Professional Certificate in

Marketing (PCM)

Recommended Study Text

Part One

Introduction to Marketing & the Marketing Process

Chapter 01 Nature and Scope of Marketing

Chapter 02 The Marketing Environment
Chapter 03 The Marketing Mix
Chapter 04 Marketing Research and Information Systems
Chapter 05 Consumer & Organisation Buyer Behaviour
Chapter 06 Segmentation, Targeting & Positioning
CHAPTER 1
NATURE AND SCOPE OF MARKETING
“Management must think of itself not as producing products, but as providing
customer-creating value satisfactions. It must push this idea (and everything it
means and requires) into every nook and cranny of the organisation. It has to do
this continuously and with the kind of flair that excites and stimulates the people
in it”
(Theodore Levitt)

1. THE HISTORY OF MARKETING

In the ancient past, people were self-sufficient. With time, as their needs grew, they were
unable to produce all their needs by themselves. When they were able to produce more
than what is necessary for individual survival (a surplus), the extra can be exchanged for
other goods. Therefore, they started to exchange products with each other. For example,
people who were involved in agriculture would exchange rice with fish with people who
were living by the sea side and did fishing. As a result, the process of exchange was born.
The process of exchanging goods was known as Barter System. As societies developed,
exchange took place using an agreed medium of exchange called money. With the
introduction of money, the function of selling was born.

As years rolled on, people found it difficult to meet each other freely at all times to
exchange their goods for money. Therefore, they met at a pre-planned place at a pre-
planned time to exchange goods. Thus, the market place was born.

At this time the producers themselves acted as sellers. As time passed, the producers
realized the importance of their time. Therefore, they used an intermediary to sell and buy
the products they needed. The concept of the middlemen was born.

2. WHAT IS MARKETING?

Many people think marketing is only advertising and selling. Every day we are bombarded
with TV commercials, direct-mail offers, sales calls, email offers etc. However, advertising
and selling 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 sense of identifying and satisfying customer needs. If the marketer
understands consumer needs; develops products that provides superior customer value;
and prices, distributes and promotes them effectively, these products will sell easily.

For business, marketing is how to satisfy and delight the customers and build long-term
relationships. This relationship must bring benefits to both, value for the customer, profit
for the business. Thus, the two-fold goal of marketing is to attract customers by promising

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and delivering superior value and to retain and grow existing customers by delivering
satisfaction and delighting them.

Wall-Mart has become the world’s largest retailer by delivering on its promise, “Save
money. Live better”. Apple fulfills its motto “Think Different” with dazzling, customer driven
innovation that captures customer imaginations and loyalty. (The iPod has captured
approximately 70% of the music player market; its iTunes music store captures nearly 90%
of the song download business).

3. DEFINITIONS OF MARKETING

The most widely used definitions of marketing are as follows;

Definition 1

Marketing is a corporate philosophy and a central business function that creates value for
its customers and other stakeholders through competitive, profitable and sustainable
exchange processes.
(Sri Lanka Institute of Marketing – 2013)

Definition 2
Marketing is the management process responsible for identifying, anticipating and
satisfying customers’ requirements profitably.
(Chartered Institute of Marketing – U.K)

Definition 3
Marketing is the process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return.
(Phillip Kotler,Gary Armstrong)

Definition 4

Marketing is an activity directed at satisfying customer needs and wants through exchange
transactions in the market. (A.R.Morden)

Definition 5

Marketing consists of individual and organizational activities that facilitate and expedite
satisfying exchange relationships in a dynamic environment through the creation,
distribution, promotion and pricing of goods, services and ideas.
y e yo r
(Dibb, Simkin, Pride and Ferrell)

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Marketing is not a science: there is no single universally adopted definition of marketing.
The commonly cited definitions illustrate this variation. However, certain core ingredients
of the various definitions collectively indicate the key functions and activities of marketing:

Identifying customer requirements

Satisfying and delighting customers
Identifying favorable emerging market opportunities
Targeting the “right” customers
Facilitating exchange relationships (product or service for a payment)
Staying ahead in dynamic environments
Utilizing resources/assets effectively
Differentiate a product or service from competitors
Enhancing profitability through customer satisfaction
Creating value to both the customer and the organisation

4. DEVELOPMENT OF MARKETING

Marketing can be viewed in several different ways, according to its role and status within
the organisation

4.1 Marketing as an Exchange Process

Marketing occurs when people decide to satisfy needs and wants through exchange.
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 its market
offerings.

For an exchange to takes place, the following conditions must exist;

1. Two or more social units - individuals, groups or organizations must be involved and
each must have wants to be satisfied.
2. Each party must posses something of value that the other party desires.
3. The parties must be involved voluntarily. (willing to give up to receive)
4. The parties involved must be able to communicate with each other to make their
‘something of value’ available.

Managing the exchange process means that each party will be better off than they were
before: if this were not the case, trade would be impossible. An exchange should be
satisfying to both the buyer and the seller.

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4.2 Marketing as a Managerial Function

Marketing is said to be a function of management as it uses management techniques in

satisfying customer requirements. In a typical marketing department one will find
Marketing Managers, Product Managers, Sales Managers, Market Research Managers, etc.
As a function, marketing performs several activities;

Identifying customer requirements through market research.

Anticipate customer requirements into the future by way of forecasting.

Work with other functions in the organisation and develop products to satisfy
customer wants.

Work out associated costs, understand customer perceptions and set prices and
organise channels of distribution to distribute the products.

Analysis, planning, implementation and control of all marketing activities.

4.3 Marketing as a Business Philosophy

Marketing is considered as an overall business philosophy, a way of thinking about business

and a way of working which runs through every aspect of the firm's activities. Hence,
marketing is viewed not as a separate function but rather as a profit-oriented approach to
business that combines not just the marketing department but also the entire business. In
this regard marketing is seen as an attitude of mind or an approach to business rather than
a specific discipline.

Marketing is so basic that it cannot be considered a separate function. It is the

whole business seen from the point of view of its final result, that is, from the
customer's point of view.........Business success is not determined by the producer
but by the customer.
(Peter Drucker)

It is a philosophy that puts customer satisfaction at the center of management thinking

throughout the organisation that would distinguish a marketing oriented firm from others.

As a summary, marketing is viewed as a philosophy when marketing is considered

A way of business thinking
A way of working which runs through every aspect of the firms activities

An approach to business that combines and integrates the entire organisation

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5. THE EVOLUTION OF THE MARKETING CONCEPT

Marketing Concept is a relatively young philosophy, and has been preceded by other
business philosophies/orientations as follows:

5.1 Production Concept

The Idea that consumers will favor products that are available and highly
affordable and the organisation should therefore focus on improving production
and distribution efficiency
(Philip Kotler - 12th Edition)

The Production Concept holds that consumers will favor products that are freely available
and highly affordable. Therefore, management should focus on improving production and
distribution efficiency. This concept is one of the oldest business orientations and the
organisations that follow this philosophy/orientation are said to be production oriented
organisations.

Production orientation had its beginnings at the start of the Industrial Revolution. Up until
the nineteenth century, almost everything was hand-made and made to measure. When
machines were introduced to speed up the manufacturing process, costs dropped
dramatically, so much so that prices could also be cut provided the goods could be sold
rapidly.

The emphasis of Production Orientation is;

Efficiency of production: A focus on manufacturing and improving the process so as to

reduce costs and increase efficiency.

Efficiency of distribution: Mass distribution, thus making the product available at all
possible outlets.

Economies of Scale: By this try to achieve lower unit costs and also increasing the
supply.

Profitability through production efficiency.

The production concept is still a useful philosophy in some situations. For example,
computer maker Lenovo dominates the highly competitive, price-sensitive Chinese PC
market through low labor costs, high production efficiency, and mass distribution.

Organisations adopting this orientation run a major risk of focusing too narrowly on their
own operations and losing sight of the real objectives – satisfying and delighting customers
and building long term customer relationships.

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5.2 Product Concept
The idea that consumers will favour products that offer the most quality,
performance and features and that the organization should therefore devote its
energy to making continuous product improvements.
(Philip Kotler -12th edition)

Product concept holds that consumers will favour products that offer the most in
quality, performance and innovative features. Under this concept, the marketing strategy
focuses on making continuous product improvements. Organisations which follow this
concept are said to be product oriented. Product orientation tends to lead to ever more
complex products at ever-increasing prices; customers are being asked to pay for
features which they may not need, or which may even be regarded as drawbacks.
The emphasis of Product Orientation is;

Quality and features: making products designed to incorporate a large number of

features in an attempt to please everybody.

Profitability through product quality

Theodore Levitt often calls organisations that follow the product concept are suffering from
“Marketing Myopia”. The word myopia means “short sightedness”. What he means is that
these organisations are focused on the products rather than on the consumer’s needs. For
example, most people who buy electric drills do not really want an electric drill at all: what
they want is holes! If there were some easier, safer way of making holes than by using an
electric drill, the electric drill market would disappear.

