CHAPTER 2

LITERATURE REVIEW

2.1 Marketing Management

Marketing management takes place when at least one party to a potential
exchange thinks about the means of achieving desired responses from other parties.
Thus we see marketing management as the art and science of choosing target markets
and getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value. (Kotler & Keller, 2012:6) According to
Gamble & Gilmore (2013) marketing management is a broad concept that includes
social processes, incurring implications not only for itself, but also for the roles of the
parties directly involved in the marketing process. A necessary and useful starting
point for the study of marketing is consideration of the management process. The
management of marketing serves as the framework for the process of marketing.
Marketing management also serves as a central link between marketing and the
societal level and everyday consumption by the general public (Burnett, 2008:17-18).
While Kotler & Armstrong (2014:30) define marketing management as the art and
science of choosing target markets and building profitable relationships with them.
To win marketing strategy, the marketing manager must answer two important
questions: What customers will we serve? and How can we serve these customers
best? Based on those definitions, can be concluded that marketing management is the
concept to grow a continuous and profitable relationship with customers by creating
superior values.

Marketing management wants to design strategies that will build profitable

relationships with target consumers. There are five alternative concepts under which
organizations design and carry out their marketing strategies: the production,
product, selling, marketing, and societal marketing concepts. (Kotler & Armstrong,
2014:31-33)

1. Production concept
The idea that consumers will favor products that are available and highly
affordable; therefore, the organization should focus on improving production and
distribution efficiency.

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 2. Product Concept
The idea that consumers will favor products that offer the most quality,
performance, and features; therefore, the organization should devote its energy to
making continuous product improvements.

3. Selling Concept
The idea that consumers will not buy enough of the firm's products unless the
firm undertakes a large-scale selling and promotion effort.

4. Marketing concept
A philosophy in which achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the desired satisfactions better than
competitors do.

5. Societal marketing concept

The idea that a company's marketing decisions should consider consumers'
wants, the company's requirements, consumers' long run interests, and society's long-
run interests.

2.2 Consumer Behavior

It is well known that in this intense competition where consumers take control
over buying decision. That made managers must deliver what they promised and the
responsibility to develop culture in business ethics in order to give good quality and
values to achieve higher level of consumer satisfaction.

According to Suryani (2013:5) consumer behavior is a dynamic process that

includes the behavior of individual consumers, groups and organizations members
which are constantly changing. The American Marketing Association defines the
behavior of consumers as a dynamic interaction of the feelings, cognition, behavior,
and environment in which the individual exchanges in various aspects in his life.
(Peter and Olson, 2010:5). Consumer behavior include mental activity, emotional and
physical that people use during selection, purchase, use and dispose of products and
services that satisfy their needs and desires (Jeddi, Atefi, Jalali, Poureisa, & Haghi,
2013). According to Solomon, Bamossy, Askegaard, & Hogg (2006) consumer
behavior is the study of the processes involved when individuals or groups select,
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purchase, use or dispose of products, services, ideas or experiences to satisfy needs

and desires. While Kotler & Keller (2012:151) defines consumer behavior as the
study of how individuals, groups, and organizations select, buy, use, and dispose of
goods, services, ideas, or experiences to satisfy their needs and wants.

Based on those definitions, it can be concluded that consumer behavior is the

study of the process involved when individual or groups to select, purchase, use, and
dispose goods, services and ideas by using mental, emotional and physical activities
to satisfy their needs and desires. The efforts made by consumers for goods and
services can be started with the search for information, whether via the Internet,
neighbors, or ask the salesperson. If the products are high-risk, then consumers will
seek more information to avoid errors in decision making. If consumers are
convinced of the superiority of a product, the consumer will purchase and consume
the products. Behavior conducted among consumers would vary according to the
condition of consumers, the situation and external conditions that affect it.

Hawkins, and Mothersbaugh (2013: 6) states:

"Consumer behavior is the study if individuals, groups or Organizations, and

the processes they use to select, secure, use, and dispose of products, services,
experiences or ideas to satisfy needs and the impacts that Reviews These
processes have on the consumer and society. "

Referring to the Hawkins’ and Mothersbaugh’s opinion, consumer behavior is

the study of how individuals, groups and organizations as well as the process
undertaken to vote, securing, use, and dispose products, services, experiences or
ideas to satisfy their needs and their impact on consumers and society. Thus the study
of consumer behavior covering a wider field, as it includes studying the impact of
processes and activities carried out consumer to another consumer and the
community. The implications of such understanding is:

a. Marketers needs to pay attention to all processes performed by consumers both

individuals and groups, the complex internal factors involved, and the external
factors that influence the decision.
b. The success of the marketing strategy derived from the company's ability to
understand the behavior of consumers.
c. Marketers should proactively seek in-depth information about the consumer
behavior of groups targeted segments in order to formulate appropriate
marketing strategies.
d. Marketers should pay attention to the ethical issues associated with the consumer
and society. The attention to the ethical aspect is important because the
companies that uphold ethical values in business would be much appreciated by
the community and is a source of confidence that will have an impact on long-
term relationships with consumers.

