. Costs: Costs set the floor for the price that a firm can charge for its products.
The price charged should therefore be able to cover all its costs for producing,
distribution and selling the product and also deliver a fair rate of return for
its efforts and risk.
iv. Product Life Cycle Stage: Price cannot ignore the life cycle stage that the
product has reached. A low or high price may be set during the introduction
stage, maintained at the growth but revised during the maturity and decline
stages.
v. Organization Considerations: Any pricing process ought to take into
account the influence that various parties have in an organization have ion
pricing. These include management, marketing managers, sales managers,
product managers, production managers, finance managers, accountant
etc…Other important organizational considerations would include policies on
profitability, desired market share and goals for sales, production and
finance.

External Factors:
i. The Market and Demand: Whereas costs set the lower limit [floor] of price,
the market and demand set the ceiling or upper limit. The price setter must
seriously consider the following before setting price:
 The relationship between price and demand
 The type of market in question

Price vs. Demand: The Economics of Price

The degree to which price influences demand depends on the elasticity of
demand, that is whether demand is elastic, inelastic or unitary.
 In elastic demand, a slight change in price will trigger a big change in
demand for the product [e.g. the case of luxurious products/services]
 In inelastic demand for the product a big change in price will cause only a
slight change in demand for the product.
68
 In unitary demand, a change in price is exactly offset by a proportionate
change in demand for the product.

With inelastic demand, a price increase can actually increase total revenue even
though sales volume declines, but with elastic demand both sales volume and
total revenue fall.
ii. Pressure from suppliers of raw materials and other resources i.e. suppliers
raise the price or raw materials; if they are bought from overseas, the effects
of currency fluctuations
iii. The existing and anticipated government policies
iv. General conditions in different markets-inflation rates, consumers’
perceptions and expectations
v. Motivation of customers e.g. through communication

FRAMEWORK FOR SYSTEMATIC PRICING DECISIONS

As with any decision-making process, pricing decisions are likely to be most
effective when they are undertaken in a planned and systematic way. Pricing is
not something that is done as an afterthought during the marketing of a product.

There are many suggested frameworks for structuring the pricing decisions and
there is no one way to structure this decision
Below are logical and acceptable steps of the pricing process;

i. A statement of the Company and marketing Objectives

ii. Establish the pricing objectives and policy
iii. Assess target markets-Develop an understanding of the determinants of
price e.g. demand, costs, supply, competition, legal issues and
environmental factors
iv. Determine the role that price is to play within the marketing mix
v. Develop and evaluate the likely effect of a series of prices

DECIDING ON PRICING OBJECTIVES

Having developed the framework within which pricing decisions are to be made,
the marketer needs to decide upon specific pricing objectives that are to be
pursued. Apart from organization objectives, the starting point is to be clear
about the pricing objectives.
Pricing objectives help to focus the organizations pricing policies and decisions.
The objectives are the goals that the organization wishes to achieve through its
pricing efforts. These goals or objectives may vary from one organization to
another. For most manufacturing firms, the commonly pursued pricing objectives
include;

Survival: Arguably the most fundamental pricing objective and comes into play
when conditions facing the organization are proving extremely difficult. Thus
prices are reduced often to levels far below cost simply to maintain a sufficient
flow of cash for working capital.

69
Return on Investment: Prices are set partly to satisfy the needs of consumers,
but more importantly to achieve a predetermined level of return on the capital
investment involved.
Market Stabilization: Having identified the leader in each market, the firm
determines its prices in such a way that the likelihood of the leader retaliating is
minimized. In this way, the status quo is maintained and market stability
ensured.
The maintenance and Improvement of Market Position: The firm uses price
partly as a means of defending its current position, and partly as a basis for
gradually increasing its share in those parts of the market where gains are most
likely to be made and least likely to result in competitive action.
However, using price to pursue market has disadvantages that include:

