By Tadesse Mengistie, Asst/ Professor

Ch 1-4 By Tadesse Mengistie, Asst/ Professor 1
•Introduction
•Today's companies have one thing in common –
•They are strongly customer-focused and heavily committed to
marketing.
•These companies share an absolute dedication to sensing, serving
and satisfying the needs of customers in well-defined target markets.
•They motivate everyone in the organization to high levels of
customer satisfaction.
•These organizations know that if they take care of their customers,
market share and profits will follow.
Marketing Defined:
•Many people think of marketing only as selling and advertising and
no wonder, for everyday we are bombarded with television
commercials, direct mail offers, sales calls, and internet pitches.
•However selling and advertising are only the tip of the marketing
iceberg.

Today marketing must be understood not in the old
sense of making a sale---“telling and selling” – but in
the new sense of “Satisfying customer needs”.
If the marketer does a good job of understanding
consumer needs; develops products that provide
superior value; and prices, distributes, and promotes
them effectively, these products will sell very easily.
Broadly defined marketing is a social and managerial
process by which individuals and groups obtain what
they need and want through creating and exchanging
value with others.

 In a narrow business context, marketing involves
building profitable, value-laden exchange relationships
with customers.
 It can also be defined as the process by which
companies create value for customers and build strong
customer relationships in order to capture value from
customers in return.
 A widely accepted definition is the one used by the UK
Chartered Institute of Marketing (CIM): ‘Marketing is
the management process, responsible for identifying,
anticipating and satisfying customer requirements
profitably.’

 The American Marketing Association’s (AMA) latest
definition of marketing was produced in January 2008:
‘Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering, and
exchanging offerings that have value for customers,
clients, partners and society at large.’
 We can say that the AMA definition is more accurate

than that of the CIM, as the CIM definition infers
satisfying customer requirements profitably: in fact
public services like the police and fire service are not-
for-profit and in a modern context they undoubtedly
apply marketing principles.

Why is Marketing important to you/every consumer/nearly every citizen?
 Marketing affects almost every aspect of your daily life.

 All the goods and services you buy, the stores where you shop, and
the radio and TV programs paid for by advertisers are there
because of marketing.
 We are all consumers and active participants in the marketing

network.
 Marketing has an impact on society as a whole.
 Even your job résumé is part of a marketing campaign to sell

yourself to some employer!

 You—as a consumer—pay for the cost of marketing activities. In
advanced economies, marketing costs about 50 cents of each consumer
dollar. For some goods and services, the %age is much higher.
 There are many exciting and rewarding career opportunities in

marketing. Marketing is often the route to the top. In sales,
advertising, product management, marketing research, distribution,
and other areas.
 Some courses are interesting when you take them but never relevant
again once they’re over. Not so with marketing—you’ll be a consumer
dealing with marketing for the rest of your life.
 Even if you’re aiming for a non-marketing job, you’ll be working with

marketing people. Knowing something about marketing will help you
understand them better.

 Even if you’re not planning a business career,
marketing concepts and techniques apply to
nonprofit organizations too.
Many nonprofit organizations have a marketing
manager. And the same basic principles used to
sell soap are also used to “sell” ideas, politicians,
mass transportation, health care services,
conservation, museums, and even colleges.

An even more basic reason for studying marketing
is that marketing plays a big part in economic
growth and development.
Marketing stimulates research and new ideas—
resulting in innovative new goods and services.
Marketing gives customers a choice among
products. If these products satisfy customers,
fuller employment, higher incomes, and a
higher standard of living can result.
An effective marketing system is important to
the future of all nations.

Some Criticisms of Marketing
Marketing communications are not always honest
“They can sometimes play on people’s emotions and
fears and can cause them to buy things they really don’t
need.”
It can “psychologically manipulate” consumers
(they sell the “sizzle,” not the steak).
Youth may be targeted by companies selling adult
products (e.g. alcohol)
Marketing sells products that can be harmful

Advertising can be clichéd or corny
“99% of commercials are so boring.”
Fashion advertising emphasizes an unattainable body
Preaches that buying things makes you happy
Implicitly demeans self-control, gratitude, and
transcendent (non-material) values (e.g. buy now, you
deserve it….)
Sometimes takes advantage of consumer lack of knowledge
(let the buyer beware)
Advertising is everywhere, and it’s often annoying,
misleading, or wasteful.
• The quality of products is poor and often they are not
even safe.

 Types of Marketing “Offerings”
a) Goods
 are tangible
b) Services
 an experience provided by the application of human or mechanical
skill
 Examples – haircut, dry cleaning, consulting, movies…
 How services differ:
 Can’t inventory
 Intangible
 Quality control difficult
 Often a real time performance
 Consumer participation
c) A third marketing “offering”:
 Ideas—the most intangible of all

Marketing as Selling Ideas:
“Social marketing has been with us for a long time. The
Greeks and Romans launched campaigns to free slaves.
During the Industrial Revolution, campaigns were
mounted to abolish debtor prisons and child labor and
grant voting rights to women. In the past century social
reform campaigns in America have spoken for abolition,
temperance and prohibition, and women’s suffrage
movements.” Common Social Marketing Concerns are
health, environment, education and safety.
What if you are trying to sell yourself?

When your market yourself you are marketing your
services, idea and good (yourself).
The Marketing Process
 Simple five-step model of the marketing process.
 In the first four steps, companies work to understand
consumers, create customer value, and build strong customer
relationships.
 In the final step, companies reap the rewards of creating
superior customer value. By creating value for customers,
they in turn capture value from consumers in the form of
sales, profit, and long term customer equity.
1. Understand the marketplace and customer needs and wants
2. Design a customer driven marketing strategy
3. Construct a marketing program that delivers superior value
4. Build profitable relationships’ and create customer delight
5. Capture value from customer to create profits and customer
equity

Fig 1.1 A simple model of marketing process

1. Understanding The Market Place And Customer Needs
 As a first step Marketers need to understand customer
needs and wants and the market place within which they
operate.
 Core concepts of marketing: customer needs,
wants, and demand; products (Marketing offers); value
and satisfaction; exchange, transactions and
relationships; and markets.
a) Customer Needs, Wants and Demands
b) Marketing offers—products, Services and Experiences
c) Customer value and satisfaction
d) Exchanges and Relationships
e) Markets