According to Kotler & Keller (2012:151-159) consumer behavior is influenced by

three factors such as:

1. Cultural factors (Nationalities, Religions, Racial groups, Geographic regions)

The fundamental determinant of a person’s wants and behaviors acquired
through socialization processes with family and other key institutions.

2. Social factors (Upper uppers, Lower uppers, Upper middles, Middle, etc.)
Social class conveys perceptions of inferior or superior position. In a class,
people tend to behave alike, indicating a cluster of variables (occupation,
income, wealth).

3. Personal factors (Age, Life cycle stage, Occupation, Wealth, Personality,

Values, Lifestyle, Self-concept)

Figure 2.1 Maslow's Hierarchy of Needs

Source: Kotler, P., & Keller, K. L. (2012)

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Some theories also explain the motive of consumer behavior such as Freud’s
Theory said that Behavior guided by subconscious motivations, while Maslow’s
Hierarchy of Needs stated that Behavior is driven by lowest, unmet need. In addition,
Herzberg’s Two-Factor Theory that said Behavior is guided by motivating and
hygiene factors. (Kotler & Keller, 2012:160-161)

2.2.1 Buying Decision Behavior

Consumers can purchase different products because of the different buying
decisions process. In order to purchase goods, consumer do not need to pass all
stages of the buying decision process. However, some decision process is important
that the consumer forced to do all these steps carefully and meticulously. These steps
include: (Jeddi, Atefi, Jalali, Poureisa, & Haghi, 2013:21-22)

1) Identify the problem: The first stage of the decision-making process is that people
can feel the difference between current and desired situation, so consumers are trying
to resolve these differences.

2) Data collection: For solving buying decision problem, consumers can collect any
information. This information can be from internal (past experiences, learning,
memories, motivation, feelings, characters) and external (culture, reference groups,
family, marketing activities, exhibits, etc.)

3) Assessment Options: After gathering information, consumers are ready to make

decision. At this point, they should be able to evaluate different options and choose
products that meet their demands.

4) Purchase: This stage is the stage that all marketing activities becomes the result.
Consumer at this stage, according to the information obtained, they select a product
that feels the most satisfying their need and then bought it.

5) After purchase behavior: Consumer compare purchased products with ideas,

products, competitors, perceptions and expectations of the product and two
satisfaction and dissatisfaction, which may appear different reasons.

There are several types of buying decision behavior of consumer (Kotler &
Armstrong, 2012:174-176):
1) Complex Buying Behavior
Complex buying behavior occurs when consumers are highly involved in a
purchase and perceive significant differences among brands. Consumers has
much to learn about the product category
2) Dissonance-Reducing Buying Behavior
Consumers are involved with an infrequent, expensive, or risky purchase but
they can see little difference among brands
3) Habitual Buying Behavior
Habitual buying behavior occurs under conditions of low involvement of
consumer and little significance of brand differences
4) Variety-Seeking Buying Behavior
Variety-seeking buying behavior occur in situations characterized by significant
perceived brand differences but low involvement of consumers

High Involvement Low Involvement

Significant differences
between brands

Few differences
between brands

Figure 2.2 Types of Buying Behavior

Source: Kotler, P., & Armstrong, G. (2012:175)

Consumer buying behavior cannot be separated from consumption

process which can be seen from the perspective of both consumers and
marketers. A marketing manager do not just focus on how to make products
sold well, but also needs to understand why consumers choose the products that
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he/she offers. Good marketing manager will try to understand the consumers
buying behavior, especially on the factors that influence decision-making and
behavior. Consumer buying behavior which are the decision-making process
are influenced by internal, social, situational and external factors.

These three factors need to be considered in assessing consumer buying

behavior. Consumer internal factors such as perception, motivation, learning,
attitude, personality, and lifestyle will affect the product and brand preferences
in consumer decision making. Social influences such as culture, sub-cultures,
social classes, and group memberships also need to be considered by marketers
because it can influence the decision-making process. Situational factors such
as the physical environment and time, although it is difficult to control by
marketers, but if marketers can understand precisely these factors, it will be
useful in influencing consumers. If it is associated with the issue of consumer
behavior in Indonesia, there are three important issues in this process:
(Suryani, 2013:6-8)

1. Pre-purchase issue
From the perspective of consumer
The main issues are:
a. How consumers aware and decide that they need a product?
b. Which is the best source of information that can be learned and
provide alternatives for decision making?
From the perspective of the marketer
a. How to shape and change the consumers’ behavior towards the
products offered?
b. What should be sought so that consumers understand that products
offered have more value than another product on the market?
2. The issue at purchase
From the perspective of consumer
The main issues are:
a. Whether to obtain the product is difficult or easy, pleasant or
disappointing?
b. Whether the sellers think about them at the time of purchase?
c. What treatment they get when purchasing?
 From the perspective of the marketer
a. What efforts should be done to create a situation of purchase (store
atmosphere, service, product delivery process, etc.) that encourage
consumers interested in buying products and increase the number of
purchases?
b. What efforts should be done to ensure consumers get a pleasant
experience when purchasing?
3. After purchase issue
From the perspective of consumer
The main issues are:
a. Whether the product purchased has performance as their
expectations?
b. What to do if the product already used and unused? This issue is
often associated with the problem of environmental pollution.
From the perspective of the marketer
a. What factors which determine consumer satisfaction after
consuming the product and interested to repurchase?
b. What should be done so that consumers would express positive
experiences to other consumers, and even recommend products to
other consumers?