5.3 Selling Concept

The idea that consumers will not buy enough of the firm’s products unless it
undertakes large-scale selling and promotion effort.
(Philip Kotler – 12th Edition)
Organisation’s that follow the selling concept, holds that consumers will not buy enough of
the firm’s products unless it takes large scale selling and promotion efforts. The belief, that
if customers are left alone, they will not buy enough of the organisations products. The
aim often is to sell what the organisation makes rather than making what customer wants.

Organisations that follow this concept are said to be sales oriented. Underlying this
philosophy is a belief that a good sales force can sell just about anything to anybody. Sales
orientation should not be confused with personal selling: sales forces do not operate on the
basis of persuasion, but rather on identifying and meeting customer needs.
The emphasis with Sales Orientation is;

Aggressive selling and promotional efforts: It assumes that people will not buy anything
unless they are persuaded to do so.

Profitability through sales volume

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5.4 Marketing Concept

The Marketing management philosophy that achieving organisational goals

depends on knowing the needs and wants of target markets and delivering the
desired satisfactions better than competitors do.
(Philip Kotler - 12th Edition)

The marketing concept is not a second definition of marketing. The marketing concept is a
customer-centered “sense and respond” philosophy. It is a way of thinking – a management
philosophy guiding an organisation’s overall activities. The philosophy affects all the efforts
of the organisation not just marketing activities. The philosophy of placing customers at the
center of everything the company does is basic to marketing thought: this idea of customer
centrality is the key concept in marketing. Defining what customers want and ensuring that
the company’s activities are arranged in a way which will achieve customer satisfaction. An
organisation with this approach is said to be marketing-oriented (Thinking Customers).

In many instances, however customers don’t know what they want or even what is possible.
For example, even 20 years ago, how many consumers would have thought to ask for now
commonly used products such as smartphones, notebook computers, iPods, iPads, digital
cameras, smart television’s and satellite navigation systems in vehicles? Such situations calls
for customer driven marketing: understanding customer needs even better than customers
themselves do (anticipating) and creating products and services that meet existing and
latent needs, now and in the future. (An executive at 3M stated “Our goal is to lead
customers where they want to go before they know where they want to go)

To apply this concept three conditions should be met as follows: Figure 1.1

Figure 1.1 Key Components of Marketing Concept

Marketing Concept
The achievement of
corporate goals through
meeting and exceeding
customer needs better
than competition

Customer Orientation Integrated Effort Goal Achievement

Corporate activities are All staff should accept the The belief that corporate
focused upon providing responsibility for creating goals can be achieved
customer customer through customer
satisfaction/delight satisfaction/delight satisfaction/delight

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1. CUSTOMER ORIENTATION: All corporate activities of the organisation should be focused
upon providing customer satisfaction/delight, rather than, for example, producer
convenience.

Identifying customer requirements and then satisfying them with appropriate

products to match customer requirements.

The process does not end there, it must continue to alter, adapt, and develop
products to keep in pace with customers changing desires and preferences.

2. INTEGRATED EFFORT: All staff should accept personal responsibility for creating
customer satisfaction/delight.
The responsibility for the implementation of the marketing concept lies not just
within the marketing department.

The belief that customer needs are central to the operations of an organisation and
should run through production, finance, R&D, and all other departments. All
departments should coordinate in providing customer satisfaction/delight.

3. GOAL ACHIEVEMENT: The belief that corporate goals can be achieved through
customer satisfaction/delight.
If customers are satisfied and delighted they will buy more of your products, thus
increased profits for the organisation.

The marketing orientation is contrasted with the other orientations by which organisations
conceive, conduct and coordinate their marketing activities as shown in the table 1.1.

Table 1.1
Concept Focus Means Emphasis/Aims

Production Assumed customer Improving Profitability

Orientation demand for product production and through
production
availability and distribution efficiency
affordability efficiency
Product Assumed customer Continuous product Profitability
Orientation demand for product improvements through
quality, performance product quality
and Features
Selling Existing products Energetic selling Profitability
Orientation made by the firm; and promotion through sales
creating sales Volume
Marketing transactions
Customer needs and Integrated Profitability
Orientation wants; long- term marketing through customer
customer relationship activities
satisfaction &
delight

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5.5 The Societal Marketing Concept

Societal Marketing Concept holds that the organisation task is to determine the
needs, wants and interests of target markets and to deliver the desired
satisfactions more effectively and efficiently than competitors in a way that
preserves or enhances the consumers and society’s well-being.
(Philip Kotler – 10th Edition)

The societal marketing concept calls upon marketers to build social and ethical
considerations into their marketing practices. They must balance and juggle the often
conflicting criteria of company profits, consumer want satisfaction, and public interest.
Today, number of organisations have achieved notable sales and profit gains by adopting
and practicing the societal marketing concept. Many have questioned whether the
marketing concept is an appropriate philosophy in an age of environmental deterioration,
resources shortage, explosive population growth, world hunger and poverty and
neglected social services. A number of writers have suggested that societal marketing
concept should replace the marketing concept as a philosophy for the future.

The concepts of ethics and social responsibility are often used interchangeably, although
each has a distinct meaning. Social responsibility in marketing refers to an organizations
obligation to maximize its positive impact and minimize its negative impact on society.
Ethics relate to individual decisions.

What is Marketing Ethics?

Marketing Ethics are moral philosophies/principles that define right or wrong behaviour
in marketing. The most basic ethical issues have been formalized through laws and
regulations to conform to the standards of society. At the very least, marketers are
expected to obey these laws and regulations. However, it is important to realise that
marketing ethics go beyond legal issues; ethical marketing decisions foster mutual trust
among individuals and in marketing relationships.

Ethics are individually defined and may vary from one person to another. Although
individual marketers often act in their own self-interest, there must be standards of
acceptable behaviour to guide all marketing decisions. In marketing, many different
ethical issues arise, with regard to product, price, promotion and distribution. These are
discussed under the next chapter Marketing Environment - Section 4.6.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a management concept whereby organisations
integrate social, economic and environmental concerns in their business operations and
interactions with their stakeholders. Corporate social responsibility suggests that
organisations consider not only their customers and profits, but also the good and well-
being of the society.

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6. MARKETING ORIENTATION
Organisations which follow the marketing concept are said to be marketing-oriented.
Marketing Orientation means driven by customer needs. An organisation which adopts this
concept puts the customer at the center of all business decision-making and planning and
examines their product offerings from the customer’s viewpoint and not from a technical
perspective – being customer-centric or customer focused. A customer-centric approach
can add value to an organisation by enabling it to differentiate itself from competitors who
do not offer the same experience. Thus, corporate success is based on the ability to deliver
the desired levels of satisfaction that exceed those provided by competitors.

This means that customer needs are the driving force throughout the organisation.
Everyone in the organisation from the sales force through to the factory workers needs to
consider customer needs at every stage. Quality control in the factory, accurate information
given by the receptionists, customer care staff and courteous deliveries by delivery staff all
plays an important part in delivering customer value thus creates a competitive advantage
to the organisation.

Customer Value
Customer value is dependent on how the customer perceives the benefits of an offering
and the sacrifice that is associated with its purchase. Therefore;
Customer Value = Perceived benefits – Perceived sacrifice

Customer Satisfaction
Customer satisfaction occurs when perceived performance matches or exceeds
expectations.
Once a product has been purchased, customer satisfaction depends upon its perceived
performance compared to the buyer’s expectations.

Competitive Advantage
An advantage gained over competitors by offering a superior performance through
differentiation to provide superior customer value, or by managing to achieve lowest
delivered cost.
For major success, organisations need to achieve a clear performance differential over
competition on factors that are important to target customers. The most successful
methods are built upon the following:
▪ Being better – providing superior value
▪ Being faster – respond quickly to customer needs faster than competition
▪ Being closer – establishing close long-term relationships with customers.
Establishing a competitive advantage means that the firm, in effect, builds a wall around its
position in the market. When the wall is high, it will be hard for competitors outside the
wall to contact customers inside.

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6.1 Implementing the Marketing Concept
The marketing concept affects the entire organisational activities, not just marketing
activities, thus the top management must adopt it whole wholeheartedly.
For a production or sales oriented organisation to become marketing oriented represents a
major, possibly transformational change. It may require a programme of change including
the following measures;

Review and change of the organisation structure (restructuring): If an organisation is to

satisfy and delight customers it must coordinate all its activities. In order to achieve
this, it’s important to remove “vertical’ barriers between different functions which may
hinder the way staff co-operate and coordinate to meet customer needs.

Establishing an effective marketing information system: that will establish and track
customer needs and wants on an ongoing basis as well as service policies.

Engage in internal marketing: The marketing function supported by senior

management, needs to promote the business needs for marketing orientation and the
values associated with it. An extensive program of employee orientation and
communication is necessary to introduce customer focus.

