Principle of marketing

Meaning of marketing
The word marketing has been defined by different scholars
Marketing is meeting customers’ needs and wants profitably

Marketing is the economic process by which goods and services are

exchanged between the producer and the consumer and their values
determined in terms of money prices.

Marketing is a key function of management. (It brings success to business

organization)
 Scholars Definition Of Marketing

Marketing
 is the performance of business activities that directs the flow of goods and
services from producer to consumers or final users. It is a process of transacting goods
and services form the producer to consumers

Marketing
 is a system of business activities designed to plan, price, promote and
distribute want satisfying goods and services to present and potential customers.
(William J. Stanton

“Marketing
 is the management process for indentifying, anticipating & satisfying
customer requirements profitably(Chartered Institute of Marketing )

Marketing
 is a Social and Managerial process by which individuals and groups obtain
what they need and want through creating, offering, and exchanging products of value
with others . (Philip Kotler)
 Core concepts of marketing
Needs: it is a state of deprivation of some basic satisfaction
These needs are not created by society or by marketers.
Example: food, shelter, clothing and belongingness

Wants: Are the forms that human needs take as they are shaped by society, culture
and individual personality. For e.g. an Ethiopian needs food and wants "Injera" &
"wet", and an American needs food and wants “hamburger”.

 people's needs are few, their wants are many.

 Human wants are continually shaped and reshaped by social forces and
institutions, including churches, schools, families, and business corporations.
Demands
 when buying power backs want, it becomes demand.
 Simply demand means wants for specific products that are backed by an ability
and willingness to buy them.
 Wants become demands when supported by purchasing power

Product (Goods, Services, and Ideas)

 A product is any thing that can be offered to satisfy a need or want.
 The concept of product is not limited to physical objects but also it includes
tangible goods such as , service(s), and ideas(s)
 Sometimes, product may be a combination of physical product along with
services.
Exchange
 itis the act of obtaining a desired product from someone by offering something in
return

 Exchange must be seen as a process rather than as an event.

 Two parties are engaged in exchange if they are negotiating and moving toward an
agreement. When an agreement is reached, we say that a transaction takes place
For exchange to exist, five conditions must be satisfied:
 There should be 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/ desirable to deal with the other party

 
Transaction
Transaction – is a trade of values between two or more
parties or it is a marketing unit of measurement when the
act of obtaining something in return for the other is
measured by some unit. Eg. Barter transaction (in kind)
and Monitory transaction (in money).

A transaction consists of a trade off values between two

parties.
 There is always two parties in exchange marketer and
prospect (customer)

 Short-term transaction (relationship that lasts with the

completion of the exchange process) or long-term
transaction (relationship that continues after the transaction
is completed).
Customer Value and satisfaction:
Customer value: is the difference between the value of customer gains from owning and
using a product and the costs of obtaining the product.

Customer Satisfaction: depends on a product’s perceived performance in delivering

value relative to buyer expectations

Customers can be satisfied, dissatisfied or delighted

Markets: it consists of all the potential and actual customers sharing a particular
need or want who might be willing and able to engage in exchange to satisfy
that need or want.

 A collection of seller is an industry

 Markets can be classified in different ways but the most accustomedly
used classifications are based on the basis of free intercourse and
based on buyers characteristics.
 Classification of markets on the basis of free intercourse( perfect and
imperfect)

In perfect market
 All potential buyers and sellers are promptly aware of the prices at
which transactions take place and all the offers made by other sellers
and buyers and where any buyer can purchase from any seller.
 price of commodity would be the same all over the market.
 A market is imperfect when some buyers and sellers or both are not
aware of the offers being made
Classification on the basis of the characteristics of the
consumer(consumer or industrial markets).

 Consumer markets: it includes purchasers and/or individual household

members who intend to consume or benefit from the purchased products and
who do not buy products to make profits.

 Industrial markets (business-to-business markets): are grouped broadly into

producer, reseller, governmental, and institutional categories.

 These markets purchase specific kinds of products for use in making other
products, for day to day operations by others or to make a profit.
There are two parties in the market
Marketer:- The party that more actively seeking an exchange than the other
party, obviously it should make some efforts to make the other party interested
in the exchange

 Marketer is a party that seeks a resource from the other party and in return
willing to offer something valuable to the other party

 The party with whom the marketer needs to make exchange is known as
prospect
Marketing management
The marketing manger is responsible for all the function of marketing
management
(analysis, planning, implementation, control, pricing, promotion and
distribution)

Itis a process of planning and executing the conception, pricing,

promotion, and distribution of ideas, goods and services to create
exchange that satisfies individual and organizational goals.

Sometimes the marketing manger is called as a demand manger

There are eight different states of demand and corresponding tasks facing marketing managers.

1.Negative demand: if a major part of the market

dislikes the product and may even pay a price to avoid it. E.g. vaccince new seeds
 Marketing strategy is referred as Conversion marketing : it involve changing the
attitude of customers
2. No Demand: Target consumer may be unaware of or uninterested in the
product. E.g new seeds
 Marketing strategy is Stimulative marketing which is to find ways to connect the
benefits of the product with the person's natural needs and interests
3. Latent demand: a state demand that cant be satisfied by the existing product.
e.g harmless cigarettes none fuel cars
 Marketing strategy is referred as Development marketing : it is to measure the
size of the potential market and develop effective goods and services that would
satisfy the demand
4. Declining demand: it is when an organization or any business entity face a
decaling demand
 Marketing strategy is referred as creative marketing
it is to analyze the causes of market decline and determine whether demand can
be re stimulated by finding new target markets, changing the products features, or
developing more effective communication
5. Irregular demand: a demand that varies on a seasonal, daily, or even hourly
basis
 The marketing task, called syncro-marketing, is to find ways to bring the same
pattern of demand through flexible pricing, promotion, and other incentives
6. Full demand :Organizations face full demand when they are pleased with their
volume of business.
 Marketing task is to maintain the current level of demand in the face of changing
consumer preferences and increasing competition.
 It is referred as maintenance demand
7. Over full demand :Some organizations face a demand level that is higher than
they can or want to handle

 The marketing task is to find out ways to reduce the demand temporarily or
permanently ( demarcating)
Through raising prices and reducing promotion and service.