Referring to some definition of consumer buying behavior described

above, the consumer buying behavior is not an easy task because of many
variables that affect and these variables are interacts one to another. The
interactions are not only within individuals, but also the interaction that occurs
between individual consumers within a group or community. Consumer
behavior is a process that is complex and multi-dimensional. In studying
consumer behavior marketers not just stop at consumer behavior but also need
to relate it to the marketing strategy that needs to be prepared. A good
marketing strategy is essentially based on the needs and desires of consumers.
The company is able to understand consumer behavior will have a considerable
advantage because it can develop appropriate marketing strategies that can give
more satisfaction compared to competitors.
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2.2.2 Consumer Attitude (Preference)

Schiffman & Kanuk (2010:232) define attitude as a learned
predisposition to behave in a consistently favorable and unfavorable way with
respect to a given object. The word object includes specific consumption or
marketing related concepts, such as product, product use, causes or issues,
price, etc. Attitude relevant to purchase behavior are formed as a result of direct
experience with the product. Attitudes also relatively consistent with the
behavior they reflect. However, despite this consistency attitude are not
necessarily permanent, they can change. Peter & Olson (2010:128) define
attitude as a person’s overall evaluation of a concept. Evaluation are affective
response, usually at relatively low levels of intensity and arousal. These
evaluations can be created by both the affective and the cognitive system. The
affective system automatically produces affective responses – including
emotions, feelings, moods, and evaluations or attitudes – as immediate, direct
responses to certain stimuli. These favorable or unfavorable affective responses
are generated without conscious, cognitive processing of information about the
product. Then, through classical conditioning processes, these evaluations may
become associated with a product or brand, thus creating an attitude.Attitudes
evaluations created by the cognitive system. The cognitive processing model of
consumer decision making shows that an overall evaluation is formed when
consumers integrate knowledge, meanings, or beliefs about the attitude
concept. The goal of this integration process is to analyze the personal
relevance of the concept and determine whether it is favorable or unfavorable.
It is assumed that consumers from an attitude toward each concept they
interpret in terms of its personal relevance.

Shiffman & Kanuk (2010:233) argues that a specific situation can cause
consumers to behave in ways that are seemingly inconsistent with their
attitudes. For example: if the price of a specific brand is increases or
availability of that brand product decreases or if the quality or brand image
damages, then consumer usually switch from one brand to another. Moreover,
individual can have a variety of attitudes towards a particular behavior. It is
important to understand how consumer attitudes vary from situation to
situation. When measuring attitudes, it is needed to consider the situation in
 which the behavior takes place. Consumers’ attitudes have been studied
intensively, but marketers tend to be more concerned about consumers’ overt
behavior, especially their purchase behavior. Thus, it is not surprising that a
great deal of research has tried to establish the relationship between attitudes
and behavior. Based on the idea of consistency, there might expect attitudes
toward an object to be strongly related to behaviors toward the object. In fact,
consumers’ attitudes toward an object often are not good predictors of their
specific behaviors regarding the object. With a few notable exceptions, most
research has found rather weak relationships between attitudes toward an object
and specific single behaviors.

Consider that many consumers probably have positive attitudes toward

luxury stuff, but most do not buy them. Because favorable attitudes toward the
products can be expressed in many different behaviors, it is difficult to predict
which specific behavior will be performed. One consumer just reads ads and
test reports about the stuff. The second consumer goes to showrooms to look at
the stuff. The third consumer just daydreams about owning the stuff. In sum,
having a generally favorable (or unfavorable) attitude toward a product does
not mean the consumer will perform every possible favorable (or unfavorable)
behavior regarding that product. Marketers need a model that identifies the
attitudinal factors that influence specific behaviors. (Peter & Olson, 2010:143-
145)

2.3 Marketing Strategy

According to Peter & Olson (2010:12), a marketing strategy is the design,
implementation, and control of a plan to influence exchanges to achieve
organizational objectives. In consumer markets, marketing strategies are typically
designed to increase the chances that consumers will have favorable thoughts and
feelings about particular products, services, and brands. From a consumer analysis
point of view, a marketing strategy is a set of stimuli placed in consumers’
environments designed to influence their affect, cognition, and behavior. These
stimuli include such things as products, brands, packaging advertisements, coupons,
stores, credit cards, price tags, salespeople’s communications, and, in some cases,
sounds (music), smells (perfume), and other sensory cues.
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Marketers clearly face a design challenge in choosing the best mix of

communication, distribution, and service channels for their offerings ready to activate
automatic responses when turbulence whips up and chaos reigns in. They recommend
marketers keep these eight factors in mind as they create “chaotic marketing
strategies.” (Kotler & Caslione, 2009:151-153)