 Gaining market share, particularly in mature markets, is often prohibitively

expensive and only rarely cost effective;
 Share gaining price strategies tend to be blunt weapons, which do not
reflect differences between buyers;
 At a particular stage of the lifecycle, market share is an in appropriate goal
and can lead to the organization ignoring strategically more important
areas such as distribution.
Meeting or Following Competition: Having entered a market in which
competitors are firmly entrenched, the firm may decide simply to take its lead in
pricing from others until it has built up sufficient experience and established a
firm reputation on which it can subsequently build.
Pricing to Reflect Product Differentiation: For firms with a broad product
range, differences between the products can often be made most apparent by
means of price variations related to each market segment.
Market Skimming: The marketer enters the market with a high price and only
gradually lowers it as he seeks a greater number of market segments. In this way,
profits are likely to be relatively high and, buy minimizing the degree of
commitment at any one time; the levels of risk are minimized.
Market Penetration: The prices are set at a deliberately low level to ensure a
high level of sales to keep competitors at a distance.
Early cash Recovery: Faced with problems of liquidity or a belief that the PLC of
the product or market is likely to be short; the firm may opt for a policy designed
to generate a high cash flow and lead to an early recovery of cash. This may be
through a rigorous credit control policy and a series of discounts designed to
increase immediate sales and achieve prompt payments.
Preventing New Entry: Because of the potentially powerful role that price can
play, low price may have the effect of preventing others from entering the market
as they recognize the low returns available and the dangers of becoming involved
in a price war. In this way, the firm may be able to minimize the amount of
competition, while recognizing that the returns may be relatively unattractive.

PRICING DECISIONS AND PORTFOLIO ANALYSIS

Portfolio analysis is capable of providing a series of general pricing guidelines.

70
 Question marks-offer scope either for skimming in order to quickly regain
investment, or rapid penetration by means of low prices in order to build share
and keep competitors at bay.
 Star stage-high prices are appropriate when the buyer loyalty is high and/or if
a high level of development costs still needs to be recovered. In other markets,
a low price may be needed in order to retain share.
 Cash cow stage-prices are likely to drift down partly because of a general
increase in competition as late entrants to the market appear, and partly
because the significance of differentiation is often reduced.
 Dog-the pricing choice is straightforward. Either price aggressively in order to
build share, or where this is felt either not to be possible or worthwhile, raise
prices in order to maximize very short-term profits as far as possible and then
withdraw

PRICING METHODS/TECHINIQUES
There are four principal factors, which influence pricing decisions:
1. The company’s marketing objectives;
2. The company’s pricing objectives;
3. The determinants of demand including costs, competitors and consumers;
4. The product itself and the extent to which it has any distinguishing features.

The relative importance of these varies considerably from one product and market
sector to another. All the four, however, need to be taken into account in the
choice of the pricing method.

In deciding how to price, the strategist has a choice between a range of

techniques which can broadly be seen as:
 Cost-Oriented
 Demand/Market-Oriented

 COST-ORIENTED TECHNIQUES
The three most commonly used cost oriented pricing techniques are:
1. Mark-up or Cost-plus Pricing
2. Target return on investment Pricing
3. Early Cash-recovery Pricing

Mark-up or Cost-plus Pricing

It is the most straight forward and commonly used technique that simply involves
adding a standard mark-up to the total fixed and variable costs of the product
[FC+VC=TC].
Assuming a firm produces 500 units at a TC of 2,500,000 Shs. What would be
the Mark-up Price if the firm uses a mark-up of 20%?
Although a commonly used method of pricing, the technique has little to
commend it other than its simplicity. This is because information about costs is
easily obtainable.

Limitations of Mark-up or Cost-plus technique of Pricing

 The difficulty of identifying and allocating the product’s full costs [TC].
71
  If price is set too high, the sales may fall short of expectations. If price is set
too low then potential revenue is sacrificed.
 Cost-plus price indicates production-orientated approach to the market.
The firm is therefore inward looking rather than outward usually to the
customers’ perception of the product.
 It is inflexible in that it does not take into account the changing
circumstances within the market. It links prices to the known variable of
costs rather than to the uncertainties and realities of demand.
 It disregards the actions of competitors and lacks any real logic. Since it
disregards the competitor and the nature of demand, it’s unlikely to lead to
an optimal price.
 It ignores price elasticity of demand, which would provide clear indication
of effect of any price on revenues.
 A further limitation of the technique is that when costs rise, prices follow
almost irrespective of the implications for demand.

2. Target Return on Investment Pricing

The second cost-oriented technique is based on the idea that the organization
sets prices in order to achieve a particular level of return on the investment.
The calculation is straight forward:

Price to achieve the ROI=

Unit Cost + Target percentage return x Capital invested

Unit Sales

Suppose a firm has invested 150 million Shs. in the business and wants to set a
price to earn 20% ROI and expected sales are 100,000 units with unit cost of
1,500 Shs. What would be the Target return Price?