8. Unwholesome demand : organizations which produce products that there

consumption are discourage. Cigarettes' alcohols

 Counter marketing : is to find ways by which the company can cope up with such
actions
MARKETING MANAGEMENT PHILOSOPHIES AND CURRENT TRENDS IN
MARKETING

Production concept: This is the oldest business philosophy in marketing

“consumers will favor products that are widely and highly affordable (consumers are
primarily interested in product availability and low price)” is emanated

 Such companies focuses on the internal capability of the firm rather than on the
desire and needs of the customer so as to secure production efficiency and low cost

 It focuses on high production efficiency, low cost and mass distribution, and thus
denying the consumer choice

 Even today, it may be practiced according to the scenario, i.e. if demand is far
greater than supply or if the unit price of the product is very high and customers are
very much concerned with lower prices.
Product concept: As companies devise a way for producing products on
large scale basis, excess production that leads to excess supply comes to be the
order of the day
 This approach can be described as orientation towards making continuous
product improvement
 In order to attract customers companies offer benefits in terms of quality,
additional performance and innovative feature
 The problem of this philosophy is that the company concentrates on the product
rather than the needs of customer.
 The company sees itself as selling a product rather than providing a solution to a
need. Hence, such companies may suffer what we call marketing myopia
Marketing myopia: when a company is so taken with its products, it
focuses only on current needs and hence it will loose sights of underlying
customer needs. Such companies will have trouble if a new product comes
along that serves the customer needs better or less expensively

 Theproduct of such firms may lack acceptance in the market whatever their
quality, performance and innovative features is, as they are not produced in
accordance with customer preference and specification
Sales orientation
 This concept holds that consumers, if left alone, will ordinarily not buy enough of the
firm’s product. The firm, therefore, must undertake an aggressive selling and
promotions effort.

 It sells what they make rather than make what the market wants

 Generally we can say that selling concept is preoccupied with the seller’s need to
convert his product into cash rather than the idea of satisfying the needs of the customer

 Itfocuses on short term sales transactions rather than on building long term, profitable
relation with the customer

 Intoday’s business environment, this approach may be practiced for unsought goods:
goods that the customer may or may not know but will not be actually that much
Marketing concept
 It is a simple intuitive appealing theory

 In today’s competitive environment wherein buyers have a number of choices for

a single product, it sellers who are appealing to sell

 In today's competitive environment customers’ decision to purchase that ensures

the survivality of a company and rational customers buy only those products that
enhance their satisfaction

 This theory is based on an understanding that a sale does not depend on

aggressive sales force, but rather on customer’s decision to purchase
The difference Between Selling and Marketing
selling

Emphasis is on the product

Company first makes the product then figures out how to
sell it
Management is sales volume oriented
Planning is short term oriented, in terms of today’s
products and markets
Needs of the seller are stressed
Marketing
Emphasis is on customer’s wants
Company first determines customer wants and then
figures out at ‘how to make and deliver a product to
satisfy those wants
Management is profit oriented
Planning is long run oriented in terms of new products
and future growth
Wants of buyers are stressed
 In these days environment, it is obvious that what a business thinks to produce is
not of primary importance to its successes. Instead, what customers think they
are buying, their satisfaction defines a business

 Instead of a product-centered “make and sell” philosophy, the marketing concept

is a customer-centered “sense and respond” philosophy

 The selling concept takes an inside-out perspective In contrast, the marketing

concept takes an outside-in perspective.
This philosophy rests on the following core concepts
1.Customer needs and satisfaction (identification of customers need and wants)
 The first task in marketing is identification of customers’ needs and wants.
 Companies should produce a product that is capable enough to satisfy customers
 A product is ought to satisfy customers so far as its design and specification
matches with their interest

2. Market segmentation, targeting and positioning:

 Marketing concept preaches that companies should first divide their market
(customers) into component parts (segments) based on their similarity and then
produce and offer products for each of the segments differently in accordance with
the segment’s need.
 3. Marketing Mix Elements
 Not only the promotion but the place (distribution), product and price should
be considered

4. Integrated marketing (Inter and Intra departmental coordination)

 All the departments should integrate and coordinate their efforts towards
satisfying customers.
 Inter: it is interaction in between all the departments involved.( marketing,
production, finance etc)
 Intra it is interaction with in one department
Ex: Marketing (advertising, sales promotion, product manager, distribution etc)
 Societal Marketing Approach:
 An organization exists not only to satisfy customers’ wants and needs and to meet
organizational objectives but also to preserve or enhance individuals and
societies long-term best interests.

 This concept is an attempt to fill the gap that the pure marketing concept
overlooks, i.e. possible conflict between customer short run and long run wants

 This concept questions whether the pure marketing concept is adequate in an age
of environmental problems, resource shortage, rapid population growth, world
wide economic problems and neglected social service
 The goals of marketing System
 Maximizing consumption
Maximum consumption inter maximize production, employment and wealth.