1. Secure your market share from core customer segments

2. Push aggressively for greater market share from competitors
3. Research customers more now, because their needs and wants are in flux
4. Minimally maintain, but seek to increase, your marketing budget
5. Focus on all that is safe and emphasize core values
6. Drop programs that are not working for you quickly
7. Don’t discount your best brand
8. Save the strong; lose the weak

2.3.1 Segmenting, Targeting, Positioning

The focus of the marketing concept is consumer current needs and to
secure, a picture of their likely future needs. At the same time, recognizing the
high degree of diversity amongst, consumer researchers seek to identify the
many similarities – or constants – that exist among the peoples of the world.
The marketer must adapt the image of its product so that each market segment
perceives the product as better fulfilling its specific needs than competitive
products. The three elements of this strategic framework are: market
segmentation, targeting, and positioning. (Schiffman & Kanuk, 2010:6-7)

1. Segmentation is the process of dividing a market into subsets of

consumers with common needs or characteristics.
2. Targeting is the selection of one or more of the segments identified for
the company to pursue.
3. Positioning refers to the development of a distinct image for the product
or service in the mind of the consumer, an image that will differentiate
the offering from competing ones and faithfully communicate to the
target audience that the particular product or service will fulfill their
needs better than competing brands
 In this research will be explained in detail about the segmentation of
Coca-Cola.

2.3.1.1 Segmentation
Companies know that they cannot profitably serve all consumers in a
given market in the same way. There are too many different kinds of
consumers with too many different kinds of needs. Most companies are in a
position to serve some segments better than others. Thus, each company
must divide up the total market, choose the best segments, and design
strategies for profitably serving chosen segments. This process involves
market segmentation, market targeting, differentiation, and positioning
(Kotler & Armstrong, 2012:73). Market segmentation also define as the
process of dividing a market into groups of similar consumers and selecting
the most appropriate group(s) and individuals for the firm to serve (Peter &
Olson, 2010:365). Market segmentation is the process of dividing a market
into distinct groups of buyers who have different needs, characteristics, or
behaviors (Kotler & Armstrong, 2012:214).

Table 2.1 Advantages of segmentation

Advantage Explanation
Customer analysis By segmenting, the firm can get to understand its
best customers better.
Competitor analysis It is much easier to recognize and combat
competition when concentrating on one small part of
the overall market.
Effective resource Companies’ scarce resources can be concentrated
allocation more effectively on a few consumers, rather than
spread thinly across the masses.
Strategic marketing Planning becomes easier once the firm has a clear
planning picture of its best customers.
Expanding the market Good segmentation can increase the overall size of
the market by bringing in new customers who fit the
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profile of typical customer, but were previously

unaware of the product.

Source: Blythe, Essentials of Marketing 5th Edition, 2012

Not everyone likes the same goods, services, any things. Therefore,
marketers start by dividing the market into segments. Market segmentation
divides a market into well-defined slices. A market segment consists of a
group of customers who share a similar set of needs and wants. The
marketer’s task is to identify the appropriate number and nature of market
segments and decide which one(s) to target. Some researchers try to define
segments by looking at descriptive characteristics: geographic, demographic,
and psychographic. Then they examine whether these customer segments
exhibit different needs or product responses. Other researchers try to define
segments by looking at behavioral considerations, such as consumer
responses to benefits, usage occasions, or brands. The researcher then sees
whether different characteristics are associated with each consumer-response
segment.

The process of market segmentation can be break down into five tasks.
(Peter & Olson, 2010:365)

Figure 2.3 Steps in Segmenting

1. The first task in segmenting markets is to analyze consumer–product
relationships. This entails analysis of the affect and cognition,
behavior, and environments involved in the purchase/consumption
process for the particular product. There are three general approaches
to this task. First, marketing managers may brainstorm the product
concept and consider what types of consumers are likely to purchase
and use the product and how they differ from those less likely to buy.
Second, focus groups and other types of primary research can be used
for identifying differences in attributes, benefits, and values of various
potential markets. Third, secondary research may further investigate
differences in potential target markets, determine the relative sizes of
those markets, and develop a better understanding of consumers of this
or similar products.
2. There is no simple way to determine the best bases for segmenting
markets. In most cases, however, at least some initial dimensions can
be determined from previous purchase trends and managerial
judgment. Several dimension for example are sex, age, lifestyle, and
income level.
3. The firm should have a good idea of the basic segments of the market
that potentially could be satisfied with its product. The next step
involves product positioning: positioning the product relative to
competing products in the minds of consumers. The key objective of
positioning strategy is to form a particular brand image in consumers’
minds. This is accomplished by developing a coherent strategy that
may involve all of the marketing mix elements. There are at least five
approaches to positioning strategy: positioning by attribute, by use or
application, by product user, by product class, and by competitors.
4. After the analysis in the previous stages is completed, the appropriate
segmentation strategy can be considered. There are four basic
alternatives. First, the firm may decide not to enter the market.
Analysis to this stage may reveal there is no viable market niche for
the product, brand, or model. Second, the firm may decide not to
segment but to be a mass marketer. This may be the appropriate
strategy in at least three situations:
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• When the market is so small that marketing to a portion of it is