A. Customer Needs, wants and Demands
 The most basic concept underlying marketing is that of
human needs.
 Human needs are states of felt deprivation.
 They include:
 basic physical needs for food, clothing, warmth, and
safety;
 social needs for belonging and affection; and
 individual needs for knowledge and self expression.
 These needs were not created by marketers; they are a
basic part of the human make up.
 When a need is not satisfied, a person will do one of two
things:
1. look for an object that will satisfy it; or
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2. try to reduce the need.
By Tadesse Mengistie, Asst/ Professor 17
People in industrial societies may try to find or develop
objects that will satisfy their desires. People in less
developed societies may try to reduce their desires and
satisfy them with what is available.
Wants are the form human needs take as they are
shaped by culture, and individual personality.
 An Ethiopian needs food but wants ‘Injera’ with ‘Doro
Wot’. Where as an American needs food but want a Big
Mac, French fries, and a soft drink.
 Wants are shaped by one’s society and described in
terms of objects that will satisfy needs.
When backed by buying power, wants become demands.
Given their wants and resources, people demand
products with benefits that add up to the most value and
Ch 1-4 satisfaction. By Tadesse Mengistie, Asst/ Professor 18
C) Customer Value and Satisfaction
Customers usually face a broad array of products
and services that might satisfy a given need.
How do they choose among these many marketing
offers?
Customers’ value refers to the customer’s
evaluation of the difference between all the
benefits and all the costs of a marketing offer
relative to those of competing offers.
In other words we can define value as the ratio
between what the customer gets and what he/she
gives.
The benefit includes functional benefits and
emotional benefits. The cost includes monetary
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costs, time Bycosts and energy costs.
Tadesse Mengistie, Asst/ Professor 19
Customer satisfaction is the extent to which a
product’s perceived performance matches a
buyer’s expectation.
PP>BE=?
PP<BE=?
PP=BE=?
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 too
high, buyers will be disappointed. Customer value
and customer satisfaction are key building rocks
for developing and managing customer
relationships.

d) Exchanges and Relationships
 Marketing occurs when people decide to satisfy
needs and wants through exchange
relationships.
 Exchange is the act of obtaining a desired object
from someone by offering something in return.
 In the broadest sense, the marketer tries to bring
about a response to some marketing offer.
 The response may be more than simply buying
or trading products and services. A political
candidate, for instance, wants votes, a church
wants membership, and a social action group
wants idea acceptance.
For exchange potential to exist, five conditions
must be satisfied:
 There are at least two parties
 Each party has something that might be of
value to the other party
 Each party is capable of communication and
delivery.
 Each party is free to accept or reject the
exchange offer.
 Each party believes it is appropriate or
desirable to deal with the other party.

e) Markets
 The concept of exchange and relationships lead to the
concept of market.
 A market is the set of actual and potential buyers of a
product. These buyers share a particular need and want
that can be satisfied through exchange relationships.
 Although we normally think of marketing as being
carried on by sellers, buyers also carry on marketing.
Consumers do marketing when they search for the
goods they need at the price they can afford.
 Company purchasing agents do marketing when they
track down sellers and bargain for goods terms.

Figure 1.2 illustrates the main elements in a modern
marketing system. In the usual situation, marketing
involves serving a market of final consumers in the face of
competitors. The company and the competitors send their
respective offers and messages to consumers, either
directly or through marketing intermediaries. All of the
actors in the system are affected by major environmental
forces (demographic, economic, physical, technological,
political/ legal, and social/cultural).

2. Designing a Customer-Driven Marketing
Strategy
marketing management can be defined as the art
and science of choosing target markets and building
profitable relationships with them.
The marketing manager’s aim is to find, attract,
keep, and grow target customers by creating,
delivering, and communicating superior customer
value.
Marketing management is concerned not only with
finding and increasing demand, but also with
changing or even reducing it

To design a winning marketing strategy, the
marketing manager must answer two important
questions:
What customers will we serve (what’s our target
market)?
How can we serve these customers best (what’s our
value proposition)?

Types of Demand
Marketing management has the task of
influencing the level, timings and composition of
demand in a way that will help the organization to
achieve its objectives. Also, A marketer has to
take into consideration different types of demand
for his product before he comes up with
a strategy.

Negative Demand- A market is in a state of negative demand
if a major part of the market dislikes the product and
may even pay a price to avoid it.
 Some people have negative demand for vaccination and
in some situation they even pay a higher price to replace
it by tablets or some other form of treatment.
 The marketing task is to analyze why the market dislikes
the product and whether a marketing program
consisting of product redesign, lower prices, and more
positive promotion can change the market’s beliefs and
attitudes these marketing task/ activity is known as “
conversional marketing”.

 No Demand- Target consumers may be unaware of or
uninterested in the product or services. Thus, farmers
may not be interested in a new farming method, and
college students may not be interested in foreign
language courses. The marketing task is known as
“stimulational marketing”; its task is to find ways to
connect the benefits of the product with the person’s
natural needs and interests.
 Latent Demand- Many consumers may share a strong
need that cannot be satisfied by any existing actual
product. There is a strong latent demand for harmless
cigarettes and HIV/AIDS medicine. The marketing
task is called; “developmental marketing” its main task
is to measure the size of the potential market and
develop effective goods and services that would satisfy
the demand.

 Declining/ falling Demand- Every organization,
sooner or later, faces declining demand for one
or more of its products.
 The marketer must analyze the causes of market
decline and determine whether demand can be
restimulated by finding new target markets,
changing the product’s features or developing
more effective communication.
 The marketing task is, “remarketing” to reverse
the declining demand through creative
remarketing of the product.

 Irregular Demand— Many organizations- face
demand that varies on a seasonal, daily, or even
hourly basis, causing problems of idle or
overworked capacity.
 Museums are under visited on weekdays and
overcrowded on weekends.
 Hotels, restaurants, recreational areas are also
overworked in weekends and some specific
hours and less attended on others.
 The marketing task, which is called
‘synchromarketing’, is to find ways to alter the
same pattern of demand through flexible
pricing, promotion, and other incentives.