 Maximizing Satisfaction

 Maximizing choices

Maximizing life quality

Importance of Marketing
 Purchasing of products

 Benefits Economy

 It employ many people

 It increases competition

 it leads to better products

 it creates new products

 Chapter two
Marketing environment
 Internal Environment
• Factors essentially emenated from the organizations own teritory and companies
can have full control over such factors
• This environment is the basic source of the organization’s strengthe and weakness

• External Environment

• Refers to the actors and forces outside of the company that affect the organization’s
ability to develop and maintain sucessful relationship with its target market.

• As these factors are stem from the external forces, they are a source of
opportunuties and threat
 There are two levels of external factors i.e. at macro level and at micro level.

 Macro level environmental forces:

 These are factors springing from demographic, economic, political, cultural,
physical and technological forces
 Affect all the companies operating in a given market
 They are largely uncontrollable by a given company
 All these forces are inter related to eachother
 Hence, a change in one of these factors is likely to cause a change in one or more of
the others
 They are all dynamic in nature, that is, they are subject to change at an alarmic rate
Demographic environment
Demography: is the study of human population in terms of size, density,
location, age, gender, race, occupation etc
 This environment is of major concern to marketers because it essentially involves
people and people constutite markets
 Population growth can be an opportunities or threat to the marketer
 National demographic factors which vary from country to country, also have
significant impact on marketing.
(youngesters/seniors, literate / unliertae , household composition)
 Economic environment:

Factors that directly affect customers purchasing and spending pattern.

 level of the economy ( subistance and industrial economies)

 Income distribution through out the country

 Booming (Additional employment opportunity, additional income, more investment)

 Depression(As increased unemployment, decrease in investment, decrease in income

etc)

 Booming and depression affects the purchasing power and psychology of individuals
 Inflation and Deflation
 Inflation: it is a rise in the prices of goods and services

 When prices rise at a faster rate than personal income, consumers buying power
declines
(consumption declines)

 Deflation: when the purchasing power of currency raises at an alarmic rate

Technological environment:

Technology can affect companies in different ways

 By starting new industries such as computer, robot etc

 Byradically altering or virtually destroying existing industries as it paves the

way for improved products, innovative products

 Communication

 Technology is a mixed blessing in some ways

Socio-cultural environment: it is made up of institutions and other forces that
affect a society’s basic values, perceptions, preferences and behaviors

Natural Environment: it refers to the physical environment with in which the

company operates
 Infinite resources such as water and air
 Finite but renewable (recoverables) such as food, forest
 Finite but non renewable such as petroleum and coal
 pollution.
Political and legal Environment:
This consists of laws, governmental agencies and pressure groups
 laws that prevent unfair business practice,unfair comeptition and new laws

Micro environmental forces

These are factors that are specific only for the company under consideration

1.Suppliers
They are specific to the company
(time, quality requirment, price)

Compnies have some bargaing power to affect the supplier activity

Marketing intermediaries
These are all those parties that are involved in delivering the company’s
products to the market

Retailers
Physical distribution companies (transportation and warhousing
companies)
Marketing service companies such as advertising companies
Marketing research companies
Financial intermediaries such as banks and insurances.
Competitors: There are three type of competition

 Brand competition: comes from marketers of directly similar products e.g.

coca and pepsi.

 Substitute
products: products from other catagories but can substitute the
company’s products.

 In the third, more general type of competition, every company is a rival as all
strive to get the limited buying power of buyers.
Customers
 companies should keep on improving themselves with the changing environment of
their customers
 The Buyers Decision Process
Chapter THREE
analyzing consumer and business market

The consumer Decision Process

1. Need recognition
2.Information search
3. Evaluation
4. Purchase decision
5. Post purchase behavior
Stages in the Adoption Process

Consumers go through five stages in the process of adopting a new

product:
1] Awareness: The consumer becomes aware of the new product, but
lacks information about it.
2]Interest: The consumer seeks information about the new product.
3]Evaluation: The consumer considers whether trying the new product
makes sense.
4]Trial: The consumer tries the new product on a small scale to improve
his or her estimate of its value.
5]Adoption: The consumer decides to make full and regular use of the
new product
Types of Consumer Buying Decision Behavior

1. Complex buying behavior

 This buying behavior occurs in situations where:
High degree of buyer involvement
High/ significant differences among brands
Expensive, purchased infrequently, risky, self-expressive
products
2. Dissonance reducing buying behavior
This occurs when there is
High degree of buyer involvement
Low/insignificant differences among competing brands
 
3. Habitual buying behavior
This occurs when there is:
Low buyer involvement
Low/insignificant differences among alternative products
4.Variety seeking buying behavior
This buying behavior occurs in situations where there is
Low level of buyer involvement
Significant differences among brands
Consumer Buying Roles (Participants )
There are different roles played by members of the family in purchase
decisions
Initiator- is a person who first suggests the idea of buying.
Influencer –is a person whose view/ advice influence the purchase
decision.
Decider – is member of the family who decides on issues such as
‘whether to buy, how to buy, where to buy’.
Buyer – is a person makes the actual purchase.
User – is the person who consumes/ uses the product to be purchased.
 