The problems that exist with application of the technique are broadly similar to
those that are associated with mark-up pricing.
The method is essentially introspective and market opportunities are likely to be
missed. There is also the problem if the price that emerges proves to be too high
to achieve the level of sales needed to cover costs and target return.

3. Early Cash-Recovery Pricing [ECR]

Pricing in order to achieve a rapid recovery of the investment involved is often
needed when forecasts suggest either that the life of the market is likely to be
short [e.g. a fashion –related product], or when the organization anticipates that a
larger company will shortly enter the market and, by lowering prices, force others
out. In these circumstances emphasis needs to be placed upon pricing at a level
which will, as far as possible, maximize short-term revenues and reduce the
firm’s medium-term risk.

DEMAND/MARKET ORIENTED TECHNIQUES

72
Because of the shortcomings of the cost-oriented techniques, many organizations
opt instead for methods of pricing that take a far greater and more explicit
account of market and market-related factors.

Prices in these circumstances are to be determined by a combination of

competitive forces, and consumers’ perceptions of relative value. In using this
approach, the justification for a price increase has to be that it will add profit or
help gain or increase a competitive advantage.

The most common manifestations of a demand-oriented approach are:

1. Perceived value Pricing
2. Going rate Pricing

1. Perceived Value Pricing

In this approach which is also known as “perceived benefit or benefit pricing” the
marketing strategist gets beyond the stage of “What does it cost us to deliver the
product/service?”

It is based on the idea that in setting a price, costs should be of secondary rather
than primary importance. The more important factor is the question of how
customers perceive the value of the product. This perception can be influenced by
several factors, the majority of which are under the control of marketing
Managers. They include the positioning strategy that is used, the image, the level
of support services, and how the lifetime operating costs of the product compare
with those of a competitor.
From the customers point of view value for money is the key ingredient when
weighting prices. Therefore organizations are tasked to deliver the promised value
if at all they are to charge the price.
Value pricing is useful when cost structures are unobtainable e.g. where the
marketer is unable to assess the underlying costs of a service and therefore has
to charge a price that is relevant to what the customer feels they should pay as
far as possible.

2. Going Rate Pricing

It is based on the notion that costs are of only limited direct value when setting a
price that customers will respond to most meaningfully. Instead, the benchmark
is the price set by a major competitor. The firm then sets its price at the same
level or, depending upon the existence or absence of any additional distinguishing
features, either just above [premium pricing] or just below [discount pricing] this
level.

Going rate pricing as a method of pricing has proved popular not just because of
its apparent simplicity but it appears to reflect what is sometimes referred to as
the collective wisdom of the industry, and also because it tends to reduce the
likelihood of price wars emerging.

PRICING PROBLEMS

73
Although in an ideal world the strategist would simply determine the pricing
objectives and then move on to develop the detail of pricing structure, there are in
practice several problems that are commonly encountered and conspire to
prevent the objectives being achieved unless an allowance is made for them.
These include:
i. Prices may be too high when compared with those of competitors and lead
either to reassessment of objectives or an acceptance of erosion of market
share.
ii. A given price, while acceptable in one sector of the market, may be too high
or low elsewhere.
iii. The price may be viewed by sections of the market as exploitative and the
company consequently seen as untrustworthy.
iv. Price differentials across the product line may be illogical
v. The price may destabilize a previously stable market
vi. The price may damage or inhibit brand loyalty
vii. The strategy may well lead to an increase in buyers’ price sensitivity.

APPROACHES TO PRICE SETTING

In some industries at least organizations have little choice other than to follow the
prices set by the market leader. This leads to the hypothesis that there are two
types of firms:
1. Price takers which, by virtue of their size and market position, lack of
product differentiation, or passive organizational culture, are either unable or
unwilling to adopt a proactive pricing stance. As a result they follow the lead
set by one or more larger and more aggressive organizations within the
industry.
2. Price makers who, largely as the result of their size and power within the
market, are able to determine the levels and patterns of price which others
then follow.