 Full Demand- Organizations face full demand
when they are pleased with their volume of
business.
 “Maintenance marketing” is the marketing task,
which designs to maintain the current level of
demand in the face of changing consumer
preferences and increasing competition.
 The organization must maintain or improve its
quality and continually measure consumer
satisfaction to make sure it is doing a good job.

 Overfull Demand— In some situations,
organizations face a demand level that is higher
than what they can or want to handle.
 The marketing task, which is called
“demarketing”, it requires finding ways to
reduce demand temporarily or permanently.
 Demarketing seeks to discourage overall
demand and consists of such steps as raising
prices and reducing promotion and service.
 Demarketing aims not to destroy demand but to
reduce its level, temporarily or permanently.

 Unwholesome Demand- It is the demand for
unhealthy products like cigarette, alcohol, hard
drugs, handguns, and X-rated movies.
 Unwholesome products will attract organized
efforts to discourage their consumption.
 The marketing task is to get people who like
something to give it up, using such tools as fear
massage, price hikes, and reduced availability.
 The corresponding marketing task is known as
“counter marketing”.

Marketing Management Orientations
 There are five alternative concepts under which
organizations design and carry out their marketing
strategies: the production, product, selling, marketing
and societal marketing concepts.
 These competing philosophies strongly influence an
organization’s marketing processes.
1. The production concept
 The production concept holds that consumers will favor
products that are available and highly affordable
 Therefore, management should focus on improving
production and distribution efficiency
 This concept is one of the oldest orientations that guide
sellers.
 The production concept is still a useful philosophy in
two types of situation. The 1st occurs when the demand
for a product exceeds the supply.
 The 2nd situation occurs when the product’s cost is too
high & improved productivity is needed to bring it down
 Can lead to Marketing Myopia (losing sight of Z real
obj. of satisfying CNs and building Customer R/ship. )
2. Product concept
 The product concept holds that consumers will favor
products that offer the most in quality, performance,
and innovation features.
 Under this concept marketing strategy focuses on making
continuous product improvement.
 Some manufacturers believe that if they can build a better
mouse-trap, the world will beat a path to their door. It can
also lead to Marketing Myopia
3. Selling concept
holds that consumers will not buy enough of the
firms products unless it under takes a large-scale
selling and promotion effort.
The concept is typically practiced with unsought
goods
 Most firms practice the selling concept when they
face overcapacity. Their aim is to sell what they
make rather than making what the market wants.
Very Risky—It focuses on creating sales
transactions rather than on building long-term
profitable customer relationships.

4. The Marketing Concept
 The marketing concept holds that achieving
organizational goals depends on knowing the needs and
wants of target markets and delivering the desired
satisfactions better than competitors do.
 Under this concept, customer focus and value are the
paths to sales and profit.
 Instead of a product centered “market and sell”

philosophy, the marketing concept is a customer-
centered “sense and respond” philosophy.
 Hunting Vs Gardening
 Right customer for your product Vs right product for
your customers.
 Inside-out perspective Vs Outside-in perspective

Selling concept Vs Marketing concept

5. The Societal Marketing Concept
 The societal marketing concept holds that the
organization should determine the need of target
customers, then deliver the desired satisfaction more
effectively and efficiently than competitors in way
that maintains or improves the consumers’ and
societies’ well-being.
 It is the newest of the five marketing management
philosophies.
 Consider the Coca-Cola Company. Most people see
it as a highly responsible corporation producing
fine soft drinks that satisfy consumer tastes. Yet
certain consumer and environmental groups have
voiced concerns that Coke has little nutritional
value, can harm people's teeth, contains caffeine
and adds to the litter problem with disposable bottles
Ch 1-4 and cans.By Tadesse Mengistie, Asst/ Professor 40
The societal marketing concept questions
whether the pure marketing concept is
adequate in an age of environmental
problems, resource shortages, worldwide
economic problems and neglected social
services.
According to the societal marketing

concept, the pure marketing concept
overlooks possible conflicts between
short-run consumer wants and long-run
consumer welfare.
Society (Human welfare)
Social
Marketing
Concept
Consumers Company
(Wants satisfaction) (Profit

Chapter Two
The Marketing Environment
Marketers need to be good at building
relationships with customers, others in the
company, and external partners.
To do this effectively, they must understand the
major environmental forces that surround all of
these relationships.
A company’s Marketing Environmental consists of
the actors and forces outside marketing that
affect marketing management’s ability to build
and maintain successful relationships with target
customers.
Successful companies know the vital importance
of constantly watching and adapting to the
changing environment
The marketing environment is made up of a
microenvironment and a macro environment.
The microenvironment consists of the
actors close to the company that affect
its ability to serve its customers-
the Company,
suppliers,
Marketing intermediaries,
customer markets, competitors and
publics.
The macro environment consists of the
larger societal forces that affect the
microenvironment-
demographic, economic,
natural, technological, political, and
Ch 1-4
cultural forces.
1.The Company’s Microenvironment
a). TheCompany
 In designing marketing plans, marketing
management takes other company group into
account—groups such as top management,
finance, research and development / R and
D/ , purchasing, operation, and accounting. All
these inter related groups form the internal
environment.
 Top management sets the company’s mission,
objectives, broader strategies and policies.
Marketing managers make decision within the
strategies and plans made by top management.
 Marketing managers must also work closely with

the other company departments. Finance is
concerned with finding and using funds to carry
out the marketing plans.
 The R and D department focuses on designing

safe and attractive products, whereas operations
is responsible for producing and distributing the
desired quality and quantity of products.