Factors Affecting Consumer Buying Behavior

The factors are;

cultural factors,
social factors,
 personal factors and Age & life-cycle in the stage
Occupation
psychological factors eg Motivation learning
Business Buyer Behavior
Business buyer behavior refers to the buying behavior of
the organizations that buy goods and services for use in
the production of other products and services that are
sold, rented, or supplied to others.
Business Markets
Business market consists of buyers of a product for non-consumption purpose such as for reselling,
processing, rendering services for the public and giving subsidies … etc….
These buyers are resellers, government, organizations, institutions/ charity organizations and international
buyers.
Characteristics of Business Markets
The characteristics of business markets can be summarized under three major points/issues;
1 Market structure and demand
A]Fewer but larger buyers . B]They are geographically concentrated buyersC]derived demand D] inelastic
demand E] fluctuating demand
2 Nature of the buying units
business market involves more buyers( buying units)
business market involves professional buyers(trained purchaser
3 Types of decisions and the decision process
more complex buying decision &
more formalized buying decision
. Types of decision and the decision process
Business markets involve:
more complex buying decision &
more formalized buying decision
(Business buying involves formalized request, product
specifications and purchasing decisions).
Buying Situations in Organizational Buying
An industrial buyer faces many decisions in making a
purchase.
The number of decisions depends on the types of buying
situations.
Robinson and others distinguish three buying situations;
Straight re-buy
Modified re-buy
New Task Buying(NTB)
1.Straight re-buy buying situation
This happens when the buying department in the organization re-orders the products
without modification. It is mostly applied to inexpensive & regularly purchased
products.
2.Modified re-buy situation
This buying situation occurs when the buying organization wants to modify any or the
combination of the following terms of purchase;
1 ] price
2] product specification(technical and performance requirements that the product to be
purchased is expected to fulfill e.g. delivery process, suppliers, quantity and other terms)
3] Since, some terms are modified; this buying situation is sometimes called limited
problem solving. Decision participants are larger than straight re-buy buying situation
and applied to products that are purchased infrequently.
3.New Task Buying
This is when the organization buys some products for the first
time for the following purposes;
for accomplishing new tasks
This might involve launching new products for the new arising
customer needs.
for solving new problems
Generally, in new task buying, the organization considers all
terms, thus, it is called extensive or large problem solving.
 
The Business Buying Process

There are eight stages of the business buying process.

Business buyers who face a new-task buying situation usually
go through all stages of the buying process. Buyers making
modified or straight re-buy may skip some of the stages.
1) Problem Recognition
The buying process begins when someone in the company
recognizes a problem or need that can be met by acquiring a
specific product or service. Problem recognition can result
from internal or external stimuli.
 2)General Need Description

Having recognized a need, the buyer next prepares a general need

description that describes the characteristics and quantity of the needed
item.
3) Product Specification
The buying organization next develops the item's technical product
specifications, often with the help of a value analysis team.
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 computer searches, or phoning other companies for
recommendations.
5)Proposal Solicitation

Having recognized a need, the buyer next prepares a general need description
that describes the characteristics and quantity of the needed item.
3) Product Specification
The buying organization next develops the item's technical product
specifications, often with the help of a value analysis team.
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 computer searches, or phoning other companies for recommendations.
.
7) Order-Routine Specification

The buyer now prepares an 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
In this stage, the buyer reviews supplier performance.
The buyer may contact users and ask them to rate their
satisfaction
Major Influences on Business Buyers

1)Environmental Factors
 These are forces related to:
 Economic factors
 Technological factors
 Legal /political factors
 Competitive developments in the market( actual and potential competitors)
 Natural environment (depletion, buying and storing … etc…)
2)Organizational Factors
 These are forces that arise from the organization itself such as;
 Organizational objective
 Organizational policies and procedures(statements that guide thinking in making decisions)
 Organizational structures(distribution of authority) and systems (interrelated parts working together)
3)Interpersonal Factors
These are forces that arise from the interaction of individuals within in the buying unit
such as:
Interest
The degree of conformity
Status … etc …
4)Individual/Personal Factors
These are factors that each individual within the buying unit carries for himself such as:
Personal motivation
Personal persistence
Perception
Age
Personality … etc …
 CHAPTER FOUR
MARKET SEGMENTATION, TARGETING AND POSITIONING

Market Segmentation

 Itis the process of dividing the whole market for a product into several smaller,
internally homogenous groups

 itis dividing a market into distinct groups of buyers with different needs,
characteristics, or behavior who might require separate products of marketing
mixes.

 Theability to segment markets effectively is considered as a major element for

company success.
 Basis for segmenting consumer market
 Two broad ( consumer characteristics and consumer behavior)
 Consumer characteristics (geographic, demographics, psychographics and behavioral
segmentation)
 Consumer responses (behavior) to benefit sought, use occasions or brands

Geographic segmentation

 Itis dividing the market into different geographical units such as nations, states,
regions, countries, cities or neighborhoods

 This is the earliest form that served a base for segmenting markets

 Itis used in order to know regional variation in customer taste and also determine and
supply good appropriate to climate changes.
Demographic Segmentation
 it is dividing an over all market into homogeneous group based upon
population characteristics such as age, sex and income levels, occupation,
education, household size and stage in the family life cycle

 It is the most popular form of market segmentation

A. They are easy to identify and measure

B. They are associated with the sale of many products and services
C. They are typically referred to describing the audiences of advertising media
Psychographic Segmentation

 Buyers are divided into different groups on the basis life style
and/or personality

 life style the mode of lives

 People within the same demographic group can exhibit very

different psychographic profile

 It utilizes behavioral profiles developed from analyses of the activities,

opinions, interest and life styles of consumers
 Behavioral Segmentation
 It focuses on product related behavior of customers

 it includes product usage rate

(heavy users, medium users or light users)

 Attitude towards the product

(positive, indifferent, negative, hostile)

 Buyers readiness stage

(unaware, aware, informed, interested, intending to buy)

 The benefits derived from the product(benefit sought)

 Importance of Segmentation

 it helps companies to identify the part of the market that it can serve best and most
profitably.