not profitable.
• When heavy users make up such a large proportion of the sales
volume that they are the only relevant target.
• When the brand is dominant in the market and targeting to a few
segments would not benefit sales and profits.
5. The firm is now in a position to complete its marketing strategy by
finalizing the marketing mix for each segment. Selecting the target
market and designing the marketing mix go hand in hand, and thus
many marketing mix decisions should have already been carefully
considered. For example, if the target market selected is price
sensitive, some consideration has already been given to price levels.
Product positioning also has many implications for selecting
appropriate promotions and channels.

After identifying market segments, the marketer decides which present

the greatest opportunities which are its target markets. For each, the firm
develops a market offering that it positions in the minds of the target buyers
as delivering some central benefits.

According to Kotler & Keller (2012:214 - 229) there are several bases
for segmenting market, but these are major segmentation variables:

2.3.1.1.1 Geographic Segmentation

Geographic segmentation divides the market into geographical units
such as nations, states, regions, countries, cities, or neighborhoods.
Companies can operate in one or a few areas, or it can operate in all but pay
attention to local variations. In that way it can tailor marketing programs to
the needs and wants of local customer groups in trading areas,
neighborhoods, even individual stores. In a growing trend called grassroots
marketing, such activities concentrate on getting as close and personally
relevant to individual customers as possible.

2.3.1.1.2 Demographic Segmentation

In demographic segmentation, the market divided on variables such as
age, family size, family life cycle, gender, income, occupation, education,
 religion, race, generation, nationality, and social class. One reason
demographic variables are so popular with marketers is that they’re often
associated with consumer needs and wants. Another is that they’re easy to
measure. Marketers have used certain demographic variables to segment
markets such as: Age and life-cycle stage; Life stage; Gender; Income;
Generation; Race and culture;

2.3.1.1.3 Psychographic Segmentation

Psychographics is the science of using psychology and demographics
to better understand consumers. In psychographic segmentation, buyers are
divided into different groups on the basis of psychological/personality traits,
lifestyle, or values. People within the same demographic group can exhibit
very different psychographic profiles.

2.3.1.1.4 Behavioral Segmentation

Behavior segmentation focuses on whether people buy and use a
product, how often and how much they consume (Keegan & Green,
2015:231). Marketers divide buyers into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product. Behavior
variables can include needs or benefit, decision roles, or be user and usage-
related.

Needs and Benefits - Not everyone who buys a product has the same needs
or wants the same benefits from it. Needs-based or benefit-based
segmentation is widely used because it identifies distinct segments with
clear marketing implications.

Decision Roles - People can play five roles in a buying decision: Initiator,
Influencer, Decider, Buyer, and User. Different people are playing different
decision roles, but all are crucial in the decision process and ultimate
consumer satisfaction.

User and Usage - Many marketers believe variables related to various

aspects of users or usage – occasions (daily, weekly, monthly, etc.), user
status (nonusers, ex-users, potential users, first-time users, and regular
users), usage rate (light, medium, heavy), buyer-readiness stage (informed,
 A17

interested, desired, intended), loyalty status (Hard-core loyals, split loyals,

shifting loyals, switchers), and attitude (enthusiastic, positive, indifferent,
negative, and hostile) - are good starting points for constructing market
segments.

Figure 2.4 Behavioral Segmentation Breakdown

Source: Kotler, P., & Keller, K.L. ( 2012:229)

2.3.1.1.5 Evaluating and Selecting the Market Segments

In evaluating different market segments, the firm must look at two
factors: the segment’s overall attractiveness and the company’s objectives
and resources. Marketers have a range or continuum of possible levels of
segmentation that can guide their target market decisions.

1. Full Market Coverage

With full market coverage, a firm attempt to serve all customer groups
with all the products they might need. Large firms can cover a whole market
in two broad ways: through differentiated or undifferentiated marketing. In
undifferentiated or mass marketing, the firm ignores segment differences
and goes after the whole market with one offer. It designs a marketing
program for a product with a superior image that can be sold to the broadest
number of buyers via mass distribution and mass communications.
Undifferentiated marketing is appropriate when all consumers have roughly
the same preferences and the market shows no natural segments.

The argument for mass marketing is that it creates the largest potential
market, which leads to the lowest costs, which in turn can lead to lower
prices or higher margins. The narrow product line keeps down the costs of
research and development, production, inventory, transportation, marketing
research, advertising, and product management. The undifferentiated
communication program also reduces costs. However, many critics point to
the increasing splintering of the market, and the proliferation of marketing
channels and communication, which make it difficult and increasingly
expensive to reach a mass audience.