 Accounting has to measure revenues and costs to
help marketing know how it is achieving its
objectives.
 Together, all of these departments have an
impact on the marketing department’s plans and
actions. Under the marketing concept all of these
must “think customers’’. They should work in
harmony to provide superior customer value and
satisfaction.
b). Suppliers
 They are firms and individuals that provide the
resources needed by the companies to produce its
goods and services.
 Supplier problems can seriously affect
marketing. Marketing managers must watch
 supply availability-
Ch 1-4  supply shortages andAsst/delays,
By Tadesse Mengistie, Professor 47
 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 tends
of their key inputs. Rising supply costs may
force price increases that can harm the
company’s sales volume.
c). Marketing Intermediaries
c1). Resellers: are distribution channel firms that
help the company find customers or make sales
to them. Ex. Ws, Rs
c2). Physical Distribution firms: help the company
to stock and move goods from their points of
origin to their distribution.
Examples: Warehouses, transportation companies
c3). Marketing Service Agencies - are the marketing
research firms, advertising agencies, media firms, and
marketing consulting firms that help the company target
and promoter its products to the customer.
c4). Financial intermediaries - include banks credit
companies, insurance companies and other businesses that
help finance transactions or insure against the risks
associated with the buying and selling of goods.
c5). Customer Markets: The company needs to study five
types of customer markets closely
 Consumer Markets - 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
profit
 Government market- are made up of government agencies
that buy goods and services to produce public service or
transfer the goods and services to others who needs them.
 International markets—consists of these buyers in other
countries including consumers, producers, resellers, and
governments. Each market type has special characteristics
that call for careful study by the seller.

d). Competitors: The marketing concept states that, to be
successful, a company must provide greater customer value
and satisfaction than its competitors do. Thus, marketers
must do more than simply adapt to the needs of target
consumers.
e). 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. We can identify seven types of
publics.
 Financial publics- influence the company’s ability to obtain
funds. Banks, investment houses, and stockholders are the
major financial publics.
 Media publics-carry news, features, and editorial opinion.
They include newspapers, magazines, and radio and
television stations.
 Government Publics-management must take government
developments into account. Marketers must consult the
company’s lawyers on issues of product safety, truth in
adverting, and other matters.

 Citizen action publics-a company’s marketing decisions
may be questioned by consumer organizations,
environmental groups, minority groups, and others. Its
public relations department can help it stay in touch with
consumer and citizen groups.
 Local Publics—include neighborhood residents and
community organizations. Large companies usually
appoint a community relations officer to deal with
community, attend meetings, answer questions, and
contribute to worthwhile causes.
 General public-A company needs to be concerned about
the general public’s attitude towards its products and
activities.
 Internal Publics- include workers, managers, volunteers,
and the board of directors. Large companies use
newsletters and other means to inform and motivate
their internal publics. When employees feel good about
their company, this positive attitude spills over the
external publics.

2. The Company’s Macro Environment
The company and all of the other actors operate in
a larger macro environment of forces that shape
opportunities and pose threats to company.
The figure below shows the six major forces in the
company’s macro- environment.

a) Demographic Environment
Demographic tell marketers who current and potential
customers are; where they are; and how many are likely to
buy what the marketer is selling.
Demography is the study of human population in terms of
size, density, location, age, gender, race, occupation and
other statistics.
The demographic environment is of major interest to
marketers because it involves, people, and people make up
markets.
Population growth trends are important because they can
offer marketers an indication of demand for certain goods
and services, Examples: High birthrategrowing dd for
infant foods, nursery appliances, baby clothing, toys,
Large family size larger accommodation, educational
services etc
Households are growing more slowly and
getting older: These consumers should have
an interest in high-quality household goods
and in-home health care.
Married couples with/without children
The continued increase in education: More
skilled workers mean more knowledgeable
and sophisticated consumers who expect
more information about product attributes
and benefits before making a purchase.

Economic Environment
Marketers require buying power as well as people.
The Economic Environment consists of factors
that affect consumer purchasing power and
spending patterns.
Nations vary greatly in their levels and
distribution of income.
Some countries have subsistence economies- they
consume most of their own agricultural and
industrial output. These countries offer few
market opportunities.
The other extreme are industrial economies-
Which constitute rich markets for many different
kinds of goods

A list of several aspects of consumer buying power is
presented next. Each can be measured relative to a
marketer's external environment.
 Buying power: A consumer's ability to make purchases.
 Income: The amount of money an individual receives from
wages, rents, investments, pensions, and/or subsidies.
 Disposable income: The income available for spending
after taxes have been paid.
 Discretionary income: Disposable income available for
spending or saving after basic necessities (e.g., food,
housing, clothing) have been purchased.
 Credit: An individual's ability to buy something now and
pay for it later.
 Wealth: The accumulation of past income and other assets
including savings accounts, jewelry, investments, real
estate, and the :ike.
Willingness to spend: An individual's choice
of how much disposable income to spend and
what to spend it on.
Consumer spending patterns: Amount of
money spent on certain kinds of products and
services each year.
Comprehensive spending patterns: The
amount of income individuals allocate to
expenditures for classes of products and
services.
Pdt. spending patterns: The amount of
income spent for specific products in a
product class.
Natural Environment
The natural environment involves the natural
resources that are need as inputs by marketers or that
are affected by marketing activities.
Marketers should be aware of several trends in the
natural environment.
 The first involves growing shortages of raw materials.
Air and water may seem to be infinite resources, but
some groups see long-run dangers. Air pollution
chokes many of the world’s large cities and water
shortages are already a big problem in some parts of
the world. Renewable resources, such as oil, coal, and
various minerals, pose a serious problem. Firms
making products that require these scarce resources
face large cost increases, even if the materials do
remain available.
 Another trend is increased government intervention in
Ch 1-4 natural resource management
Technological Environment
The technological environment is perhaps the most
dramatic forces now shaping our destiny.
Technology has released such wonders as antibiotics,
organ transplants, laptop computers and the Internet.
It also has released such horrors as nuclear missiles,
chemical weapons and assault rifles.
 It has released such mixed blessings as the
automobile, television and credit cards. Our attitude
towards technology depends on weather we are more
impressed with its wonders or its blunders.
New technologies create new markets and
opportunities. However, every new technology replaces
an older technology. Transistors hurt the vacuum-
tube industry, the auto hurt the railroads and compact
Ch 1-4 disks hurt Byphonograph records.
Tadesse Mengistie, Asst/ Professor 61
Changes in technology are changing the way business
operates.
 The Internet is having a profound impact on the marketing
mix strategy of organizations. Consumers can now shop 24
hours a day comfortably from their homes. The challenge
these organization faces is to ensure that they can deliver
on their promise.
 Is the car of the future the electric car? They're called
zero-emission vehicles by their advocates, but they do not
have zero emissions according to some experts. While an
electric car does not emit exhaust, the technology required
to charge their batteries does.