Effective internal communication systems to be designed: to ensure all employees are

kept informed of all progress and activities.

Training to all staff members on customer care on an ongoing basis: reinforcing cultural
values, educating, training, coaching and employee development programs.

Benchmarking the organisation’s performances and processes against competitors and

best practices.

6.2 Benefits of Implementing the Marketing Concept

Several benefits will emerge as result of implementing the marketing concept philosophy
within an organisation. The benefits are as follows;

Customer Centric: customer needs are the driving force throughout the organisation
Customer satisfaction and delight thus profits to the organisation.
Enhanced image and reputation. (organisation/product)
Leads to customer loyalty thus provides competitive edge
Customer retention is high. (cost savings)
Staff are motivated (staff turnover is low thus cost savings)
Responding quickly to changing needs of the customers
Increased revenue through customer satisfaction and delight
Value created to both the customer and the organisation
Effective utilization of resources
Positive word of mouth

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6.3 Difficulties in Implementing the Marketing Concept
Even though marketers might feel that a market orientation is the obvious way for the
organisation to be successful, in practice there are likely to be barriers in developing such an
orientation. Possible barriers or difficulties are as follows;

Lack of committed leadership and vision

Managers fail to realise or understand the true concept.
Conflict between marketing and other functions - The power struggle between
different departments within an organisation can hinder the process.
Lack of customer knowledge
The structure of the organisation may require changing and this can lead to other
managers’ resistance and costs.
Employees are frightened and reluctant to change.
Autocratic leadership - is one who wants to make all the decisions him or herself.
Lack of infrastructure - The required technology to record and track customer
behaviour.

7. RELATIONSHIP MARKETING

"Customer retention has become increasingly recognised as the key to long-term

survival. In the past, most companies have operated on a 'leaky bucket' basis,
seeking to refill the bucket with new customers while ignoring the ones leaking
away through the bottom...a one percent improvement in customer retention will
lead to a five percent improvement in the firm's value”.
(Jim Blythe – 2006)

7.1 What is Relationship Marketing?

Relationship Marketing is the process of creating, building up and managing long-
term relationships with customers, distributors and suppliers. It aims to change
the focus from getting customers to keeping customers.

Traditional marketing is concerned with the exchanges between organisations and their
customers. The emphasis has always been on producing products that will satisfy customer
needs, and the focus has tended to be on the single transaction. This has led to an over-
emphasis on acquiring new customers, at the expense of ensuring that the firm keeps its old
ones.
Relationship marketing, on the other hand, tries to establish and build a longer-term, more
intimate bond between an organisation and its individual customers. Relationship
marketing is concerned with the lifetime value of the customer rather than their value in the
single transaction. Effective Relationship marketing connects people, processes, and
technology to increase profitability and reduce operational costs.
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7.2 Types and levels of a Relationship

The type of relationship between a buyer and a seller may be of two types:

(a) In a Transaction approach, a supplier gives the customer a good or service in exchange
for money. The marketer, in offering the good or service, is looking for a response.
Transaction-based marketing is based on individual transactions.

(b) In a Relationship approach, a sale is not the end of a process but the start of an
organisation’s relationship with the customer.

So building up customer relationships requires change of focus from the transactional-

based approach to the relationship approach. The contrast is summarized in Table 1.2:

Table 1.2 Transaction Focus and Relationship Focus

Characteristics Transaction Marketing Relationship Marketing

Focus Single sale Customer retention
Orientation Product features Product benefits

Time Scale Short Long

Customer Service Little emphasis High emphasis

Customer Limited High

Commitment
Customer Contact Moderate High

Quality Concern of the Concern of all

production department

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7.3 The Ladder of Customer Loyalty
Relationship marketing acknowledges that different marketing strategies are needed for
customer acquisition and retention. The relationship marketing ladder of loyalty as shown
in Figure 1.2 identifies the different stages of relationship development. This ladder has
relevance for all groups – buyers, intermediaries and consumers.

Figure 1.2 Ladder of Customer Loyalty

Partner: Someone who has the relationship of a partner

Partner with you

Advocate: Someone who actively recommends you to

Advocate others, who does your marketing for you (word-of-
mouth)
Supporter
Supporter: someone who likes your organisation but
only supports you passively
Client
Client: someone who had done business with you on a
repeat basis but may be negative, or at best neutral,
Customer towards your organisation.

Customer: someone who has done business just once

Prospect with your organisation

Prospect: someone whom you believe may be

persuaded to do business with you

It groups types of customers according to their level of loyalty. The ladder's first rung
consists of "prospects", that is, people that have not purchased yet but are likely to in the
future. This is followed by the successive rungs of "customer", "client", "supporter",
"advocate", and "partner". The relationship marketer's objective is to "help" customers get
as high up the ladder as possible. This usually involves providing more personalized service
and providing service quality that exceeds expectations at each step.

7.4 Benefits of Relationship Marketing

Relationship marketing has the following benefits;

Retaining customers is cheaper than recruiting new ones. It has been estimated that
the cost of attracting a new customer may be five times the cost of keeping an existing
customer.

Regular customers tend to be less expensive to service because they are familiar with
the process and require less "education".

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 Loyal customers are less likely to switch to competitors, making it difficult for
competitors to enter the market or gain market share.

Customer loyalty leads to long-term stability and growth: If we have a core of loyal
customers, it is much easier to predict revenues, and retaining them will lead to
growth and survival.

In addition loyal and satisfied customers can be an important source of referrals. They
also would recommend your business to others, thus expanding your business.

Increased customer retention and loyalty makes the employees jobs easier and more
satisfying. In turn, happy employees provide a better customer service.

Ability to develop customized marketing offers to suit specific needs of customers.

8. INTERNAL MARKETING
Internal Marketing (IM) is a process that occurs within an organisation whereby the
functional process motivates, aligns, and empowers employees at all management levels to
deliver a satisfying customer experience and molding the corporate culture.
According to Kotler, Internal Marketing is:
“Orienting and motivating customer-contact employees and supporting service
people to work as a team to provide customer satisfaction”.
Key concepts of internal marketing include the following;
• Alignment of the organisations purpose with employee behaviour.
• Employees internalizing the core values of the organisation.
• Motivation, reframing and empowerment of employee attitude.

8.1 Internal Marketing tools

Internal Marketing tools are as follows;

Internal newsletters: these can take the form of emails, notice boards, or A4
documents with the latest company information

Staff magazines: magazines with relevant articles about employees, promotions,

achievements, about family, and articles of general interest

Staff meetings: between staff and management to discuss issues, to celebrate success
and this could be done in an informal way

Team-building exercises: these can be particularly important when inducting new

employees into the organisation

Awards for employees: Employee recognitions and rewards such as employee of the
month, gifts for exceptional performance, incentive trips, etc.
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CHAPTER 2
THE MARKETING ENVIRONMENT
“It is useless to tell a river to stop running; the best thing is to learn swimming
in the direction it is flowing” (Anonymous)

1. MARKETING ENVIRONMENTAL FRAMEWORK

The marketing firm operates within a complex and dynamic external environment. It is the
task of the marketing-oriented organisation to link the resources of the organisation to the
requirements of customers. This is done within the framework of opportunities and threats
in the external environment.

The marketing environment refers to the internal and external influences that affect the
marketing function. The marketing environment is defined as follows:

A company’s marketing environment consists of the actors and forces outside

marketing that affect marketing management’s ability to build and maintain
successful relationships with target customers.
(Philip Kotler -12th Edition)

According to the above definition, the actors and forces which are outside to the marketing
management function may be within the organisation as well as outside the organisation.

Figure 2.1 Marketing Environmental Framework

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Factors within the organisation could be forces that are outside the marketing management
function. Factors outside the organisation could be from the micro and the macro
environments. The figure 2.1 above, illustrates the marketing environmental framework.

In the previous chapter we discussed the importance of understanding and focusing on the
customer as the essence of business philosophy we call “marketing”. Although a clear
understanding of customer requirements is of paramount importance in implementing such
a business philosophy into practice, that alone is not sufficient. Organisation’s must monitor
not only the changing needs and wants of target markets, but must also monitor the
changes in the marketing environment in order to be successful. By understanding the
marketing environment, marketers can adapt their strategies to meet new market place
challenges and opportunities. Successful organisations know the vital importance of
constantly monitoring and adapting to the changing environment.

2. THE INTERNAL ENVIRONMENT

The organisation’s internal marketing environment is the staff relationships, corporate

culture and resources constraints and is within the control of the organisation. Figure 2.2

Figure 2.2 The Internal Environment

Staff Relationships

Resource Internal Behaviour in dealing

Constraints Environment with the Environment

Corporate Culture

2.1 Staff Relationships

The relationships between staff within the organisation are key in ensuring an effective
working environment. While there are many areas of staff relationships that are outside the
control of managers, management should be able to create an environment in which
staff relationships can flourish.