 It helps Sellers to distinguish the major market segments

 Target one or more of those segments

 Develop products and marketing programs tailored to each segments

 Instead of scattering their marketing effort, they can focus on the buyers whom they
have the greatest chance of satisfying
Criteria’s for effective segmentation
Market segments must be:
 Measurable : The size purchasing power and profiles of the segments must
be measured.
 Substantial : The market segments are large or profitable enough to serve
 Differentiable : The segments are conceptually distinguishable and respond
differently to different marketing mix elements and programs.

 Accessible : The market segments can be effectively reached and served

 Actionable : effective programs can be designed for attracting and serving the
segment
 Target Marketing
 Select one or more segments to enter.
 consists of a set of buyers who share common needs or
characteristics that the company decides to serve
In target marketing it is advisable for companies to consider the
followings
 First,
target markets should be compatible with the organization’s goals and
image.
 Second, the segment’s opportunity should commensurate with the
company’s resource.
 Third, the segment must be profitable.
 Fourth, a company ordinarily should seek a market where there are the least
and smallest competitors.
 There are three alternative strategies in target marketing
1.Aggregation strategy: (undifferentiated marketing or mass strategy
 A firm might decide to ignore market segment differences and go after the
whole market with one offer (treating the total market as a single segment)

 This approach focuses on what is common among consumers rather than

what is different.
 The company designs a product and a marketing program that will appeal to
the largest number of buyers.

 It relies on mass distribution , mass advertising, one pricing strategy and

superior image in the people’s minds.
 Cont’d…..
 Undifferentiated marketing provides cost economies
(Advertising cost, marketing research, production, inventory and transportation costs)

 But this approach may not be advantageous to use in today’s competitive

environment
 It may be applied when the total market are likely to respond in very similar fashion
to one marketing mix.

 In addition, it may be appropriate for firms that are marketing an undifferentiated,

staple product like salt or sugar.

 For most customers sugar is sugar and salt is salt

Single segment strategy (Concentrated marketing)
 it is selecting one segment among many segments

 one marketing mix (program) will be designed to reach this

market segment

 it helps companies with limited resource .

 it enables companies to penetrate new market in depth and to

acquire reputation as a specialist in that market

 But it has a risk

Multiple segment strategy (differentiated marketing)

 When a firm selects two or more market segments to serve.

 A separate marketing mix (program)

 Companies pursuing this strategy hope that a stronger position in several

segments

 This strategy may provide the company with higher sales as compared to
other strategies

 it minimizes the risk of the companies but it incurs high cost

The Concept of Positioning

 The act of – designing the company’s offering and image to

occupy a distinctive place in the mind of the target customers

 Inpositioning, the firm will decide upon the nature of the product
(form, attribute, performance quality, durability and reliability etc)
Positioning task consists of three steps
A. Identifying possible competitive advantage

 A firm should come up with some kind of benefits to customers that make it
different from competitors

 A company needs to know on what grounds it can make its offers peculiar from
competitors

 companies need to differentiate their offer from competitors

 A company’s offer can be differentiated along the lines of product, services, people
or image.
1.Product differentiation

Companies can differentiate their products on such attributes as

features, performance, durability, reliability, reparability, style and
design.

2. Service differentiation

speed, convenient, careful delivery, installations, customer training,

customer consultancy service and maintenance and repair.
3. Personnel differentiation:
companies can get competitive advantage through hiring and training better
people than their competitors do

4. Channel differentiation:

companies can gain competitive advantage through the way they design their
distribution channel’ coverage, expertise and performance.

5. Image differentiation:
Image refers to the way the public perceives the company or its product.
Buyers respond differently to company and brand image.
B. Selecting the right competitive advantage

 How many to promote

 Which difference to promote

(important, distinctive, superior, communicability, preemptive, affordability and profitability)

C. Communicating and delivering the chosen position

Positing cal for a concrete action not talk

 Chapter Five
Managing Marketing Mix Elements
Marketing mix is a set of marketing tools: product, price, place and
promotion, which the firm uses to pursue its marketing objectives in
the target markets

Meaning of a Product
 It is anything that can be offered to a market to satisfy a want or need
 Based on type of customer products are classified as consumer and
industrial product
Consumer products
 Products bought by final consumers for personal consumption
 Based on shopping habit it classified in to four types

1. Convenience products
 Products that the consumer usually buys frequently
 Put a minimum of comparison and buying effort
 They are usually low priced
 Marketers place them in many locations
Eg: soap or candy
2. Shopping products

 less frequently purchased consumer products

 Consumers compare carefully on suitability, quality, price and style.

 Consumers spend much time and effort in gathering information

 Make comparisons.

Eg: Furniture, clothing or hotel service

3.Specialty products
 Consumer products with unique characteristics or brand identification

 Buyers are willing to make a special purchase effort

 Buyers normally do not compare

 They invest only the time needed to reach dealers carrying the wanted
products.

E.g: specific brands and types of cars, high priced photographic

equipment and designer clothes
4.Unsought products
 Products that the consumer either does not know about or knows
about it but does not normally think of buying

 They require a lot of advertising, personal selling and other

marketing efforts.