The Influence of Technology
Impacts on all aspects of life
Fundamental to improvement in productivity
Interdependent with skills/skill acquisition
Shifts production possibilities outward
Underpins advances in marketing
Central to new product development
Source of new processes and techniques
Critical to the effective use of information

Stages in development of new technology:
Research = Accumulation of Knowledge
Invention = Development of new ideas/applications
Innovation = commercial exploitation of an idea
Diffusion = rate of adoption through target market
Refinement = to fully exploit the new technology

The Power of the Internet
– Global computer network providing computer
access for computer users to innumerable
international, public, and private networks.
– It enables e-mail communication, information
exchange and commercial transactions for
users
– It meets corporate information needs: Access
to databases on markets and competitors
– It meets consumer information needs: Websites
for convenience, versatility and transparency
in product and price comparison
– Is a powerful communication/promotional tool

Allows low-cost entry to a global market
– Provides a channel for e-commerce: 24/7 connectivity,
speed of response, interactive
– Vehicle for flexible business solutions: Facilitates
development of digital super-highways delivering
text /sound /vision, teleworking, etc.
– Undermines traditional channels: Imminent
(forthcoming) threat to music and publishing
industries
– A major engine for economic development and job
creation

ICT Applications to Marketing
Product
– Computer analysis of market research findings
– Computer-aided design and manufacture
– Flexible manufacturing systems
Price
– Point of sale analysis of buying patterns
– Computer analysis of price changes
– Customer databases for purchase history
– Electronic funds transfer

Promotion
Database marketing for segmentation
Targeted promotional messages
Building long-term customer relationships
Promotional websites
Place
JIT delivery to optimize floor space
Transportation models to optimize delivery
Customized on-line ‘home’ deliveries

Resistance to Change
Technical change has always been resisted:
– Double-edged by its nature: has goods and bads
– Process innovations ¼ short-term unemployment
– Internal resistance from managers /employees
– External resistance of customers, suppliers, etc

Causes of resistance include:
Force of habit
Social and economic needs threatened
Culture of complacency
Legislation, custom and practice
Pressure from interest groups
Negative experience of past change
MARKETING CHANGE
– Identifying and anticipating the likely impacts of the
proposed change
– Timely communication with affected stakeholders
– Consultation over proposed change
– Securing the participation of those affected in driving the
change process
– Promoting ‘change’ as the norm
 Some examples of negative consequences of
technological change :
 Environmentally unclean pollution
 Unemployment (employment shifts leading to
temporary unemployment.)
 Misuse of information and loss of privacy.
When old industries fought or ignored new
technologies, their business declined.
Thus, marketers should watch the technological
environment closely.
Companies that don’t keep up with technological
change soon will find their products outdated. They
will miss new product and market opportunities.

Political /legal Environment
Marketing decisions are strongly affected by
developments in the political and legal
environment. This environment is composed of
laws, government agencies, and pressure groups
that influence and limit various organizations and
individuals.
Legislation regulating business: business
legislation has three main purposes;
to protect companies form unfair competition,
to protect consumers form unfair business
practices and
to protect the interest of society form unbridled
business behavior.
Marketers must have a good working knowledge
of the major laws protecting competition,
consumers, and society.
The political and legal environment may create
both opportunities and challenges for businesses.
Sometimes governmental laws create highly
usable opportunities for business.
An example of opportunities created by
regulations is the case of mandatory recycling
laws which gave the recycling industry a major
boost.

Chapter Three
Consumer Buying Behavior
Having read this chapter, you should be able to:
Describe the behavior of the individual consumers in the
marketplace.
Examine the many factors that influence consumer
behavior.
Identify the various principles of psychology, sociology,
and social psychology that are of value in explaining
consumer behavior.
Examine the relationship of consumer behavior to
marketing management decisions-particularly, target
market selection and the design of the marketing mix .
Discuss how organizational market behavior differs from
consumer market behavior.
Examine how organizations make purchase decisions.
Consumer buyer behaviour is defined as:
‘The acts of individuals directly involved in obtaining and

using goods and services, including the decision processes
that precede and determine these acts.’
3.1. Consumer Markets and CBB

Managers in an organization spend a great deal of time
thinking about customers.
They want to know who their customers are, what they
think and how they feel, and why customers buy their
product rather than competitors
Management needs to put top priority on understanding
customers

Marketers need to satisfy consumer needs. And in
order to do this, they need to understand the
consumers or buyers behavior. If consumers are
satisfied:
They will buy more of a companies products
They advocate or talk favorably about the
company and company's product
They may advice the company for improvement
They give little attention to other companies and
their goods
They may buy new products of the company.

3.1.1 Model of Consumer Behavior
Consumers make many buying decisions every
day
Most large companies’ research consumer buying
decisions in great detail to answer the questions
about
what consumers buy,
where they buy,
how and how much they buy,
when they buy, and why they buy.

Marketers can study actual consumer purchases
to find out what they buy, where, and how much.
But learning about the whys of consumer buyer
behavior is not so easy – the answers are often
locked deep within the consumer’s head.
Often, consumers themselves don’t know exactly
what influences their purchases. “95% percent of
the thought, emotion, and learning [that drive our
purchases] occur in the unconscious mind – that
is without our awareness,” notes one consumer
behavior expert.

The central question in marketing is: how do
consumers respond to various marketing efforts
the company might use?
The starting point is the stimulus response model
of buyer behavior shown in the figure below.
This figure shows that marketing and other
stimuli enter the consumer’s “black box” and
produce certain responses. Marketers must figure
out what is in the buyer’s black box.

Stimulus
It is a cue (social, commercial, or noncommercial)
or a drive (physical) meant to motivate a person
to act.
A social cue occurs when some one talks with
friends , family members, co-workers, and others.
It is from an interpersonal source not affiliated
with a seller
A commercial cue is a message sponsored by a
seller to interest a person in a particular product.
Ex: Ads, personal selling, and sales promotions.
They are less regarded than social cues b/c people
know they are seller controlled.

A noncommercial cue is a message from an
impartial source such as consumer reports or the
government
It has high believability because it is not affiliated
with the seller.
A physical drive occurs when a person’s physical
senses are affected. Thirst, hunger, and fear cause
physical drives.