In setting price for a new or modified product, or for an existing product, which is
being introduced into a new sector of the market, the strategist needs to give
explicit consideration to a variety of factors that are summarized as follows:
1. The organization’s corporate objectives;
2. The nature and structure of competition;
3. The product lifecycle;
4. Legal considerations;
5. Consumers and their response patterns;
6. Costs

1. Corporate Objectives
By starting with a statement of the firm’s overall objectives and of what it is trying
to achieve within each sector of the market, it is possible to identify the broad
dimensions of the pricing strategy and the role that price is expected to play.
2. The nature and structure of competition
If the market is dominated by large aggressive competitor the firm is likely to be
forced into the position of having to follow the market leader with little or no real
control over price charged. This, in turn, may have consequences for prices in
74
other markets either because a policy of price standardization is being pursued,
or because it is seen to be necessary to increase prices elsewhere to compensate
for these pressures. In other circumstances the firm may find itself in a market in
which it has a degree of technological leadership or in its manufacturing or
marketing expertise provides it with a significant competitive advantage and
hence a greater degree of pricing flexibility.
3. The product Lifecycle
As the products move through their life cycle, the role of each element of the
marketing mix also changes. In determining the pricing policy, consideration
should therefore be given to three main factors:

i. The probable length of the product’s life cycle;

ii. The scope that exists for a competitor to introduce a new product or
technology –possibly from another market – thereby artificially shortening
the length of the life cycle;
iii. The firm’s profit expectations

Each stage of the PLC has got specific implications for pricing that are as follows:

Pre-launch Establish price objectives. Analyze the various influences upon

price [e.g. forecast levels of demand, costs, competitors,
product characteristics, supply factors, legal issues etc…

Introduction Penetration or skimming prices depending on objectives and

market characteristics.

Growth Use price to combat competition. Make use of economies of scale.

Strengthen dealer ties, improve price/value perceptions.

Maturity Price to protect position. Identify alternative distribution channels

offering scope for higher prices.

Decline Price to maximize profits, even at the expense of market share. Use
price reductions in short-life segments.

4. Legal Considerations
In many markets the pricing policies of large companies and particularly the
multinationals are a potentially controversial issue, with some governments,
particularly those in the Third world, viewing their strategies as unduly
manipulative, exploitative and against consumer interest. Because of this
countries have carried out price legislation in one form or another. This has taken
the form of anti-monopoly rules in an attempt to protect small companies,
domestic manufactures and consumers from abuses of large firms.

A second area of concern for governments, which has also led to the emergence of
legislation, is that of price dumping. This is where an international firm uses its
revenues from one market to subsidize abnormally low prices in another. The

75
 consequences of dumping have often proved to be disastrous for indigenous
manufacturers.

The final legal issue, which needs to be considered, relates to price collusion. In
some circumstances, companies may attempt to reduce price competition and
establish a greater degree of control over the market by some form of collusion
since, by doing this; price is to all intents taken out of the competitive equation.
Collusion, however, is seen in many developed countries to be anti-competitive
and such is typically subject to legal sanctions.
5. Consumers and their response Patterns
In setting a price the strategist needs to understand in as much detail as possible
what effect it will have on levels and patterns of demand. This requires taking into
account competitors and their probable patterns of behavior, and the consumers’
sensitivity to price. Although a number of approaches have been developed, one of
the most useful has been proposed by Nagle [1987] who suggests that there are
nine principal influencing factors:
i. The unique effect: the more distinctive a product is, the less price sensitive
buyers become;
ii. The substitute awareness effect: the more aware consumers become of
substitutes, the greater their price sensitivity;
iii. The difficult comparison effect: the more difficult it is to make direct
comparisons between products, the less price sensitive they are likely to be;
iv. The total expenditure effect: the lower the expenditure is as a proportion of
their total income, the lower the degree of price sensitivity;
v. The end benefit effect: as perceived benefit increases, so price sensitivity
reduces;
vi. The sunk investment effect: when the product is used in association with
products bought previously, price sensitivity is reduced;
vii. The shared cost effect: price sensitivity is reduced when the costs are shared
with one or more other parties;
viii. The price-quality effect: the greater the degree of perceived quality or
exclusiveness, the lower the price sensitivity;
ix. The inventory effect: when the product cannot be stored and consumption
takes place immediately, price sensitivity again reduces.
6. Costs
Costs determine/set the floor/lower limit a company can charge for its
product. The organization needs to charge a price that covers all its costs for
producing, distributing and selling the product and delivers a fair return for its
effort and risk.