 Most major new innovations

Eg: life insurance

Industrial products

Are
 products that are bought for further processing, not for final consumption. Eg.,
motor, tires,
Industrial products are divided in to three groups
a) Materials and parts
products that make up the final product of the company
component part of the final product

E.g. Raw materials, Manufactured materials, parts

b) Capital items
Are products that aids in the buyers production or operation.
They are neither make up the final product nor are consumed
Eg installations ,buildings, offices, main machineries  
c) Supplies and services:
 It refer to those products that are consumed in the production process or
operation of buyers.
 E.g. lubricants, oil, paper, pencil, repair and maintenance items etc.

Services
 It refer to maintenance and repair services that the firm purchases from outsiders
or services supplied by outsiders

Eg: legal, Management counseling, Advertising etc

Product life cycle
PLC- refers to the course of a product’s sales and profit in its
life time.
 Like living beings, products have life cycle.
 The Product Lifecycle (PLC) is depicted by the sales curve of the product since
its introduction.
 A product normally passes through (i.e PLC has) four different stages,.
 Namely, introduction, growth, and maturity and decline
 According to product life cycle products born and dies
 It shows the life pattern of a product
 Products passes through introduction, growth, maturity and decline stage
Product Life Cycle
Introduction Stage
 It is launching of the new product
 Customers are shy in buying the product
 Productivity is low since demand is low
 Low sales
 High costs per unit.
 High promotion
 Absence of or low competition
 Loss or insignificant profits

Growth Stage
 Fast growth in sales
 Growing profits
 Increasing competition
 Promotion is still high
 introduction of different versions (models) of the product
Maturity stage
 Saturation or full level of sales
 powerful competition
 Failing profits
Decline stage
 Entry of new products, which compete with the product.
 Decline in sales
 Decline in profits: profits may even become negative
 Exit of some of the firms
 New Product Development
 A firm can obtain new products in two ways: (Acquisition and new
product development)

 Acquisition: buying the whole company, patent or license etc

 New product includes original products, product improvements,

product modifications and new brands
Steps in developing a new product
1 Idea generation The systematic search for new product ideas. A company typically has to generate many
ideas in order to find a few good ones. From (customers, scientists, competitors, employees, suppliers
and distributors)

2 Idea Screening Process used to spot good ideas and drop poor ones based on (strategies, resources,

objective) of the company

3 Concept Development and Testing (a product concept is a detailed report of the idea)
An attractive idea must be developed into a product concept. It is important to distinguish between product
idea, product concept, and a product image.
A product idea is an idea for a possible product that the company can see itself offering to the market

4 Marketing Strategy Development marketing strategy development which is designing an initial

marketing strategy for a new product based on the product concept.

( it has three steps)

A The first part describes the target market, the planned product positioning and the sales, market share and
profit goals for the first few years.
B The second part outlines the product’s planned price, distribution, and marketing budget for the first year.

C The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and
the marketing mix strategy
5 Business Analysis
(Evaluate the attractiveness of the business proposal)
 Involves a review of the sales, costs, and profit projections to assess fit with company objectives.
 If results are positive, project moves to the product development phase.

6 Prototype (product) Development: involves developing the product concept into physical product in
order to ensure that the product idea can be turned into a workable product.
changing the concept product in to a physical product)
7 Test Marketing marketing program are tested in more realistic market settings.
8 Commercialization( A decision to launch a new product or amendment up on the tested
product)
if Test marketing gives the management the information needed to make final decision about whether to
launch a new product or not. Commercialization means introducing the new product into the market. The
company may have to build or rent a manufacturing facility.
Level of a product

Products can be described on three levels:

A Core product/ core benefit
Describes the fundamental reason for buying a product.
It answers the question ‘what the buyer is really buying’.
B Actual product
Describes the key features, designs, styles, branding, packaging and quality
levels.
It is the physical/ natural structure of a product from which the company’s
product benefit is derived.
C An augmented product
Additional benefit or services added to products basically to differentiate from
competing offerings. E.g. installations, warranty and transportation services.
Introduction to Branding, Packaging & Labeling
Branding
Brand
It is a name, term, sign, symbol, design, or combination of them which is
intended to identify the goods or services of one seller or group of sellers
and to differentiate them from those of competitors

 it is one of competitive force ( SONY)

 it provides legal protection
 It enables company to segment its market in profitable way
 customer can easily identify the product
 It is a customer guarantee
A good brand name should……
 Suggest something about the product’s qualities or benefits

 Be short, easily pronounced, recognized, and remembered

 Be distinctive

 Be consistent with the image of the product

 Have no undesirable associations (in English or other languages)

 Be legally available & legally protectable

Brand development

companies have four alternatives when they come brand development;

1 Line extension
This happens when the company introduces additional products with different size, color, flavor,
style and ingredients in the same brand name.
Products are in the same category E.g. Biscuit---- Hip hop( brand name)---- differing in their flavor
However an unlimited brand name can cause;
Loss of its specific meaning
Consumer confusion and dissatisfaction
Sales of an overextended product may come from at the expense of other items in the line
2 Brand extension
This is a case where a successful brand name is applied for new or modified products in a new
category E.g. Sony ----- Television
 ----- DVD
 ------ Flash
3 Multi brands
Using different brand names for products in the same category.
E.g. Pepsi------ Pepsi
 ------ 7up
 ------ Mirinda
 -------Apple
4 New brands
Using or introducing new brand names in a new product category.
 