The marketer wants to understand how
stimuli are changed in to responses inside
the consumer’s black box, which has two
parts.
First, the buyer’s characteristics influences
how he or she perceives and reacts to the
stimuli.
 Second, the buyer’s decision process itself
affects the buyer’s behavior.
 Lets see each of these one by one

3.1.2. Characteristics Affecting Consumer Buying
Behavior
 Consumer purchases are influenced strongly by
culture, social groups, personal and psychological
characteristics.
 For the most part marketers cannot control such
factors, but they must take them into account.
A. Cultural Factors
 Cultural factors exert the broadest and deepest
influence on consumer behavior. The marketer
needs to understand the role played by the buyer's
culture, sub-culture and social class.

Cultural trends
Position of women
– Rise of work and career
– Decline of maternal and domestic roles
– Smaller families – more use of childcare
– Educational opportunity w rising aspirations
Implications
– Control over discretionary spending power
– Changing stereotypes in adverts
– Premium on time/convenience ¼ time-saving
meals, appliances and family eating habits
– One-stop, home and internet shopping

Reference groups:
 A point of reference (of knowledge and
influence) for consumers in decisions
making
Actions and behavior of the family; peer
groups and work colleagues influence
individual attitudes and behavior
The ‘wish to belong’ to preferred groups
encourages conformity to norms, dress
codes
Opinion formers influence the norms

Implications
If marketers persuade opinion leaders, followers buy
Nike seek endorsements (backing or support) from top
players
The family: is a close and influential reference group.

Continuously influences values and buying
decisions

B. Psychological Factors
A person's buying choices are further influenced by
four major psychological factors: Motivation,
Perception, Learning, Beliefs and attitudes.
3.1.3. Types of Buying Decision Behavior
Consumer decision making varies with the type of
buying decision.
Consumer buying behavior differs greatly for a
tube of toothpaste, a tennis racket, an expensive
camera and a new car.
There are four types of consumer buying behavior
based on the degree of buyer involvement and the
degree of differences among brands.

Complex Buying Behavior:
 Consumers undertake complex buying behavior when
they are highly involved in a purchase and perceive
significant brand differences.
 Consumers may be involved when the product is
expensive, risky, purchase infrequently, and highly
self-expressive (e.g. Car). Typically the consumer has
to learn about the product

Dissonance-reducing Buying Behavior:
It occurs when consumers are highly
involved with an expensive, infrequent, or
risky purchase, but see little difference
among brands.
For example a consumer buying carpeting
may face a high-involvement decision
because carpeting is expensive and self-
expressive.
Yet buyers may consider most carpet brands
in a given price range to be the same. In this
case, because perceived brand differences
are not large, buyers may shop around to
learn what is available, but buy relatively
Ch 1-4 quickly.By Tadesse Mengistie, Asst/ Professor 90
They may respond primarily to a good price or
purchase convenience.
After the purchase, consumer might experience
post-purchase dissonance (after sale discomfort)
when they notice certain disadvantage of the
purchased carpet or hear favorable things about
brands not purchased.
To encounter such dissonance, marketer’s after-
sale communications should provide evidence and
support to help consumers feel good about their
brand choices.

Habitual Buying Behavior:
It occurs under conditions of low
involvement and little significant brand
difference.
For example, take Salt. Consumers have
little involvement in this product category-
they simply go the store and reach a brand.
Consumers appear to have low involvement
with most low cost, frequently purchased
products.

Variety-seeking Buying Behavior:
Consumers undertake variety-seeking
buying behavior in situations characterized
by low consumer involvement, but
significant perceived brand differences.
In such cases, brand switching occurs for
the sake of variety rather than because of
dissatisfaction.

3.1.4. The Buyer Decision Processes
The purchase decision process is the stages a
buyer passes through in making choices about
which products and services to buy

Clearly the buying process starts long before actual
purchase and continues long after. Marketers need
to focus on the entire buying process rather than on
just the purchase decision.
Consumers pass through all the five stages with
every purchase. But in more routine purchases, they
often skip or reverse some of the stages.
For example, a student buying a favorite hamburger
would recognize the need (hunger) and go right to
the purchase decision, skipping information search
and evaluation. However, the model is very useful
when it comes to understanding any purchase that
requires some thought and deliberation.

A. Problem Recognition: Perceiving a Need
 Perceiving a difference between a person's ideal
and actual situations big enough to trigger a
decision.
 PR(awareness of need) is the d/c b/n the desired
state and the actual condition.
 Deficit in assortment of products.
Ex. A need can be stimulated by the marketer
through product information--did not know you
were deficient? I.E., see a commercial for a new
pair of shoes, stimulates your recognition that you
need a new pair of shoes.

The need can be triggered by internal stimuli
when one of the persons normal needs, hunger,
thirst, – rises to a level high enough to become a
drive. A need can also be triggered by external
stimuli.
B. Information Search: Seeking Value
The information search stage clarifies the options
open to the consumer and may involve
Two steps of information search:
Internal Search and
 External Search

Internal Search
Scanning one’s memory to recall previous experiences
with products or brands.
Often sufficient for frequently purchased products.
External Search
When past experience or knowledge is insufficient
The risk of making a wrong purchase decision is high
The cost of gathering information is low.

An aroused consumer may or may not search for
more information.
If the consumer's drive is strong and a satisfying
product is near at hand, the consumer is likely to
buy it.
If not strong, the consumer may not store the need
in memory or undertake an information search
related to the need.
The primary sources of external information are:
Personal sources: friends, family, neighbor,
aquintacies
Public sources: various product-rating
organizations such as Consumer Reports, mass
media
Marketer-dominated (commercial) sources: Adg,
Ch 1-4 company websites, andAsst/salespeople,
By Tadesse Mengistie, Professor package 101
C. Alternative Evaluation: Assessing Value
 The information search clarifies the
problem for the consumer by
(1)Suggesting criteria to use for the purchase.
(2)Yielding brand names that might meet the
criteria.
(3)Developing consumer value perception.
A consumer's evaluative criteria represent
both
the objective attributes of a brand
the subjective factors (such as prestige).

D. Purchase Decision: Buying Value
Three possibilities:
1. From whom to buy
2. When to buy
3. Do not buy

1. From whom to buy: which depends on such
considerations
Terms of sale
Past experience buying from the seller
Return policy.
2. When to buy which: can be influenced by
store atmosphere
time pressure
a sale
pleasantness of the shopping experience.