When different groups of consumers have different needs and wants,

marketers can define multiple segments. The company can often better
design, price, disclose, and deliver the product or service and also fine-tune
the marketing program and activities to better reflect competitors’
marketing. In differentiated marketing, the firm sells different products to all
the different segments of the market. Differentiated marketing typically
creates more total sales than undifferentiated marketing. However, it also
increases the costs of doing business. Because differentiated marketing leads
to both higher sales and higher costs, no generalizations about its
profitability are valid.

2. Multiple Segment Specialization

With selective specialization, a firm selects a subset of all the possible
segments, each objectively attractive and appropriate. There may be little or
no synergy among the segments, but each promises to be a moneymaker.
Keeping synergies in mind, companies can try to operate in super-segments
rather than in isolated segments. A super-segment is a set of segments
sharing some exploitable similarity. A firm can also attempt to achieve some
synergy with product or market specialization. With market specialization,
the firm concentrates on serving many needs of a particular customer group.
The firm gains a strong reputation among this customer group and becomes
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a channel for additional products its members can use. The downside risk is
that the customer group may suffer budget cuts or shrink in size.

3. Single-Segment Concentration
With single-segment concentration, the firm markets to only one
particular segment. Through concentrated marketing, the firm gains deep
knowledge of the segment’s needs and achieves a strong market presence. It
also enjoys operating economies by specializing its production, distribution,
and promotion. If it captures segment leadership, the firm can earn a high
return on its investment.

A niche is a more narrowly defined customer group seeking a

distinctive mix of benefits within a segment. Marketers usually identify
niches by dividing a segment into sub-segments. Niche marketers aim to
understand their customers’ needs so well that customers willingly pay a
premium. What does an attractive niche look like? Customers have a distinct
set of needs; they will pay a premium to the firm that best satisfies them; the
niche is fairly small but has size, profit, and growth potential and is unlikely
to attract many competitors; and the niche gains certain economies through
specialization. As marketing efficiency increases, niches that were
seemingly too small may become more profitable.

4. Individual Marketing
The ultimate level of segmentation leads to “segments of one,”
“customized marketing,” or “one-to-one marketing.” Today, customers are
taking more individual initiative in determining what and how to buy. They
log onto the Internet; look up information and evaluations of product or
service offerings; conduct dialogue with suppliers, users, and product critics;
and in many cases design the product they want. Customization is certainly
not for every company. It may be very difficult to implement for complex
products such as automobiles. It can also raise the cost of goods by more
than the customer is willing to pay. Some customers don’t know what they
want until they see actual products, but they also cannot cancel the order
after the company has started to work on it. The product may be hard to
repair and have little sales value. In spite of this, customization has worked
well for some products.
 The decision regarding which strategy to adopt will rest on the following
three factors:
• The company’s resources,
• The product's features and benefits, and
• The characteristics of the segment(s).

Table 2.2 Resourcing and degree of differentiation

Type of product

High-differentiation Low-differentiation
consumers consumers

High- Mass market Differentiated Undifferentiated

resource
Specialist Differentiated Concentrated
company
market

Low- Mass market Concentrated Differentiated (perhaps

resource geographically)
company
Specialist Concentrated Concentrated
market

Table 2.3 Targeting Decisions

Segment Profit Number of Strategic decision rationale

size per unit competitors
sold

Large Large Large A large market with large profits will

attract competitors; prices will fall rapidly,
and so will profits.

Large Small Large This is a mature market. A new entrant

would have to have something special to
dominate the market: perhaps a much
 A21

reduced cost base.

Small Large Large A small segment with a high profit per unit
and a large number of competitors can be
captured entirely by a penetration pricing
strategy.
Cont.

Segment Profit Number of Strategic decision rationale

size per unit competitors
sold

Large Large Small If the segment is both large and profitable

competitors will certainly enter the market.
A skimming policy is best for this market;
as competitors enter, it will be possible to
reduce prices to compete effectively.

Large Small Small This is a mature market, but should be low

risk; the lack of competition means that it
should be easy to capture a share, and the
low profit margin will discourage others
from entering.

Small Small Large This is a dying market. Really not worth

entering at all.

Small Large Small This is a niche market. It should be

possible to capture all of this market.

Small Small Small This is clearly not a very profitable

segment at all. Unless the firm has
something very new to bring to the
segment, this is probably not worth
targeting.
 A23

2.3.2 Marketing Mix

The marketing mix consists of a company’s service and/or product
offerings to consumers and the methods and tools it selects to accomplish the
exchange. The marketing mix consists of four elements known as the four Ps:
(Schiffman & Kanuk, 2010:7)

1) The product or service that is the features, designs, brands, and packaging
offered, along with post purchase benefits such as warranties and return
policies.
2) The price – the list price, including discounts, allowances, and payment
methods.
3) The place – the distribution of the product or service through specific
store and non-store outlets.
4) Promotion – The advertising, sales promotion, public relations, ad sales
efforts designed to build awareness of and demand for the product or
service.

This research will focus on the product especially in packaging and size
(volume) and the price.