Staff Members
The members of the organisation can give a positive or negative image of the firm after they
leave work for the day and interact with their friends and families, and even while at work
they will usually come into contact with some of the organisations external publics.
Sometimes employees convey a negative image of the organisation they work for, and this

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bound to have an effect on the perceptions of the wider public. Since the members of those
external publics will regard staff communications as being authoritative, the effect is likely
to be stronger than anything the marketing department can produce in terms of paid
communications. In other words, if the company’s staff speak to outsiders, the outsiders are
far more likely to believe those comments than to believe the company’s promotional
campaigns.

The staff of the organisation therefore, constitutes a market in their own right; the
organisation needs their loyalty and commitment, in exchange for which the staff are
offered pay and security. As discussed in Chapter One, Internal marketing (IM) is a process
that occurs within an organisation whereby the functional process aligns motivates and
empowers employees at all management levels to deliver a satisfying customer experience
and moulding the corporate culture.

Organisation Structure
The organisation structure has a very important bearing on the way it would carry out its
operations. Traditionally there are four methods in which an organisation’s structure could
be formed. The four common methods are as follows;

❑ Organising by Function
A functional department is structured along the lines of specific organisational activities
such as marketing, finance, human resources, production, administration etc. This
means there are very specialized roles and responsibilities, and that the individual
managers have to build expertise.

❑ Organising by Product
Each division is divided into sections based on the major product lines, brands or
categories the organisation sells. Organising by products gives the organisation the
flexibility to develop special marketing mixes for different products.

❑ Organising by Regions
A large organisation that markets products nationally may adopt this structure. The
divisions are divided into the geographical areas represented by the organisation.

❑ Matrix Based Structure

In a matrix structure, the horizontal divisions are diminished or in some cases removed
completely to allow integration between functions. Individuals are given responsibilities
that require them to work with members of other functions while still retaining some
allegiance to their primary function. Cross-functional teams are formed – sometimes for
specific tasks or projects, sometimes on a semi-permanent basis – with representatives
from all the key areas. The team members continue to report to their line managers
within their function but also to the leader of the cross-functional team. It is these
horizontal and vertical relationships that form matrix structure.

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2.2 Corporate Culture
Culture is a set of shared rules and beliefs. Within the organisations beliefs will develop, and
a corporate culture will eventually emerge. Corporate culture has been called “the way we
do things around here” and it can be a powerful influence on staff behaviour.

Developing the appropriate corporate culture is a lengthy process, since people change
slowly. Often the beginning of a corporate culture is the firm’s mission statement, in which
the organization lays down its long term aim and overall beliefs.

2.3 Resource Constraints

All organisations operate with limited resources. Organisations create competency in what
they do by making appropriate combinations of the resources at their disposal: the more
effectively the resources are deployed, the better the firm will do in the competitive
environment.

3. THE MICRO ENVIRONMENT

The micro environment is made up of actors close to the organisation that affects its ability
to serve its customers. These actors are as follows: Figure 2.3

Suppliers
Intermediaries
Competition
Customers
Publics

Figure 2.3 Actors in the Micro Environment

Competition

Intermediaries Customers

Suppliers Public

Micro Environment

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3.1 Suppliers
Suppliers are other business organisations and individuals who provide the organisation
with raw materials, parts, components, supplies or services required to produce and supply
products to customers. Suppliers form an important link in the organisations overall
customer value delivery system. Supplier problems can seriously affect marketing.
Marketing Managers must monitor supply availability and supply shortages or delays, labor
strikes and other events which can cost sales in the short run and damage customer
satisfaction in the long run. Because of this, Marketing Managers, by means of its marketing
intelligence should continuously monitor changes in the supplier environment and should
have contingency plans ready to deal with potentially adverse developments.

Building supplier relationships has become an important aspect in the recent past where
organisations have moved away from merely squeezing suppliers for better prices,
extended credit periods into building long term business relationships and making them
partners. The buyer/seller relationship is one of economic interdependence, both partners
relying on the other for their commercial well-being.

3.2 Intermediaries
Many organisations rely on marketing intermediaries to ensure that their products reach
the final consumer. Some organisations supply directly to the retailer whilst others use a
complex “chain” including intermediaries such as wholesalers, agents and distributors.
Like suppliers, marketing intermediaries form an important component of the organisation
overall value delivery system. In its quest to create satisfying customer relationships, the
organisation must do more than just optimizing its own performance. It must partner
effectively with marketing intermediaries to optimize the performance of the total system.

3.3 Competition
The marketing concept states that to be successful, an organisation must provide greater
customer value and satisfaction than its competitors. Thus, marketers must do more than
simply adapting to the needs of target consumers. They must also gain competitive
advantage by differentiating their offerings against the competitor’s offerings in the
minds of consumers.

3.4 Customers
Customers are a crucial part of an organisation’s micro environment. In a commercial
environment, no customers means no business. An organisation should be concerned about
the constantly changing requirements of its customers and should keep in touch with these
changing needs by designing and implementing an appropriate information gathering
system.
The organisation can only influence their decisions by offering products and services that
would delight them. Thus, identifying, anticipating and satisfying/delighting their
requirements are a crucial issue for marketers.

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3.5 Publics
The organisation’s micro environment also includes various publics. A public is any group
that has an actual or potential impact on an organisation’s ability to achieve its objectives.
The range of public is as follows:

Financial Publics: influence the organisation’s ability to obtain funds. – include the banks,
shareholders and other financial institutions who control the organisations finances,
and who can presence the organisation to behave in particular ways.

Local Publics – consists mainly of the organisation’s neighbours. These local

organisations and individuals may well pressure the company to take local actions, for
example clean up pollution or sponsor local charities. Large organisations usually
appoint a Community Relationship Officer to deal with community related issues in order
to obtain goodwill of the local public.

Media Publics – carry news, features and editorial opinions. They include newspapers,
magazines, radio and television stations. Public Relation Departments go to great
length to ensure that positive images of the firm are conveyed to (and by) the media
publics.

Government Publics – management must take into account all government rules and
regulations. Marketer must ensure all marketing activities comply with these rules and
regulations. Government publics can be influenced by lobbying by trade associations.

General Public – The organisation needs to be concerned about the general public’s
attitude towards its products and marketing activities. The public image of the
organisation affects its buying.

4. Macro Environment

The macro environment includes the major societal forces that affect not only the
organisation, but also on its competitors and on elements in the micro-environment. The
macro environment tends to be harder to influence than the micro environment, but this
does not mean that organisations must simply remain passive; the inability to control does
not imply the inability to influence.

Figure 2.4 shows the main forces in the organisations macro-environment. It is commonly
denoted by the mnemonic PESTEEL forces.

Political Environment
Economic Environment
Social and Cultural Environment
Technological Environment
Ecological Environment
Ethical Environment
Legal Environment

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 Figure 2.4 Macro Environment Forces

Social & Cultural Technological Ecological

Economic Ethical

Political Legal
Macro Environment

4.1 Political Environment

The political environment can be one of the less predictable elements in an organisation’s
marketing environment. Marketers need to monitor the changing political environment
because political changes can profoundly affect a firm’s marketing.

4.2 Economic Environment

The economic environment is basically about the level of demand in the economy and is the
most visible aspect in the macro environment. Economic factors are of concern to
marketers because they are likely to influence, among other things, demand, costs, prices
and profits. Some of the key aspects of the economic environment are as follows;

Income distribution: this is how the income is distributed among the people of the
country and in many instances there is unequal distribution of income. In most
countries, 10-20% of the population gets around 60-75% of the income and the balance
gets the rest. An organisation should identify the high-income earners for luxury items
and targeting the rest for value for money offers is important.

Inflation level: Although a certain level of inflation is healthy, high rates of inflation will
bring down the real income of its people, thus the amount of goods that they can
purchase would be less.

Economic Boom and Recession: A boom is a continuous growth in the gross domestic
product (GDP) of a country. A recession is a negative movement. When a country is in
boom all of its industries tend to grow. The conduct of business would be to expand its
operations. In contrast, in a time of recession the strategy would be survival.

Investment Policy: The tax structure and the policies adopted by the government to
attract investment will improve the future performance of the country. For example, the
Board of Investment of Sri Lanka is responsible for planning and implementing
investment policies for Sri Lanka in order to attract foreign investment.

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 Policies of tax and Interest Rates: The taxes imposed by the government and the interest
rate policies initiated by the central bank will determine the economic level of a country.

Saving Habits: The general saving levels of the country will determine its investment
potential. The saving habit of Sri Lankan’s is low due to low disposable income level and
the levels of inflation. In contrast, countries such as Japan where people are thrifty have
higher saving habits and therefore, have higher levels of investment potential.