PRICING STRATEGIES

 PRICING STRATEGIES FOR NEW PRODUCTS

Three of the most important strategies for pricing new products are:
1. Skimming Pricing
2. Market penetration Pricing
3. Perceived value Pricing
76
Skimming Pricing- This strategy involves setting a high initial price for the
product so as to just “skim the cream” of demand for the product. [The name
comes from the analogy of skimming the cream off the top of the milk]. The
strategy is intended to create early profits by attracting non price-sensitive
customers or by implying high product quality.

It is suited for new products because:

i. New products are less affected by price until competition arrives.
ii. It allows the marketer to attract the less price-sensitive prior to attracting
the more price-sensitive with a cut price
iii. A high initial price may help the product gain an image of prestige and
quality.
iv. A skimming price can be a means for testing demand. It is often easier to
set a high initial price and reduce it as the market demand emerges. It is
often more difficult to do the reverse.
v. A high initial price often produces more revenue in the early days, thus
bringing funds to finance expansion into larger markets.
vi. An initial high price can also serve to recoup research and development
costs.
vii. There are sufficient buyers to pay the high price i.e. demand is inelastic
viii. People with high disposable incomes will often pay such high prices to
enjoy the prestige and/or novelty of being first.

Market Penetration Pricing – This is the opposite of skimming pricing. It sets

an artificially initial low price in order to gain maximum penetration or capture a
large share of the market quickly.

Penetration pricing is a valid strategy if one or more of the following conditions

exist/apply;

 The market appears price sensitive

 The intention is to win or capture a large market share in a mass market or
price-sensitive markets.
 The quantity of the product sold is highly sensitive to price even in the
introductory stage of the PLC.
 A large sales volume is needed to achieve substantial economies in
production and/or distribution costs.
 Strong competition will emerge soon after introduction or where already
there is a lot of competition.
 There are probably not elite markets i.e. a group willing to pay a premium
price to obtain the product early.
 Following the penetration, small producers/providers/sellers frequently
have to withdraw hence increasing the penetration’s market share.

Perceived Value or Value pricing – Perceived benefit or benefit pricing: The

marketer gets beyond “What does it cost us to deliver?” to “What is the perceived
value [benefit] to the Customer?” Value pricing is useful when your cost
77
structures are unobtainable e.g. where the marketer is unable to assess the
underlying costs of a service and therefore s/he has to charge a price that is
relevant to what the customer feels they should pay as far as possible.

 PRICING STRATEGIES FOR EXISTING PRODUCTS

Existing products will need to be re-priced from time to time in order to reflect
changes in demand for the product and the stage that it has reached in the life
cycle.

Pricing strategies for Existing Products include the following;

Cost plus Pricing: Identify the basic cost of the product and add percentage
markup [or profit margin] to the cost in order to arrive at the price. The approach
requires the ability to assess accurately cost structure. It is more used in
product-based firms.
Market Pricing or Competitive Pricing: If the market is fiercely competitive,
then the firm may have to price its products at the price the market will bear i.e.
at the same level as its competitors. This strategy:
 Reacts to competitors’ prices in an attempt to match or out price them.
 Ignores completely the wishes of the customers and the firm’s cost
structures.

Thus the price setter need to consider the firm’s pricing objectives before
employing this strategy.
Break-even Pricing: B/E is the point at which product price or revenue will
cover all its cost. The price can be adjusted to fit in with expected demand and
customer sensitivity until a price is arrived at that fits the target sales and
produces target profit.
Relationship Pricing: The firm is aware of the cost structure, but even more
aware of the need to nurture a sound relationship with the customer who will
later be ripe for profitable cross-selling activity. Thus, prices charged are designed
to keep the customer happy in pursuance of the firm’s long term gain.
Loss-Leader Pricing: The firm sells particular products at a loss so as to enable
it cross-sell other profitable services. Under this system, loss leader products act
as crowd-pullers.
Pricing for Market Share: This strategy is aimed at gaining cost leadership in
order to build market share. Profits will suffer in the short term, but grow in the
long term if the strategy succeeds.
Differential Pricing: The approach entails the use of different prices for different
market segments, with the price being varied according to the differing degrees of
price sensitivity.
Tactical Pricing: It’s primarily concerned with short term pricing decisions
where price is almost being used as a “promotional devise” to stimulate an
increase in market share. This strategy may be used to smoothen [even out]
fluctuations in demand, which typify the demand for services.