E. Post-purchase Behavior: Value in Consumption
or Use
After buying a product, the consumer compares it
with expectations and is either satisfied or
dissatisfied.
Satisfaction or dissatisfaction affects
consumer value perceptions
consumer communications
repeat-purchase behavior.
Many firms work to produce positive post-
purchase communications among consumers and
contribute to relationship building between sellers
and buyers.

Cognitive Dissonance: Z feelings of post-
purchase psychological tension or anxiety a
consumer often experiences
It is doubt that a correct decision has been
made. A person may regrate a purchase or
wish another choice had been made.
Firms often use ads or follow-up calls from
salespeople in this post-purchase stage to try
to convince buyers that they made the right
decision. Extended warranties to reassure
people.

Business Markets and Business
/organizational Buyer Behavior
After completion of this topic, successful students
should be able to;
Explain how business markets differ from
consumer markets.
Identify the main factors that influence business
buyer behavior.
List and define the steps in the business buying
decision process.
Explain how institutional and government buyers
make their buying decisions.

Business market: All the organizations that
buy goods and services to use in the
production of other products and services,
and identify, evaluate and choose among
alternative brands and suppliers.
It also includes retailing and wholesaling
firms that acquire goods for the purpose of
reselling or renting them to others at a
profit

The business buying process is the decision-making
process by which business buyers establish the need
for purchased products and services, and identify,
evaluate and choose among alternative brands and
suppliers.
Companies that sell to other business organizations

must do their best to understand business markets and
business buyer behavior.

This example (the above figure) shows why there
is more business buying than consumer buying -
many sets of business purchases were made for
only one set of consumer purchases.
Characteristics of Business Markets
In some ways, business markets are similar to
consumer markets. Both involve people who
assume buying roles and make purchase decisions
to satisfy needs. The basic philosophy and practice
of marketing are the same whether the customer is
a business organization or a consumer.
However, business markets differ in many ways
from consumer markets.

The main differences are in market structure
and demand, the nature of the buying unit, and
the types of decision and the decision process
involved
1)Market Structure and demand
The business marketer normally deals with far
fewer but far larger buyers than the consumer
marketer does.
BMs are also more geographically concentrated:

Further, business demand is derived demand -
it ultimately derives from the demand for
consumer goods.
Example 1: Mercedes buys steel because
consumers buy cars. If consumer demand for
cars drops, so will the demand for steel and all
the other products used to make cars.
Example 2: the market for CPUs, hard drives,
and CD-ROMs is derived from the demand for
personal computers. These items are only
valuable as components of computers. Demand
for these items rises and falls with the demand
for PCs.
Because demand is derived, business
marketers must carefully monitor demand
patterns & changing preferences in final
consumer markets, even though their
customers are not in those markets.
Many business markets have inelastic
demand: that is, total demand for many
business products is not affected much by
price changes, especially in the short run.
A drop in the price of leather will not
cause shoe manufacturers to buy much
more leather unless it results in lower
shoe prices, which, in turn, will increase
consumer demand for shoes.
The price of a product used in the production of, or as
part of, a final product is often a minor portion of the
final product’s total price. Therefore, demand for the
final consumer product is not affected. If the price of
automobile paint or spark plugs rises significantly,
say, 200 percent in one year, do you think the number
of new automobiles sold that year will be affected?
Probably not.

 Finally, business markets have more fluctuating
demand. The demand for many business goods and
services tends to change more — and more quickly -
than the demand for consumer goods and services does.
 A small percentage increase in consumer demand can
cause large increases in business demand. Sometimes a
rise of only 10 per cent in consumer demand can cause
as much as a 200 per cent rise in business demand
during the next period.

B). Nature, of the Buying Unit
 Compared with consumer purchases, a business
purchase usually involves more buyers & a more
professional purchasing effort.
 Often, by trained purchasing agents,
 who spend their working lives learning how to buy
well.
 The more complex the purchase, the more likely that
several people will participate in the decision-making
process.

 Buying committees made up of technical experts
and top management are common in the buying of
primary goods. Therefore, business marketers
must have well-trained salespeople to deal with
well-trained buyers.
C) Type of Decision and the Decision Process
Business buyers usually face more complex buying
decisions than do consumer buyers.
Purchases often involve large sums of money,
complex technical & economic considerations, and
interactions among many people at many levels of
the buyer's organization.

The business buying process tends to be more
formalized than the consumer buying process.
Large business purchases usually call for
detailed product specifications, written
purchase orders, careful supplier searches and
formal approval.
The buying firm might even prepare policy
manuals that detail the purchase process.
D) Characteristics of Business Markets
DIRECT PURCHASING. Business buyers often
buy directly from producers rather than through
intermediaries, especially for items that are
technically complex or expensive.

RECIPROCITY. Business buyers often practice
reciprocity, selecting suppliers that also buy from
them. For example, a paper company might buy
needed chemicals from a chemical company that in
turn buys the company's paper.
LEASING. Business buyers are increasingly leasing
equipment instead of buying it outright.

Characteristics Business Consumer
Markets Markets
Demand Organizational Individual
Purchase Volume Larger Smaller
Number of Customers Fewer Many
Location of Buyers Geographically Geographically
concentrated Dispersed
Distribution structure More direct More indirect
Nature of Buying More More Personal
professional
Nature of buying Influence Multiple Single
Type of Negotiations More Complex Simpler
Use of reciprocity Yes No
Use of leasing Greater Lesser
Primary promotional method Personal Selling Advertisin

Ch 1-4
What Buying Decisions Do Business Buyers Make?
The business buyer faces a whole set of decisions in
making a purchase. The number of decisions
depends on the type of buying situation.
Main Types of Buying Situation
STRAIGHT REBUY. In a straight rebuy, the buyer
reorders something without any modifications. It is
usually handled on a routine basis by the purchasing
department. Based on past buying satisfaction, the
buyer simply chooses from the various suppliers on
its list

 'In' suppliers try to maintain product and service
quality. They often propose automatic reordering
systems so that the purchase agent will save
reordering time
 The 'out' suppliers try to offer something new or

exploit dissatisfaction so that the buyer will consider
them, 'Out' suppliers try to get their foot in the door
with a small order and then enlarge their purchase
share over time.