4.3 Social and Cultural Environment

Of all the elements making up the macro environment, perhaps socio-cultural factors are
the most difficult to evaluate, and hence pose the greatest challenge to the marketing
organisation. Social and cultural change manifests itself in changing tastes, purchasing
behaviour and priorities of consumers and marketers need to understand and identify these
changing trends.
Some of the socio-cultural forces are as follows:

Demographic forces: This refers to the structure of population in term of factors such as
age, f a m i l y s i z e , e t h n i c i t y , income distribution and wealth concentration.
These variables will determine the marketing mix strategies.

Socio Cultural factors: are those areas that involve the shared beliefs, attitudes and
behaviour prevalent within the society in which the organisation operates. These
include language, religious beliefs, customary ways of working, gender roles, purchasing
behaviour, gift-giving behaviour and so forth. Changes in taste and fashion are also
components of the social-cultural environment.

Social Responsibility and Ethics: Derived in part from culture, ethical, beliefs about how
marketers should operate affect the ways in which people respond to marketing
initiatives.

Role of women in society: Today the woman is also considered as an economic

contributor to the family. Examples of marketing responses include a variety of
convenience products that have come into the market is a confirmation of this trend.

Changes in Social Attitude towards credit: In the past purchasing products on credit was
considered as shameful. Today, offering instant credit has become an integral part of
the marketing activity and also using credit cards has become fashionable. For many
people today it is often the availability and terms of credit offered are the major factors
in deciding a purchase of a particular product.

Changes in attitude towards health: Today, people are more concerned of health than
they were a few decades ago. An individual interest in health and physical fitness in
recent years seems to have cut across most segments of our society. Participation in
fitness activities from aerobics to yoga is on the increase and thus marketers have
responded with a wide range of products and services for the health- co n sciou s
population.

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4.4 Technological Environment

The pace of technological change is becoming increasingly rapid and marketers need to
understand how technological development might affect them in the following areas:

New Technologies: creates new markets and opportunities and replaces older
technologies. Thus, marketers should watch the technological environment closely.
Organisations that do not keep up with technological change, will soon find their
products outdated (technology obsolescence) and they will miss new opportunities.
Technological advances in the recent past have been rapid, and have affected almost all
areas of life: for example, Satellite TV Stations, Cable Networks, Robotic Surgery, Virtual
Reality, Computer-aided design system, Internet, etc.

Impact on Internet: clearly the internet has had a tremendous impact on marketing.
From a marketing view point, one major impact of the internet is that it has placed
market power even more firmly in the hands of consumers. Consumers are able to
compare prices and suppliers much more quickly, can comment and communicate to
each other much more quickly about exceptionally good or bad service, and can make
themselves much better-informed about products than before.

Virtual Shopping: The rapid growth in virtual shopping (accessing catalogues on the
internet) means that consumers can buy goods anywhere in the world and have them
shipped - or, in the case of computer software, simply downloaded - which means that
global competition will reach unprecedented levels.

Technological Developments: have allowed new methods of distributing products and

services. This is seen in the banking industry such as bank ATM machines, credit cards,
debit cards, etc.

4.5 Ecological Environment

Ecological Environment is concerned of issues as to how the organisation interacts with and
affects the natural environment or the ecology. Ecological Environment issues relevant to
marketing as follows:

Resources Depletion: the impact of the use of certain materials to develop products
which would lead to the depletion of natural resources.

Pollution Concerns
o Noise Pollution
o Environmental Pollution
o Eye pollution

Health Related Concerns

o Related Products, use of employees etc

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4.6 Ethical Environment
Marketing Ethics are moral philosophies/principles that define right or wrong behaviour in
marketing. The most basic ethical issues have been formalized through laws and regulations
to conform to the standards of society. At the very least, marketers are expected to obey
these laws and regulations. However, it is important to realise that marketing ethics go
beyond legal issues; ethical marketing decisions foster mutual trust among individuals and
in marketing relationships.
Ethical decisions related to marketing would be:

Product issues: Should be honestly produced and informed; commercial pressures may
tempt organisations to use cheaper raw materials or to use new additives or new
formulations to make the product perform differently. The ethical issue arises when
customers are not informed of such changes; this failure is a form of dishonesty about
the nature of the product.

Pricing issues: Price fixing, predatory pricing (pricing below cost of production in order
to bankrupt competitors) and failure to disclose the full price associated with a purchase
are typical ethical issues. Marketers have the right to price their products so that they
earn a reasonable profit, but ethical issues may crop up when an organisation seeks to
earn high profits at the expenses of its customers.

Promotional issues: The communication process provides a variety of situations that can
create ethical issues; deceptive or misleading advertising, manipulative sales methods,
and even bribery in selling situations. Unethical actions in advertising can destroy the
trust customers have in an organization. Sometimes adverts are questioned because
they are unfair to a competitor.

Place issues: Abuse of power in managing distribution channels and failure to pay for
goods within the specified credit terms of the supplier are both regarded as unethical,
but frequently occur anyway.

4.7 Legal Environment

Changes in the political environment often lead to changes in legal environment and in the
existing laws enforced. The legal environment sets the basic rules for how a business should
operate in society.
Some of the laws an organisation should be aware of are as follows:
Protection of Intellectual Rights
Consumer Protection Act
Companies Act
Regulatory Commission
Environmental Protection Laws
Code of Takeovers and Mergers.
Laws with regard to Media Freedom and Advertising
Exchange Control

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CHAPTER 3
THE MARKETING MIX
“Marketing Mixes have to be changed from time to time in response to new
factors in the marketing picture. The firm can react to environmental changes in
an expedient or a systematic fashion”
(Philip Kotler)

1. THE MARKETING MIX

“The Right Mixture and the Vital Spark”

1.1 Introduction to Marketing Mix

Marketing Mix is the set of controllable, tactical marketing tools that the firm
blends to produce the response it wants in the target market.
(Philip Kotler – 12th Edition)

Thus, in performing their key tasks marketing managers have at their disposal a number of
tools or ingredients they can use to develop marketing programs to create customer
satisfaction and, ultimately profits for the organisation. These tools or ingredients are often
referred as the as the “4 P’s”: Product, Price, Place and Promotion and decisions on how to
use these ingredients require ‘Marketing Research and Information’.

2. THE TRADITIONAL MARKETING MIX

The traditional marketing mix elements and its variables are as follows: Figure 3.1

Product: is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need.

Price: is the amount of money charged for product or service, or the sum of all the
values that consumers exchange for the benefit of having or using the product or
service.

Place: includes all activities in order to make the product available to target consumers
in the ‘right place’ and at the ‘right time’.

Promotion: is the mean by which an organisation attempts to inform, persuade, and

remind consumers – directly or indirectly – about the products they sell.

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 Figure 3.1 The Marketing Mix Variables

Product Price
Variety
List Price
Design
Discounts
Quality
Strategies
Features
Allowances
Brand name
Payment terms
Packaging
Credit terms
Sizes
Services
Marketing
Mix

Promotion Place
Advertising Channels
Personal Selling Coverage
Public Relations Assortments
Sales Promotions Locations
Direct Marketing Inventory
Transportation

3. THE EXTENDED MARKETING MIX

3.1 Why Extended Marketing Mix?

The advent of service into the marketing equation created issues for marketers to manage
service situations with the existing marketing mix. Therefore, there was a requirement to
extend the traditional marketing mix with other extended elements. Thus, the traditional 4
P marketing mix was extended to a 7 P Marketing Mix. Figure 3.2

3.2 Elements of the Extended Marketing Mix

The elements of the extended marketing mix are as follows;

• People: Relates to all personnel dealing with delivering the marketing experience to
the target audience.

• Process: All procedures, systems and policies a consumer needs to go through in

dealing with the organisation.

• Physical Evidence: Deals with all aspects of giving tangibility to the intangible service
offered to the consumer.

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Figure 3.2 The Marketing M ix: 7P’s Concept

Product

Physical
Evidence Price

Focus on
satisfying
customer’s
needs
Process Promotion
profitably

People
Place

a) People

Relates to all personnel dealing with delivering the marketing experience to the
target audience.

The higher the level of customer contact involved in the delivery of a product or service, the
more crucial is the role of people. The importance of employees in the marketing mix is
particularly important in service marketing, because of the inseparability of the service from
the service provider. The 'creation' of the service and 'consumption' of the service generally
happens at the same time. Organisations can also gain a strong competitive advantage
through people differentiation: hiring and training better staff than their competitors.

Consideration is the key word in services marketing. Consumers make decisions about
which service to choose not only on their experience of the quality of what is provided but
also on their perceptions of the person providing it. For example, staff of Disney are known
to be friendly and upbeat, Singapore Airlines enjoys an excellent reputation, largely
because of the grace of the flight attendants and Ritz Carlton provides its customers a
unique, personal, memorable experience by training and empowering its staff.

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Organisations need to take measures to implement a customer orientation philosophy in all
sectors of activity. Managers must promote values of customer service in order to create a
culture of customer service.