Packaging
 Itrefers to designing and producing the container or wrapper covering
for a product

1.primary container: a container to be used all over the life time of the
product

2. secondary container: a container to be thrown away when the product is

about to be used or the shipping package
 Importance of packaging
 To contain and protect the product from damage
 Attracting customers
 Describing the product
• the package makes handling of a product easy
Labeling
it ranges from simple tags attached to product to complex graphics)
It is the part of the product that carries written information about the product or seller.

Who made it?

When it is made?
Where it has made?
How is it be used ?
How to use safely?
Its content of ingredient?
 Chapter six
PRICING DECISION
Meaning price
Price is the amount of money charged for a product or service

 More broadly, it is the sum of all the values that consumers exchange
for the benefits of having or using the product or service.

 It is the only element in the marketing mix that Produces revenue

 it is also one of the most flexible elements of the marketing mix

Pricing Objectives
I. Survival
Companies pursue/follow survival, as their major objective if they are
troubled/plagued by overcapacity, intense competition or changing
customer wants
 company sets a low price
 hoping to increase demand,
 profits are less important
 It is only a short-term objective
 in the long run, the firm must learn how to add value or face extinction
II. Current profit maximization
 Set the price that will produce the maximum current profit
 cash flow or return on investment.

III. Market share leadership

 firms set prices as low as possible.
 wants to share a market(lowest costs and highest long run profit)

IV. Product quality leadership

charging a high price(quality and high cost of R&D)
Generally objectives of pricing
Profit oriented - To achieve a target return
- To maximize profit
Sales oriented - To increase sales volume
- To maintain or increase market share

Status quo-oriented - To stabilize prices

 To meet competition
Factors Affecting Pricing Decision
Internal factors affecting pricing decisions
1.Marketing objectives

( survival, profit maximization or market share leadership)

2. Marketing mix strategy

( product distribution, promotion and performance quality)

3. Cost sets the floor for setting price

(costs for producing, distributing and selling the product and delivers a fair rate of return for its effort and risk)

4. Organizational consideration

( responsible person to set the price)

External factors affecting pricing
1 Demand increasing and decreasing of consumer demand for the product
2 Competition. Another factor that contributes to the degree of control a firm
has over prices is the competitive environment within which it operates.
3 Channel Members Each channel members seeks to play a significant role in
setting prices in order to generate sales volume, obtain adequate profit margins,
derive a suitable image, ensure repeat purchases and meet specific goals.
4 Economic Conditions: The inflationary or deflationary tendency affects
pricing.
5 Buyers The various consumers and businesses that buy a company’s products
or services may have an influence in the pricing decision. Their nature and
behavior for the purchase of a particular product, brand or services etc affect
pricing when their member is large.
6 Government Price decision is also affected by the price controlled by
government through enactment of legislation, when it is thought proper to
arrest the inflationary trend in prices of certain products.
 General Approaches to Pricing
1.Cost –plus pricing
 Adds a standard markup to cost of the product
 doesn’t consider the demand and competitors price
 it is popular and simplest method of pricing
 Involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and
risk
Example suppose a manufacturer wants to earn 20 % markup on sales, the mark up price could be calculated.
 
 Variable cost ………………………10
 Fixed cost ………………………….300, 000
 Expected unit sales ………………..50,000
  Unit cost = vc+fc/unit sales
 Unit cost =10+300,000/50,000 =16
 Markup price = unit cost/ 1- desired return {20%)
 16/1-0.2=20
2. Break-even and target profit pricing

 consider the cost and desired profit

 doesn’t consider price- demand relationship
Example
Example expected volume quantity =10 units per year
 Fixed cost=20
 Variable cost =10
 Price =20
 Calculate
 Total revenue…..?
 Total cost ………?
 Total profit ……..?
 Breakeven point….?
 Solution
 Total revenue = pxq=20x10 =200
 Total cost =fixed cost +(Q)variable cost
 20+(10x10)= 120
 Total profit = Total revenue –total cost
 200-120=80
 BEP=FC/P-VC
 20/20-10=2/ units 
3.Value buyers based pricing
 price of a product is decided based on the perception of consumers
rather than sellers cost

4. Competition based pricing

 competition is the most important factor

 companies follow market leader price

New product Pricing Strategies
A Market Skimming Pricing
 it is setting a high price for a new product to skim maximum revenue layer by
layer from the segments

 Market skimming makes sense only under certain conditions.

 The products quality and image must support its higher price and enough
buyers must want the product at that price.

 The costs of producing a smaller volume cannot be so high that they cancel the
advantage of charging more.

 Competitors should not be able to enter the market easily and undercut the high
price.
B Market Penetration-Pricing
setting a low price for a new product in order to penetrate the market quickly and
deeply to attract a large number of buyers quickly and win a large market share.