PROMOTION

78
Promotion refers to communication with individuals, groups or organizations in
order to facilitate exchanges by informing and persuading the audience to accept
the firm’s products. MTN Uganda, for example recruited Jose Chameleon to
communicate the benefits of its services

THE PROMOTION MIX

Promotion is concerned with the communications between the marketer and the
market. The marketer is the source while the market is the audience. This
communication can be verbal or non-verbal. We communicate company offerings.
Hence the communication is about the product, price, people, process, physical
distribution, etc. In most cases, the audience will dictate on how you can reach
them. Promotion keeps the product in the minds of the consumer helps
stimulate demand for the product. Promotion involves advertising, personal
selling, sales promotion, public relations and direct marketing. A marketer should
balance the promotion mix elements and decide how much more advertising you
need or public relations. You need to note that this will depend on the product
and market situation. The quality and price of the product should be balanced
with the elements of the promotional mix.
Promotion mix includes the following;
 Advertising
 Personal selling
 Sales promotion
 Public relations
 Publicity
 Direct marketing
 Sponsorship

1. ADVERTISING
This refers to any paid form of non-personal communication about an
organization and its products that is transmitted to a target audience through
mass medium such as; television, radio, newspapers, magazines, direct mail,
public transport, outdoor displays/catalogues, posters and billboards, yellow
pages, cinemas, junk mails, telephones and websites. Advertising is cost affective
in that one page advertising in The New vision is 1,360,000/= and the newspaper
reaches 36,000 readers, the cost of reaching, the cost of reaching each customer
is 38/=

Advertising objectives/uses include;

 Conveying the message about the product/service
 Building a good image for the company and its products
 Stimulate primary and selective demand
 Offset competitors advertising
 Aid sales personnel and make them effective
 Increase uses of a product
 Reducing sales fluctuations
 Remind and reinforce customers
79
  Educating the market about the offers
 Creating awareness about the product
 Creating customer loyalty
 Communicating other marketing elements.

Informative advertising
It is used heavily when introducing a new product category and the objective is to
build primary demand. When an airline opens a new route, its management often
runs advertisements informing the market about the new service.

Persuasive Advertising.
This becomes more important as competition increases and a company’s objective
build selective demand.

Reminder Advertising
This is important for nature products, because it keeps consumers thinking
about the product. For example, a personalized “thank you” card creates good will
and reminds the customer about the establishment.

For an advertising campaign to create long-term sales, the product advertised

must create satisfied customers. There must be consistency in terms of service
delivery and quality of the products. Otherwise, dissatisfied customers quickly
spread negative word of mouth to potential customers, who are eager to know the
company.

Forms of Advertising and their advantages and disadvantages:

Print
Newspapers and Magazines
Advantages – A lot of information is known about the people who read certain
papers
Disadvantages - Often not in color and are static and silent

Posters and Billboards

Advantages - High visual impact for a long time and will be seen by a lot of
different people
Disadvantages - Are only seen for a few seconds by drivers and are vulnerable
to weather and graffiti

Yellow Pages
Advantages - Anyone looking in the Yellow Pages wants to buy
Disadvantages - A lot of your competitors are on the same page you are

Media
Television
Advantages - Can reach millions of people all over the country
Disadvantages - Very expensive

80
 Radio
Advantages - Cheaper than T.V, can be used to reach certain listeners
Disadvantages - Sound only, smaller audiences

Cinemas
Advantages - Very high visual and sound effect, captive audience
Disadvantages - Are relatively expensive

Communications
Leaflets and junk mail
Advantages - Cheap to produce and distribute
Disadvantages - Are easy to ignore

Telephone
Advantages - Direct to customer, interactive, receive instant feedback.
Disadvantages - makes some customers feel their privacy has been violated,
sometimes has negative results.

Websites
Advantages - High visual impact, interactive and can link directly to buying
the product, is relatively cheap
Disadvantages - There is a lot of competition so getting people's attention may
be difficult, needs to be continually updated, can become expensive

Constraints/limitations/challenges of advertising
i. Language problem
ii. Media availability (Multiplicity radios can also be a problem).
iii. Government control
iv. Competition
v. Cost limitation. Some adverts are very expensive
vi. Cultural problems

Advertising Strategies
(a) Pull Strategy: This targets end-users with the message and in turn they
demand the product from the channel members (distributors.
(b) Push Strategy: This targets channel members with incentives so that they
take products to end-users.

2. PERSONAL SELLING
It the process of using personal communication in an exchange situation to
inform customers and persuade them to purchase products. Personal selling
gives marketers the greatest freedom to adjust a message to satisfy customers’
information needs. For long run survival, most marketers depend on repeat sales.