This may entail any or all of the following;

• Careful policies of recruitment and selection
• Job design to give people the authority they need to meet customer needs
• Programs of training and development to ensure that staff have both technical
competence and 'people skills'
• Standardised rules and practices, to ensure consistent basic levels of service
• Motivation and reward systems
• Internal Marketing

b) Process

All procedures, systems and policies a consumer needs to go through in dealing

with the organisation.

Efficient processes can become a marketing advantage in their own right. The service
provider needs smooth, efficient, customer-friendly procedures. It also involves in queuing
mechanisms, preventing waiting customers from getting so impatient and they leave
without purchase, processing customer details and payment etc.

For example, an airline developing a sophisticated ticketing system, could offer shorter
waiting time at check-in counters or offer a wider choice of flights through allied airlines.
This would give it a competitive edge over its competitors. Efficient order processing not
only increases customer satisfaction, but cuts down on the time it takes the organisation to
complete a transaction.

Service areas to be considered;

• Procedures, ordering systems and policies

• Automation of processes (online or automated systems)
• Queuing and waiting times
• Information flow to service units and customers
• Capacity management, matching supply to demand in a timely and cost effective
way.
• Accessibility of facilities, premises, personnel and services

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c) Physical Evidence
"Physical evidence gives the consumer something to refer to and to show other
people if necessary. Since service products are usually intangible, the consumer of
(say) an insurance policy will need some written evidence of its existence in order
to feel confident in the product” (Jim Blythe – 2005)

Deals with all aspects of giving tangibility to the intangible service offered to the
consumer.

Physical elements involve;

• Tangible evidence of purchase
• The physical environment which surrounds the purchase.

Again, this is particularly important in service industries because of;

• The intangibility or lack of physical substance involved in service
• The lack of ownership of services

“Confirmation is always sought. If the physical evidence does not match customer
expectations then the customer will withdraw”.

The following are examples of items of physical evidence that the marketer can use in the
marketing mix.
❑ Tangible Evidence of Purchase
▪ Labels and other printed information
▪ Tickets, vouchers and purchase confirmations
▪ Logos and other visible evidence of brand identity
❑ Environment of Service Delivery
▪ Staff uniforms
▪ Facilities
▪ Noise levels
▪ Smells
▪ Ambience
▪ Website design
The layout, decor and 'branding' of a bank, or a travel agency, for example, are likely to be
an important part of the customer's experience of receiving services which are otherwise
intangible. Likewise, the appearance, user-friendliness and branding of a company's website
can give a visible and 'interactive' aspect to the encounter.

Physical evidences can be used as a marketing communications tool: staff uniforms, logos
and corporate identity features, and promotional messages printed on vouchers/
envelopes/receipts are all promotional opportunities.

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Some critics think that the seven P’s concept takes the seller’s view of the market and not
the buyer’s view. From the buyer’s viewpoint, in this age of customer relationships, the
seven P’s might be better described as the seven C’s:

Sellers View (7P’s) Buyers View (7C’s)

Product Customer Value

Price Cost
Place Convenience
Promotion Communication
People Consideration
Process Co-ordination
Physical Evidence Confirmation

4. KEY CHARACTERISTICS OF AN EFFECTIVE MARKETING MIX

There are four key characteristics in the development of an effective marketing mix as
illustrated in the Figure 3.3 and explained below:

Figure 3.3 Key Characteristics of an Effective Marketing Mix

Matches Customer Needs

Effective
Matches Corporate Marketing Creates
Resources Mix Competitive
Characteristics Advantage

Well Blended

4.1 The Marketing Mix matches Customer needs

Sensible marketing mix decisions can be made only when the requirements of the target
customer is understood. Once the decision about the target market(s) is taken, marketing
management needs to understand how customers choose between rival offerings. They
need to look at the product through customers’ eyes and understand, among others factors,
the choice criteria they use. The important point is to note that an analysis of customer
choice criteria will reveal a set of key customer requirements that must be matched by the
marketing mix offerings in order to succeed in the marketplace.

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4.2 The Marketing Mix creates a Competitive Advantage
Identifying and understanding the key requirements of the customers and then offering
them with the appropriate marketing mix, that meet or exceed these requirements better
than the competition leads to the creation of a competitive advantage. A competitive
advantage is the achievement of superior performance through differentiation to provide
superior customer value. All the marketing mix elements should be used tactically to create
competitive advantage to the organisation.

4.3 The Marketing Mix should be well blended

The third characteristic of an effective marketing mix is that the marketing mix elements
should be well blended to form a consistent theme. If a product provides superior benefits
to customers, price, which may send cues to customers regarding quality, should reflect
those extra benefits. All of the promotional mix should be designed with the objectives of
communicating a consistent message to the target audience about these benefits, and
distribution decisions should be consistent with the overall strategic position of the product
in the market place. Thus, an effective marketing program blends all of the marketing mix
tools into a coordinated program designed to achieve the company’s marketing objectives
by delivering superior value to consumers.

4.4 The Marketing Mix should match Corporate Resources

The choice of marketing mix strategy may be constrained by the financial resources,
internal competences, production capabilities etc of the organisation. Before designing and
implementing the marketing mix strategies, the organisation should identify its resource
constraints.

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CHAPTER 4
MARKETING RESEARCH AND INFORMATION SYSTEMS

“To mange a business well is to manage its future; and to manage the future
is to manage information”
(Marion Harper)

1. WHAT IS MARKETING RESEARCH?

1.1 Definition of Marketing Research

Marketing Research is ‘The systematic gathering, recording, and analysing of

data about problems relating to the marketing of goods and services’.
(The American Marketing Association)

‘Market Research’ and ‘Marketing research’ are often used interchangeably although there is
a different scope.

Market Research is narrower in its focus and only considers finding out information
about the market under investigation.

Marketing Research covers finding out information about all elements of the marketing
mix, markets, customers, competitors etc.(it may encompass each and every facet of
marketing activities)

Thus Marketing Research is;

Systematic and disciplined.

Relates to needs and wants.
Provides information about marketing problems.

2. NEED FOR CONTINUOUS MARKETING RESEARCH

Often, marketing research is problem oriented in nature. For example, it is used when, say,
sales are failing for some reason and need to be investigated, or, say the marketer is
considering launching a new product. However, in addition to these necessary ad hoc
issues, it is now recognized that marketing research should be a continuous process in the
organisation.

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The main advantages in conducting continuous marketing research are as follows;

It improves the marketer’s ability to make right decisions.

The changing values and behaviour of customers can be monitored constantly.

Competitors’ development of their strategies can be identified

It can be used to continuously evaluate the current effectiveness of an
organisation’s strategies and tactics such as, for example, a television advertising
campaign.

Research in the form of environmental scanning can help to identify the changes
in social, legal, political and technological advancements, thus the ability to adapt
quickly to these changes.

3. TYPES OF MARKETING RESEARCH

The range of activities covered by marketing research is enormous, but here is a summary
of some of the main ones.

3.1 Market Research

Analysis of the market potential for existing products.
Sales forecasting for all products.
Study of market trends and factors influencing them.
Study of the characteristics of the market.
Composition of the market (age groups, income groups, size of company)
Analysis of market shares. (Ours compared to competitors)

3.2 Product Research

Comparative studies between competitive products
Studies into packaging and design
Test marketing
Research into the development of a product line (range)
Customer acceptance of proposed new products.
Product concept testing

3.3 Price Research

Analysis of elasticity of demand
Analysis of costs and contribution or profit margins.
The effect of changes in credit policy on demand.
Customer perceptions of price (and quality).

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3.4 Sales Promotion and Advertising Research
Research the advertising campaigns and sales promotion effectiveness.
Analysing the effectiveness of individual aspects of advertising such as copy and media
used.
Analysing the effectiveness of other sales promotion tools and methods.
Brand tracking studies

3.5 Distribution Research

The location and design of distribution centres
The analysis of packaging for transportation and shelving
The cost benefit analysis of physical distribution management
Effectiveness of each channel partner

3.6 Competitor Research

Competitor strengths and weaknesses
Quality of products, lines, packaging, pricing, distribution and advertising
Sales force operation/effectiveness

3.7 Consumer Research

Consumer habits and attitudes
Studies on Consumer trends and lifestyles
Consumer purchase behaviour

4. PRIMARY AND SECONDARY DATA

Marketing research information is composed of “Primary data’ and ‘Secondary data’

Figure 4.1

4.1 Secondary Data

Secondary data refers to "Off-the-shelf' information which already exists and which was
collected for some other specific purpose. The collection of secondary data is often referred
as ‘desk research’. It is recommended that a marketer collects secondary data before
collecting primary data.

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 Figure 4.1 Approaches to Collecting Data

a) Sources of Secondary Data

Secondary data could be sourced from either internal sources or external sources.

❑ Internal Sources of Secondary Data:

Accounting records
Sales force reports
Reports from previous marketing research studies
Budgets
Profit and loss statements

❑ External Sources of Secondary Data:

Computerized databases
Trade Associations
Central Bank
Export Development Board
Chamber of Commerce
Government agencies
Research agencies
Other publishing sources

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b) Advantages of Secondary Data

There are several advantages of getting secondary data in comparison to collecting primary
data. They are;

Relatively cheaper to gather secondary data since it is already available.