2.3.2.1 Product and Packaging

Packaging is an element of the product environment on which
marketers spend billions of dollars annually. Traditionally, four packaging
objectives are considered. Packaging should protect the product as it moves
through the channel to the consumer; should be economical and not add
undue cost to the product; should allow convenient storage and use of the
product by the consumer; and can be used effectively to promote the product
to the consumer.
(Peter & Olson, 2010:393)

Packaging includes all the activities of designing and producing the

container for a product. The package is the buyer’s first encounter with the
product. A good package draws the consumer in and encourages product
choice. In effect, they can act as “five-second commercials” for the product.
Packaging also affects consumers’ later product experiences when they go to
open the package and use the product at home. Some packages can even be
attractively displayed at home. In packaging the product, it is necessary to
make product always looks new and can accepted in the market. Packaging
has an important role in consumer purchasing power. Packaging is the
activities of making, designing and producing the container or wrapper a
product. Traditionally, the primary function of package was to hold and
protect the product. But in recent times, numerous factors have made
packaging an important marketing tool. Packaging takes role to perform
many sales tasks, including attracts attention, describing the product, and to
making the sale. Besides the content of a product, a focus on the quality can
be reflected on how products can visually appealing to the consumers. The
quality of packaging, the texture of the packaging materials, the visual
impact of packaging, the size of the package, all these have a direct impact
on the demand for the product. (Kotler & Armstrong, 2012:212)

Various factors contribute to the growing use of packaging as a marketing

tool:
• Self-service. An increasing number of products are sold on a self-
serve basis. In an average supermarket, which may stock 15,000 items,
the typical shopper passes some 300 products per minute. Given that
50 percent to 70 percent of all purchases are made in the store, the
effective package must perform many sales tasks: attract attention,
describe the product’s features, create consumer confidence, and make
a favorable overall impression.
• Consumer affluence. Rising affluence means consumers are willing
to pay a little more for the convenience, appearance, dependability,
and prestige of better packages.
• Company and brand image. Packages contribute to instant
recognition of the company or brand, which in the store they can
create a billboard effect.
• Innovation opportunity. Unique or innovative packaging such as
reseal able spouts can bring big benefits to consumers and profits to
producers.
 A25

Below are the four principles need to be considered in design packaging to

improve sustainability.

Figure 2.5 Four Principles in Packaging Sustainability

Source: Australian Packaging Covenant

Innovative packaging can give a company an advantage over

competitors and boost sales. In making packaging decisions, the company
also must heed growing environmental concerns. Fortunately, many
companies have gone “green” by reducing their packaging and using
environmentally responsible packaging materials. (Kotler & Armstrong,
2012:256-257)

Packaging must achieve a number of objectives:

1. Identify the brand.
2. Convey descriptive and persuasive information.
 3. Facilitate product transportation and protection.
4. Assist at-home storage.
5. Aid product consumption.

To achieve these objectives and satisfy consumers’ desires, marketers

must choose the aesthetic and functional components of packaging correctly.
Aesthetic considerations relate to a package’s size and shape, material,
color, text, and graphics. There are a number of factors and criteria in each
area. Functionally, structural design is crucial. The packaging elements must
harmonize with each other and with pricing, advertising, and other parts of
the marketing program. Packaging updates or redesigns can occur frequently
to make the brand more contemporary, relevant, or practical. Package sizes
can influence not only which brands consumers choose but also how much
of a product they use on particular occasions. In general, consumers believe
that larger package sizes offer lower unit costs and, as such, may be willing
to use their contents more freely than from smaller packages. Consumers
may also use the contents of smaller packages more sparingly to avoid the
hassle of a trip to the store or pantry in order to get more of the product in
the short term. Larger packages and larger home inventories of products may
also increase the frequency of a product’s usage. (Peter & Olson, 2010:393)

2.3.2.2 Price
Consumer perceptions are subjective and particular to each individual,
but it is important to match pricing as close as possible to consumers’
expectations. These expectations are based partly on the consumers’
reference prices. Tactics such as odd-even pricing, reference pricing,
multiple-unit pricing and bundle pricing can be used to manage consumer
perception of value. Pricing should always be consistent with the other
elements of the marketing mix. According to Elliott, Rundle-Thiele, &
Waller (2012:253) price is a constant, fundamental concern in both
consumer and business markets. It should be distinguished between price
(which can be influenced by economic factors such as the relationship
between the supply of a product and demand) and pricing (which is a
conscious, explicit management activity). Price is a measure of value to both
buyers and sellers. Buyers see price as a measure of the benefit they derive
 A27

from the consumption of a product, whether it be a good, a service or an

idea. Price also serves as means for buyers to allocate their scarce financial
resources between purchases. Sellers need prices to cover their costs and
provide sufficient profit margin to justify the risk they take by engaging in
business activities.