Personal selling or salesmanship is an important method of selling. It involves

direct and personal contact of the seller or his representative with the prospective
buyer. It is a face-to-face oral communication with the potential buyers. It is the

81
act of convincing or persuading the buyers to buy certain goods/services.
Personal selling is beneficial to both the sellers and buyers.

Elements of the personal selling process

 Prospecting and evaluating; this is a process of developing a list of potential
customers. The list is ranked according to desirability and potential
 Preparing; i.e. identify key decision makers, reviewing account histories and
reports, contacting other clients for information, assessing credit histories
and problems, preparing sales presentations, identifying product needs and
obtaining relevant literature.
 Approaching the customer; it’s a manner in which a salesperson contacts a
potential customer-the purpose is to gather information about the buyer’s
needs and objectives. Favorable impression and rapport make ever lasting
relationships
 Making the presentations; attract and stimulate interest and stir up desire
for a product.
 Overcoming objections through anticipating them and counter them before
presentation.
 Closing- the salesperson asks the prospect to buy the product or products
 Following up- salesperson should follow up the sale; it can also be used to
determine customers future product needs.

Types of salespeople
 Order getters; employees who increase their firms sales by selling to new
customers and by increasing sales to present customers. The order getters
job is to increase the firms sales by selling to new customers and by
increasing sales to present customers
 Order takers; these are employees who ensure that repeat customers have
sufficient quantities of the desired product where and when they are
needed in order to perpetuate long lasting relationships.
 Support personnel; these facilitate the selling function but are not usually
involved solely in making sales e.g. missionary salespeople (employed by
manufacturer to assist middle men customers), trade salespeople (these
take orders as well as well as help customers, especially retail stores,
promote product), technical salespeople (give technical support to
organizations current customers)

3. PUBLIC RELATIONS (PR)

Public relations refers to ongoing activities to ensure the company has a strong
public image. It helps an organization and its
publics/stakeholders/constituencies adapt mutually to each other. PR is the
management between an organization and its publics.
It is the most misunderstood part of the marketing communications despite being
the most effective tool.

Major activities of PR in an organization.

These include the following;
82
  Press relations: Intended to give news and information about the
organization. Such news must be positive.
 Product publicity: The organization sponsors some programs in order to
convince consumers to buy more of their products.
 Corporate communication: It must promote understanding of the
organization within the internal and external audience which must receive
good news about the organization.
 Lobbying. Organizations use PR to contact legislators to influence some
organizations’ activities e.g. VAT on some items/products.
 Counseling: This means advising the organization on some public matters,
and giving some advice on the image of the products and the organization.

4. PUBLICITY:
This is the directive function of PR. It refers to the mention in the media, as
opposed to the paid space, to promote a product or a service. It is just media
coverage- news stories, feature articles, talk show interviews, editorials and
reviews.

5. DIRECT MARKETING
This refers to the distribution of products, information and promotion benefits to
prospective customers through interactive communication that enhances
customer response. There are no intermediaries in direct marketing.

Advantages of Direct Marketing

It relies on precision targeting i.e. targeting specific customers with precise
information. Personalization. It personalizes the offer to fit the needs of the target
market.
Direct marketing permits privacy because the direct marketer’s offer and strategy
are not visible to competitors. It is measurable. A marketer can track the
response to a particular direct marketing campaign and usually determine the
revenue that it produced.

Methods of Communication:
These include the following;

 Direct Mail: This is where one keeps addresses of prospective customers

and communicates to them through writing letters.
 Telemarketing: This involves dealing with customers by telephone.
Telemarketing combines some aspects of advertising, marketing research
and personal sales.
 Relationship Marketing: This method relies on developing a strong
relationship with customers and giving special offers to frequent customers.
Special offers may include special rates, amenities, privileges in checking in
and out (for hotels), special seats for airlines, etc.
 Use of Inserters (direct response): For this case, articles are inserted in
newspapers.
 Door-to-door flyers

83
It should be noted that direct marketing is not good for a business since
individuals may not be easily targeted. People who receive messages may not be
responsible decision-makers.