MODIFIED REBUY. In a modified re-buy, the
buyer wants to modify product specifications,
prices, terms or suppliers.
 The modified re-buy usually involves more

decision participants than the straight re-buy.
 The 'in' suppliers may become nervous and feel
pressured to put their best foot forward to
protect an account.
 'Out’ suppliers may see the modified re-buy
situation as an opportunity to make a better
offer and gain new business.

NEW TASK: A company buying a product or service
for the first time faces a new task situation. In such
cases, the greater the cost or risk, the larger will be the
number of decision participants and the greater their
efforts to collect information.
The new-task situation is the marketer's greatest
opportunity and challenge.
The marketer not only tries to reach as many key
buying influences as possible, butalso provides help
and information.

Who Participates in the Business Buying Process?
The decision making unit of a buying organization is
called its buying centre, defined as all the individuals
and units that participate in the business decision-
making process
The buying centre includes all members of the
organization who play any of five roles in the
purchase decision process
1). Users: Members of the organization who will use the
product

2)Influencers: People who affect the buying
decision. They often help define specifications &
also provide information for evaluating
alternatives.
Technical personnel are particularly Important
influencers.
3) Buyers: People with formal authority to select
the supplier and arrange terms of purchase.
Buyers may help shape product specifications,
but they play their most important role in
selecting vendors and in negotiating. In more
complex purchases, buyers might include high-
level officers participating in the negotiations.

4) Deciders: People who have formal or
informal power to select or approve the
final suppliers. In routine buying, the
buyers are often the deciders or at least the
approvers.
5) Gatekeepers: People who control the flow
of information to others. For example,
purchasing agents often have authority to
prevent salespersons from seeing users or
deciders.
Other gatekeepers include technical
personnel and even personal secretaries.
How Do Business Buyers Make their Buying
Decisions?
Buyers who face a new-task buying situation
usually go through all stages of the buying process,
Buyers making modified or straight re-buys may
skip some of the stages.
We will examine these steps for the typical new-
task buying situation.

1) Problem Recognition
 decisions to launch a new product that
requires new production equipment and
materials.
 a machine may break down and need new
parts.
 Perhaps a purchasing manager is unhappy
with a current supplier's product quality,
service or prices
 Externally, the buyer may get some new
ideas at a trade show, see an ad or receive
a call from a salesperson who offers a
better product or a lower price.
2).General Need Description
describes the characteristics and quantity of the
needed item.
ranks the importance of reliability, durability,
price and other attributes desired in the item
3). Product Specification
developing the item's technical product
specifications often with the help of a value
analysis engineering team.
Value analysis is an approach to cost reduction
in which components are studied carefully to
determine if they can be redesigned,
standardized or made by less costly methods of
production.
4. Supplier Search
The buyer now conducts a supplier search to find
the best vendors.
 The buyer can compile a small list of qualified
suppliers by reviewing trade directories, doing a
computer search or phoning other companies for
recommendations.
5. Proposal Solicitation
inviting qualified suppliers to submit proposals.

In response, some suppliers will send only a
catalogue or a salesperson.
However, when the item is complex or
expensive, the buyer will usually require
detailed written proposals or formal
presentations from each potential supplier
6. Supplier Selection
The members of the buying centre now
review the proposals and select a supplier or
suppliers. During supplier selection, the
buying centre will often draw up a list of the
desired supplier attributes and their relative
importance.
7. Order-Routine Specification
It includes the final order with the chosen supplier
or suppliers and lists items such as
 technical specifications,
 quantity needed,
 expected time of delivery,
 return policies and
 warranties.

8. Performance Review
The buyer may contact users and ask them to rate
their satisfaction.
The performance review may lead the buyer to
continue, modify or drop the arrangement.
The seller's job is to monitor the same factors used
by the buyer to make sure that the seller is giving
the expected satisfaction.

Chapter Four
Market segmentation and positioning
Companies today recognize that they cannot appeal
to all buyers in the marketplace or at least not to all
buyers in the same way.
Buyers are too numerous, too widely scattered, and
too varied in their needs and buying practices.
Moreover, the companies themselves vary widely in
their abilities to serve different segments of the
market.
Instead, a company must identify the parts of the
market that it can serve best and most profitably. It
needs to design strategies to build the right
Ch 1-4 relationships with
By Tadesse the
Mengistie, Asst/right
Professorcustomers. 137
Thus, most companies have moved away from
mass marketing and toward market segmentation
and targeting—identifying market segments,
selecting one or more of them, and developing
products and marketing programs tailored to each.
Instead of scattering their marketing efforts (the
“shotgun” approach), focusing on the buyers who
have greater interest in the values they create best
(the “rifle” approach).

1. Market Segmentation
 Markets consist of buyers, and buyers differ in one
or more ways.
 They may differ in their wants, resources,
locations, buying attitudes and buying practices.
 Through mkt segmentation, companies divide
large, heterogeneous markets into smaller
segments that can be reached more efficiently
with products and services that match their
unique needs.

Levels of Market Segmentation.
Market segmentation can be carried out at many
different levels. Companies can practice:
no segmentation (mass marketing),
complete segmentation (micromarketing) or
something in between (segment marketing or niche
marketing).

1. Mass Marketing: mass producing, mass
distributing and mass promoting about the same
product in about the same way to all consumers.
2. Niche marketing:
 Market segments are normally large identifiable
groups within a market – for example, luxury car
buyers, performance car buyers, utility car buyers
and economy car buyers.
 Niche marketing focuses on subgroups within
these segments.

By Tadesse Mengistie, Asst/ Professor

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 We can say that the AMA definition is more accurate

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 Marketing affects almost every aspect of your daily life.

 We are all consumers and active participants in the marketing

 Marketing has an impact on society as a whole.

 Even your job résumé is part of a marketing campaign to sell

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 There are many exciting and rewarding career opportunities in

 Even if you’re aiming for a non-marketing job, you’ll be working with

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What if you are trying to sell yourself?

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 Instead of a product centered “market and sell”

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According to the societal marketing

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 Marketing managers must also work closely with

 The R and D department focuses on designing

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