Price is the one element of the marketing mix that produces revenue;
the other elements produce costs. Prices are perhaps the easiest element of
the marketing program to adjust; product features, channels, and even
communications take more time. Price also communicates to the market the
company’s intended value positioning of its product or brand. A well-
designed and marketed product can command a price premium and reap big
profits. But new economic realities have caused many consumers to pinch
pennies, and many companies have had to carefully review their pricing
strategies as a result. Pricing is a fundamental tool of positioning.
Consumers often compare competing products based on price, and to some
extent this assessment can occur relatively independently of some of the
other elements of the marketing mix. Price is therefore crucial in how the
organization’s offering is positioned in the minds of each of its target market
segments. (Kotler & Keller, 2012:383)

Customers interpret price differently. The same price may convey

quite different meanings to different customers. Some customers are
motivated by higher prices in the belief that such prices reflect higher
quality. Prestige pricing involves setting prices high to convey an image of
prestige, quality and exclusivity. Low prices may generate high sales
volume, but may also conflict with a high-quality, differentiated positioning
approach. Conversely, a high price may lead to a loss in sales volume and
market share, and may be resisted by distribution partners. Competition-
based pricing involves setting prices based on the prices charged by
competitors or on the likely response of competitors to the organization’s
prices. It serves to ensure that the company maintain its sales volumes and
market share, but it does not guarantee profitability. (Elliott, Rundle-Thiele,
& Waller, 2012:257-273)
 Another pricing strategies is skimming and penetrating pricing which
usually used for the launch of a new product. A company uses skimming
when the objective is to reach a segment of the market that is relatively price
insensitive and thus willing to pay a premium price for the value received.
When a company is the only seller of a new or innovative product, a
skimming price may be used to maximize profits until competition forces a
lower price. A penetration pricing policy is used to stimulate market and
sales growth by deliberately offering products at low prices. Penetration
pricing most often is used to acquire and hold share of market as a
competitive maneuver. Penetration pricing may be a more profitable strategy
than skimming if it maximizes revenues as a base for fighting the
competition that is sure to come. (Cateora, Graham, & Gilly, 2009:533)

Consumer purchasing behavior is usually based on a rational

evaluation of value. The relative importance of price varies between
individual consumers, however. Consumers’ attitudes to price can be
extremely variable and predicting consumers’ responses to particular prices
can prove difficult. All customers will have a notional price range or specific
price in mind when contemplating a purchase. (Elliott, Rundle-Thiele, &
Waller, 2012:281-282)

According to Cateora, Graham, & Gilly (2009:534-536) there are

many factors that affect the price to be escalate: Cost of Exporting, taxes,
tariffs, administrative cost, inflation/deflation, exchange rate fluctuation,
varying currency values, middleman and transportation cost. Thus, cannot be
ignored by the company. So, company needed to adjust the price in order to
keep the market share. Approach to reducing price escalation is an important
step to keep the product sustain in the market and within the target market
reach. The approach may come from lowering the cost of goods sold and
lowering distribution costs. If the manufacturer’s price can be lowered, the
effect is felt throughout the chain. One of the important reasons for
manufacturing is an attempt to reduce manufacturing costs and thus price
escalation. Eliminating costly functional features or even lowering overall
product quality is another method of minimizing price escalation.
Eliminating them means lower manufacturing costs and thus a
 A29

corresponding reduction in price escalation. Lowering manufacturing costs

can often have a double benefit: The lower price to the buyer may also mean
lower tariffs, because most tariffs are levied on an ad valorem basis. Shorter
channels can help keep prices under control. Designing a channel that has
fewer middlemen may lower distribution costs by reducing or eliminating
middleman markups. Besides eliminating markups, fewer middlemen may
mean lower overall taxes. Some countries levy a value-added tax on goods
as they pass through channels. Goods are taxed each time they change
hands. The tax may be cumulative or noncumulative. A cumulative value
added tax is based on total selling price and is assessed every time the goods
change hands. Obviously, where value-added tax is cumulative, tax alone
provides a special incentive for developing short distribution channels.
Where that is achieved, tax is paid only on the difference between the
middleman’s cost and the selling price.

Marketing strategies need to be based on a thorough understanding of

the competitive environment. Most companies seek to compete using
differentiation strategy, which emphasize the uniqueness of the company’s
products. Company with differentiation strategy focus on product attributes
such as uniqueness, quality, brand, image. When it is feasible, non-price
competition is clearly preferable to price competition as it gives the
company greater power to decide on the profit margin. A non-price
competition requires the organization to develop in customers a preference
for the organization’s products based on factors other than price. To be
effective, the organization must successfully differentiate itself from
competitors by unique product attributes such as: product quality,
innovation, brand image, styling, customer service, distribution coverage,
and local convenience. (Elliott, Rundle-Thiele, & Waller, 2012:276-277)
2.4 Framework
Below is the framework of research process that will be taken to find out about the
implementation strategic marketing towards Coca-Cola packaging.

Packaging Material Volume Price

PET 250ml Rp 3,000 – Rp 6,000

Can 330ml Rp 6,001 – Rp 9,000
425ml Rp 9,000 – Rp 12,000
1500ml

Consumer Preference

Segmentation based on
Consumer Preference

Figure 2.6 Research Framework

A31