Relatively quicker to extract
One would not require too much of an expertise in extracting secondary data
In many situations multiple sources are available to collect and to verify it.

c) Problems Encountered with Secondary Data

Availability - Although availability is the key advantage of secondary data, in many

instances secondary data will not be available for a specific problem in hand

Relevance - This refers to the extent to which secondary data fits the information needs
of the researched problem.
Sufficiency - At times secondary data may be available, relevant and accurate, but still
may not be sufficient to meet the data requirements for the problem being researched.

Validity - The collected information may be out dated and will therefore be redundant.

Accuracy - Accuracy of secondary data would be a concern

4.2 Primary data

Primary Data is data collected for the first time for the specific purposes of the particular
marketing research study being conducted. The collection of primary data is often referred
as ‘field research’.

Primary data is generally collected after a thorough analysis of secondary research, when
information collected from the latter is insufficient for marketing decision making.

a) Sources of Primary Data

Primary data collection methods used by marketers are as follows;

Observational Research
Observational research includes viewing and listening to situations encompassing human
behaviour with monitoring instruments. Some of these instruments could be cameras, eye
movement recorders, scanner technology, and people's meter. Examples are;
o Monitoring traffic flow
o Studying a retail outlet (display methods, prices, customer flows)
o Viewing competitors products at an exhibition
o Viewing product usage of a particular target audience - How do children consume
ice cream

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 Experimentation
This involves the manipulation of one or more variables by the experimenter in such a way
that its effect on another variable can be determined. For example, changing the pricing to
monitor different responses from customers.
Field marketing experiments are called test marketing. This is essentially used in testing new
products before it is launched to the market.

Survey Research

This is concerned with administration of questionnaires and is the most common method of
collecting primary data for marketing decision-making. When planning for a survey certain
aspects will have to be taken into consideration. They are;
(i) Selection of a medium to conduct the survey. Survey research could be carried out by
mail/fax or internet, telephone or as a personal survey. Each of these has its own
advantages and disadvantages. Each of the three main methods and how they perform with
respect to certain criteria is shown in Table 4.1

(ii) Questionnaire design - will be discussed under research process

Depth Interviews
Depth interviews normally involve either one face-to-face respondent or a group of 5-20
respondents. Individual depth interviews are used to collect primary data when the subject
matter is confidential or potentially embarrassing in nature or when detailed understanding
is required.
Group depth interviews are often used for when generating ideas for new product
concepts, exploring consumer responses to promotional and packaging ideas and other
similar activities.

Table 4.1 Criteria for selection of Research Methods

Criteria Personal Survey Telephone Postal, Internet &

Survey Fax Survey
Cost High, because of time Moderate Lowest
and travel expense
Speed Moderate High Moderate to low
Accuracy Two-way Verbal communication Moderate to low, No
communication interviewer bias
Ease of use Need Skilled Good telephone skills Easy, however
Interviewers required questionnaire design
needs care
Ease of Access Moderately easy. Excellent Easy, however
Sampling can be difficult to ensure
controlled participation

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b) Advantages in Collecting Primary Data

There are several advantages in collecting primary data. They are as follows;
Relevance: A marketer could collect data, which is relevant and specific to the
information requirement.
Accuracy: In this process the accuracy of the data could be used to ensure that the
data collected is representative of the situation.
Sufficient: Sufficient amount of information could be collected.

c) Disadvantages in Collecting Primary Data

The disadvantages in collecting primary data are as follows;

Time Consuming: The collection of primary data would require effective planning
and this would invariably require more time to plan, thus it would be a time
consuming process.
Cost: The nature of data collection would also mean that a marketer would have
to spend more money in collecting it and thus making it expensive.
Expertise: A certain amount of expertise is required in collecting primary data thus
any person will not be able to be a part of this process.

5. THE MARKETING RESEARCH PROCESS

We have seen that marketing research needs to be planned and systematic. The key stages
of the marketing research process are as follows: Figure 4.2

Figure 4.2 Key Stages of The Marketing Research Process

Defining the Designing Data Presentation

problem and the Collection Analysis
of of
setting Research And Research
specific Plan Data Interpretation findings
objectives

5.1 Defining the Problem and Setting Specific Objectives

Marketing research is intended to provide information in order to solve marketing
problems. This being the case, it is important that the researcher defines the
research problem, which in turn will enable precise objectives for the research to be set.
Marketing mangers and researchers must work closely together to define the problem and
agree on research objectives. The manager best understands the decision for which

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information is needed; the researcher best understands marketing research and how to
obtain the information. Defining the precise problem and research objectives is often the
hardest step in the research process. The manager may know that something is
wrong, without knowing the specific causes.
Having identified the problem, the manager and researcher must translate the agreed
research problem(s) into specific research objectives. Both the agreed research problem
and research objectives should be put in writing, what is known as the ‘research brief’ and
this guides the entire research process.

5.2 Designing the Research Plan

Once the marketing – research problem(s) have been defined and then translated into
specific research objectives, then a marketing research plan for achieving those objectives
can be developed, followed by collection of the data itself. The key elements of the research
plan are: (a) Types of Data required, (b) Selection of research techniques (s), (c) Selection of
research instrument(s), (d) Designing the sampling plan, and (e) Selection of contact
methods. Figure 4.3

Figure 4.3 Elements of the Research Plan

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a) Types Of Data Required

As explained, the first sensible option would be to collect secondary data and if this cannot
meet the requirements then one need to seek primary data sources. At times although
secondary data is not sufficient for the information requirement, finding some secondary
data would help to design questionnaires or interview schedules.
Once the decision to collect primary data is made, then the remaining elements of the
research plan will need to be initiated, starting with the selection of the research
techniques to be used for collecting the primary information.

b) Selection of Research Techniques

As explained under primary data collection methods, the researcher may choose one of the
following methods to collect the data;

Observation
Experimentation
Survey
Depth Interviews

The choice of a research technique will depend on several factors, including, for example,
the research problem, company resources, timing and so on. Of the three, however, surveys
are probably the most widely used, followed by experimentation and observation.

Qualitative versus Quantitative Research

It is possible to distinguish between two major categories of research techniques in

marketing research, namely qualitative versus quantitative marketing research.

Qualitative Research: As the term implies, qualitative marketing research involves the
collection of data (qualitative data) which is difficult or impossible to quantify. (Questions in
terms of “why”) It includes information such as customer attitudes, motives, opinions and
feelings etc. Depth interviews and observation techniques could be used effectively to
collect qualitative data.

Quantitative Research: Quantitative research, on the other hand, involves the collection of
data (quantitative data) which can be measured (Questions in terms of “How many”). So, for
example it would include things like market size, market share, number of people buying a
product or service, amounts spent per customer, etc. Survey research techniques are often
used in carrying out quantitative research.

c) Selection of Research Instruments

Research instrument is the tool to be used for collecting primary data. Once the research
techniques are selected, the next element of the research plan is to select the research
instruments(s).

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There are two main types of research instruments.
Mechanical / Electronic Devices.
Questionnaires

Mechanical/Electronic Devices
Although mechanical/electronic instruments are used e.g. eye cameras or devices
attached to a sample of television sets to record audience viewing habits, by far the most
widely used research instrument is the questionnaire, which can take several forms but
always needs careful and skillful design.

Questionnaires
Three main kinds of questions found on questionnaires are;

o Dichotomous questions – is a question to which the respondent can only answer in

one of two ways. Example: Do you go the gym? Yes/No
Type your te
o Multiple-choice questions – is a question to which the respondent must select from a
range of alternative possible answers. Example: The hotel service was: Excellent, Very
good, Good, Fair, Poor.
o Open-ended questions – is a question in which the respondents are free to answer in
a way they feel is most appropriate, using their own words. Example: What do you
think about the HSBC Credit Card?

d) Designing the Sampling Plan

The key elements and decisions in designing the sampling plan are the following.

Defining the Target Population/Audience

The marketing researcher must decide the population that will form the focus of the
marketing research, and from which the sample will be drawn. Who is going to be identified
to test the marketing research plan? The target population is also referred to as the'
sampling frame’.

Clearly what constitutes the target population for sampling will vary with each survey; it is
essential that this population be clearly defined: we can then drive the sampling frame from
which the sample itself will be drawn.

Determination of sample size

The sample size means, how many people should be surveyed. Larger the sample size, the
greater the accuracy, but also of course the greater the cost.