 Themarket must be highly price sensitive so that a low price produces more
market growth.

 production and distribution cost must fall as sales volume increase

 The low price must help out competition and the penetration prices must
maintain its low price position otherwise the price advantage maybe only
temporary
Product Mix Pricing Strategies
A Price lining
The simple definition is that a product line is a group of related
products, differentiating by features and price. Setting products at
different price points allows the would-be customer to orient
themselves towards the one most likely to fit their needs and
spending capabilities. Example different shoes
Often a firm that is selling not just a single product but a line of
products may price them at a number of different specific pricing
points, which is called price lining.
B Optional product pricing
Most firms offer optional/ accessory products or features
along with their main product. The pricing strategy is to
keep the prices of the optional product on the higher side
comparatively.
Example Plane tickets are generally priced fairly low, but
then the airlines charge customers for all other travel
needs.
C Captive product pricing
Captive product pricing is the pricing of products that
have both a "core product" and a number of "accessory
products.“
D By-product pricing In pricing of some products there are some remains
products which are called as by products. If the byproducts have little value
and are in fact costly to dispose other manufacturer should accept any price
that comes more than the cost of disposing them.
Exampe
E Product –bundle pricing
It calls for setting the prices of a bundle. Bundle pricing
is less than the individual item pricing. Price bundling can
promote the sales of the products consumers might not
otherwise buy, but the combined price must be low
enough to get than to buy the bundle.
Price Adjustment Strategies
Discount & allowances
Cash discount A Cash discount is a deduction granted to buyers for
paying their bills within a specified time. ‘ex ‘’ 2/10,net30,’’which
means that payment is due within 30 days the buyer can deduct
2% if the bill is paid within 10 days
Seasonal Discounts This is based on the time that the purchase is
made and designed to reduce seasonal variation in sales. For
example, the travel industry offers much lower off-season rates.
Psychological pricing Price indicates something about the product.
For example, many consumers use price to judge quality.
 Chapter seven
Placing the Product
Meaning of Distribution
It is a set of interdependent organizations involved in the process
of making a product or service available for use or consumption

Factors influencing Channel Decision

 Cost
 Nature of Market:
 Accessibility or easy of access
 Suitability or correctness
• Nature of the Company
 Middlemen Consideration:
 Nature of the product
Primarily a channel of distribution performs
the following functions:
It helps in establishing a regular contact with the
customers and provides them the necessary information
relating to the goods.
It facilitates the transfer of ownership as well as the
delivery of goods.
It helps in financing by giving credit facility
It provides the facility for inspection of goods
TYPES OF CHANNELS LEVEL
Zero stage channel of distribution
 exists where there is direct sale of goods by the producer
to the consumer
 can be made through door-to door salesmen, own retail
outlets or even through direct mail. Also in case of
perishable products and certain technical household
products,
One stage channel of distribution

there is one middleman i.e., the retailer

This type of distribution channel is preferred by
manufacturers of consumer durables like refrigerator, air
conditioner, washing machine, etc
It is also used for distribution through large scale retailers
such as departmental stores (Big Bazaar, Sponsors) and
super markets
Two stage channel of distribution

This is the most commonly used channel of distribution

for the sale of consumer goods
In this case, there are two middlemen used, namely,
wholesaler and retailer.
This is applicable to products where markets are spread
over a large area, value of individual purchase is small
and the frequency of purchase is high.
Three stage channel of distribution

When the number of wholesalers used is large and they

are scattered throughout the country,
the manufacturers often use the services of mercantile
agents who act as a link between the producer and the
wholesaler.
Intensity of distribution channel
Companies have to decide on the number of intermediaries to use at
each channel level. Three strategies are available:
Intensive distribution; it is a strategy to use as many outlets (intermediaries)
as possible.
Advantageous especially for convenience products
Exclusive distribution
some producers purposefully may limit the number of their intermediary in a
given region to one intermediary

Selective distribution
Producers limit the right to distribute their products for intermediaries more than
one but fewer than all
 Chapter eight
Promoting the Product
Meaning of promotion
Promotion is a form of corporate communication that uses various methods to reach
a targeted audience with a certain message in order to achieve specific organizational
objectives
 The Purpose of Promotion

 Build Awareness & Provide Information

 Create Interest

 Stimulate Demand

 Reinforce the Brand

Promotional Mix Elements
Advertising:
 any paid form or non-personal presentation and promotion of ideas, goods or services by an
identified sponsor.
 Advertising is the most commonly used tool for informing the present and prospective consumers about the
product, its quality, features, availability, etc
 It can reach masses of geographically dispersed buyers at a lower cost per exposure

 it enables the seller to repeat the message many times.

 consumers tend to believe that advertised products are more legitimate than unadvertised.

 It can be used to build up a long-term image of the company or it may also be used to
trigger quick sales.

 its impersonalnes
Sales Promotion
 itis a variety of short-term incentives to encourage trial or purchase of a
product or a service.
 It refers to the use of a wide assortment of tools –such as coupons tool
contests, games, gifts, trade shows, discounts, etc
 They attract consumers’ attention, offer strong incentives to purchase and
can be used to dramatize product offers and to boost sagging sales.
 Its effect is short term

 itis not as effective as advertising or personal selling in building long run

brand preference
Public Relations
It is a variety of programs designed to promote and/or protect a company’s image or its
individual products (by building good relations with the company’s various publics)
 is a non-paid process of generating wide range of communication to contribute a favorable
attitude towards the product and the organization.
Personal Selling
 Face-to-Face interaction with one or more prospective purchasers for the
purpose of making presentations, answering questions and procuring orders.
 It is most effective promotional tool in case of industrial goods.
 It involves personal interaction between two or more people, so each person
can observe the other’s needs and characteristics and make quick adjustments.

 It allows all kind of relationships to develop beginning from short term up to

long term relation with customers.
Direct Marketing:
Use of mail, telephone, fax, e-mail, and other non
personal contact tools to communicate directly with or
solicit a direct response from specific customers and
prospects.
Promotion mix strategies
There are two strategies
 push and pull strategies

Push: it involves pushing the product through distribution channels to

final consumers

Pull strategy: producer directs its marketing activities (primarily

advertising and consumer promotion) toward the final consumer to
induce them to buy the product
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