6. SALES PROMOTION
Sales promotion is an activity or material (or both ) that acts as a direct
inducement and offers added value to or incentive to buy the product to resellers,
salespeople or consumers. The sale probably would have taken place without the
sales promotion activity, but not for a while; the promotion has brought the sale
forward.
This includes all those activities that are directed towards promotion of sales.
These activities include displays, distributions, free samples, fairs and
exhibitions, bonuses/premiums, coupons, clearance sales (sales at reduced
prices), and patronage/support rewards.

Sales promotion activities are used for the following purposes:

 To introduce new products;
 To increase sales during slack period;
 To win new customers;
 To improve public image of the firm; and
 To encourage the dealers to carry large stocks.

Consumer sales promotion methods

 Coupons-a promotion method that reduces the purchase price of an item in
order to stimulate consumers to try a new or established product, to
increase sales volume quickly, to attract repeat purchasers or to introduce
new package sizes or features.
 Demonstrations-these are occasions on which manufacturers show how a
product actually works in order to encourage trial use and purchase of a
product.
 Frequent user incentives- incentive programs that reward customers who
engage in repeat purchases.
 Loyalty card – it’s a mechanism whereby regular customers who remain
loyal to a particular company are rewarded with discounts or free
merchandise
 Trading stamps – trading stamps are dispensed in proportion to the
amount of a consumers purchase and can be accumulated and redeemed
for goods. Stamps are attractive to consumers as long as they do not drive
up the price of goods.
 Point of sale materials – include such items as outside signs, window
displays, counter pieces, display racks and self-service cartons.
 Free samples – are used for several reasons: to stimulate trial of a product
desirable distribution. The sampling program should be planned as total
event, not merely a give-away. Free samples are not appropriate for mature
products and products with a slow turnover.

84
  Money refunds – a specific amount of money mailed to customers who
submit proof of purchase.
 Premiums – they are items offered free or at minimum cost as a bonus for
purchasing a product. Premiums can attract competitors customers,
introduce different types of products, add variety to other promotional
efforts and stimulate loyalty

Trade sales promotion

 Buy back allowance – a certain sum of money given to a purchaser for
each unit bought after an initial deal is over
 Buying allowance – a temporary price reduction given to resellers who
purchase specific quantities of a product.
 Counts and recounts – a promotion method based on the payment of a
specific amount of money for each product unit moved from a resellers
warehouse in a given time period
 Free merchandise – give-a ways sometimes offered to resellers who
purchase a specific quantity of the same or different products.
 Dealer listing- an advertisement that promotes a product and identifies the
names of retailers or dealers who sell it.

PLACE (DISTRIBUTION)
Distribution refers to the movement of products/services from the point of
production to a point of consumption. This involves distribution channels. A
distribution channel is a set of independent organizations involved in the process
of making a product or service available to the consumer or business user.
Without distribution, we cannot enjoy what we produce. Distribution networks
may consist of loosely organized alliances between independent organizations.

Distribution Channel Functions

A distribution channel moves goods from producers to consumers. It overcomes
major time, place and possession gaps that separate goods and services from
those who would use them. Members of the marketing channel perform the
following key functions;
1) Information: They gather and distribute marketing research and
intelligence information about the marketing environment.
2) Promotion: They develop and spread persuasive communications about an
offer.
3) Contact: This concerns finding and communicating with prospective
buyers.
4) Matching: This involves shaping and fitting the product to the buyer’s
needs such as packaging.
5) Negotiation: This is about agreeing on price and other terms of the offer so
that ownership and possession can be transferred.
6) Physical Possession and Distribution: This concerns transporting and
storing products.

85
 7) Financing: This is acquisition and use of funds to cover the costs of
channel work.
8) Risk Taking: This is where one assumes financial risks such as the
inability to sell inventory at full margin.
9) Payments: This is when one receives payments on behalf of the business
owner.

Number of Channel Levels

The number of channel levels can describe distribution channels. However, most
services are distributed at zero level. You know that manufacturers deal directly
with consumers because the two are inseparable.

Each layer that performs some work in bringing the product and its ownership
closer to the final buyer is a channel level. A channel level consists of a
manufacturer selling directly to consumers. The second channel contains one
level. In consumer markets, this level is typically a travel agent. The third channel
contains two levels. In consumer markets, these are typically a wholesaler and a
retailer. Channel four contains three levels. The jobber buys from wholesalers and
sells to smaller firms that are not served by larger wholesalers.
It should be noted that several types of flows connect all institutions in the
channel. These include; physical flow of products, the flow of ownership, payment
flow and promotion flow.

86