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 Determining the sampling method or procedures

The major sampling methods may be classified into two groups as follows such as
probability sampling and non-probability sampling methods. Figure 4.4

Figure 4.4 Sampling Methods

Sampling Methods

Probability sampling methods Non-probability sampling methods

▪ Simple Random Sample ▪ Quota Sampling
▪ Stratified Random Sample ▪ Judgment Sampling
▪ Cluster Sample ▪ Convenience sampling

1) Probability sampling methods: Sample in which each member of a given population

is selected on some objective basis not controlled by the researcher. The biasness of the
interviewer in selecting the sample is minimized. There are three types of probability
samples, namely;

➢ Simple Random sample: Every member of the population has a equal chance of being
selected to the sample. The biggest advantage of this technique is that the
biasness of the interviewer in selecting the sample is minimized to a very large extent.

➢ Stratified random sample: Is a situation where you would divide the entire
population into mutually exclusive groups (such as age, gender groups) and then draw
a sample from each sub-group.

➢ Cluster sample: in which the population under study is divided into subgroups or
blocks such as geographical area and then parts of the area may be sampled.

2) Non-probability sampling methods: Sample that involves personal judgment in the

selection of sampled items. These methods are generally cheaper though less accurate
than probability samples. The probability of the interviewer biasness to creep in is high.

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The methods used are;
➢ Quota sampling: The researcher finds and interviews a prescribed number of
people in each of several categories.
➢ Judgment sampling: The researcher uses his or her judgment to select population
members who are good prospects for accurate information.
➢ Convenience sampling: The researcher selects the easiest population members from
which to obtain the required information. (Man-on-the street)

e) Selection of contact methods

This element in the design of the marketing-research plan is only relevant where the
research technique being used is the survey method. When this is the case, a choice must
be made as to how to contact respondents. There are three main methods.

Personal Surveys
Telephone Surveys
Postal/Internet/Fax Surveys
Each of these has its own relative advantages and disadvantages as already explained
earlier. (Refer Table 4.1)

5.3 Collection of Data

Only when all the preceding elements in the design of the marketing research plan have
been completed can we take the final step of actually collecting the data. In fact this is really
the implementation stage of the marketing-research plan.
In collecting data the question would be to decide whether the data will be collected in
house by the researcher himself or will it be outsourced to an external research agency.
a) In-house Marketing Research

In-house marketing research will usually be performed by the marketing department, or in

large organizations, by a separate marketing research department.
Advantages of using In-house marketing research

Confidentiality: One of the problems in using outside agencies, particularly for

sensitive topics such as new product launches, is the possibility of the information
getting into the competitors.

Cost: It is often more cost effective to use internal personnel because there is no need
to add on a profit margin as is the case for external agencies.

Internal Knowledge: Although external agencies may be aware of the latest and most
sophisticated marketing research techniques, they may have less knowledge of the
product/service, the market situation and the company’s customers.

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b) External Research Agencies

Advantages of using an external agency are;

Expertise: An external agency would bring expertise in marketing research which an

organisation might not be able to supply in-house. The agency would need to liaise with
the organisations marketing staff.

External Knowledge: Marketing research agencies is that they may have knowledge
of a particular market, and supply this information to all clients or subscribers. An
example of such information provision is the Television Consumer Audit.

Speed: External research organizations are often used for overseas research, enabling
language difficulties to be overcome, and providing local expertise and speed of access
of information.

5.4 Data Analysis and Interpretation

In this step of our marketing-research process we have to transform raw data into
information that is useful for marketing decision-making. This is done through careful
analysis and evaluation. This is the critical step in the research process. At this stage, a
researcher must draw upon many talents, including analytical skills, intuitive understanding
skills, and communicating skills. Nowadays the computer enables sophisticated analytical
procedures to be used, and the data will be edited and coded so as to be entered into the
computer system.

5.5 Presentation of the Research Findings

Obviously marketing research efforts are wasted if the results are not communicated and
subsequently acted upon by marketing management. This means that the results should be
presented in such a way that the Marketing Manager understands and can use them. When
presenting the results of marketing research, the marketing researcher should proceed as
follows;

Keep reports simple and brief

Remember the ‘target audience’ for the report
Summarize major findings
Give an indication of implications for decision-making
Where possible, present information visually (graphs, diagrams)
Put details, including statistical analyses, in appendices.

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6. MARKETING INFORMATION SYSTEMS
Marketing Information Systems (MkIS) represent a systematic attempt to supply
continuous, useful, updated stream of information to decision makers for decision making.
It has been defined as

A system in which marketing information is formally gathered, stored, analysed

and distributed to managers in accord with their informational needs on a regular
planned basis. (David Jobber)

Marketing Research and Marketing Information Systems are closely interrelated; the
former has the task of generating information, whilst an MkIS manages the flow of this
information on a continuous basis to marketing decision makers.
Marketing Information System begins and ends with information users – marketing
managers, internal and external partners, and others who need marketing information.
First, it interacts with these information users to asses information needs. Next, it develops
needed information from internal company databases, marketing intelligence activities, and
marketing research. Then it helps users to analyse information to put it in the right form for
making marketing decisions and managing customer relationships. Finally, the MkIS
distributes the marketing information and helps managers use it in their decision making.
The key elements of a marketing information system, and how they interlink, are illustrated
in Figure 4.5 and explained below:
The internal company information, marketing intelligence and marketing research
subsystems feed into the marketing information database, which in turn feeds into the
analysis and decision support system part of the marketing information framework. All of
these elements combine to provide continuous updated information for marketing decision
making.

6.1 Internal Company Information

Many organisations build extensive internal databases, electronic collections of consumer
and market information obtained from data sources within the organisation network.
Marketing Managers can readily access and work with information in the database to
identify marketing opportunities, plan programs and evaluate performance.
This is the most basic information used by Marketing Managers. The system includes reports
on;
Sales analysis by salesmen, territory, product, and dealers
Inventory levels, stock movement and production schedules
Financial statements, costs, profits, cash flow statements etc
Receivables and payables
Service issues and customer satisfaction tracking reports
An analysis of this information can help Marketing Managers to identify key issues,
strengths and weaknesses.

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 Figure 4.5 Key Elements of a Marketing Information System

6.2 Marketing Intelligence System

A marketing intelligence system is the systematic collection and analysis of publicly
available information about competitors and developments in the marketing environment.
This system is concerned with external information as opposed to the internal information.
The goal of marketing intelligence is to improve strategic decision making, assess and track
competitors’ strategies and actions, environmental scanning, and provide early warning of
opportunities and threats.

An analysis of this information can help Marketing Managers to formulate new policies,
adjust tactics, keep ahead of the competition and identify important opportunities and
threats.

6.3 Marketing Research System

Marketing research forms the final subsystem of the marketing information system, and is
used when specific answers to specific problems need to be found. In this sense, marketing
research fills the gaps in the marketing information system.

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To summarise, the design of an MkIS should start with the information needs of decision-
makers rather than with technical considerations.

A well designed Information System should have the following characteristics:

User-friendly: The system should be designed to be “user-friendly”. Information is

wasted if it cannot be used. The major problem with many MkIS system is that they are
designed to suit the information specialist rather than the actual decision makers.

Interactive: The system should be designed so as to be interactive. In other words, an

effective system allows analysis rather than merely retrieval of information. This means
that the system should be a model rather than data oriented.

Cost Effective: The system should be cost effective. As mentioned earlier, information
costs money. An effective MkIS should be based on a careful evaluation of how the
system will contribute to more cost effective decisions.

Type your tex

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CHAPTER 5
CONSUMER AND ORGANISATION BUYER BEHAVIOUR

“Anticipating consumer behaviour is not an option for marketing mangers: it is

their job description”.
(Gordon Foxal – University of Keele)

1. CONSUMER NEEDS, WANTS AND DEMAND

1.1 Consumer Needs

A human need is a state of felt deprivation of some basic satisfaction. People require food,
clothing, shelter, safety, belongingness, esteem, and a few other things for survival. These
needs are not created by society or by marketers; they are part of the human makeup.

Figure 5.1 Definition of a Need

Desired state

Need

Current state

All individuals will have a certain desired level of expectations. When there is a difference
between an actual or current state and a desired or expected state, there would be a gap. A
stimulus or drive comes about because there is a gap and drives lead to motivation, which is
the reason why people take action. When a need arises, the consumer will take action in
the following ways: Figure 5.1

Look for means of satisfying the need – to bring the current or actual state to the
desired or expected sate

OR

Try to reduce the level of desired or expected state - reduce the gap

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1.2 Consumer Wants

Wants are specific items or objects that might satisfy the need. It is a means of expressing a
need. A need may be satisfied by any one of a large number of alternatives. The availability
of alternatives means of satisfying a need constitutes choice. For example, Mr. Perera is
hungry and needs food. Thus, to satisfy his hunger, Mr. Perera could order pizza, burger,
rice and curry, fried rice, noodles etc. Mr. Perera decides to order a pizza to satisfy his
hunger. In this instance the pizza was an expression or the means of satisfying the need for
hunger.

1.3 Demand

Demands are wants for specific products backed by an ability to buy (purchasing power).
Many people want a Mercedes; only a very few are able to buy one. Organisations must
measure not only how many people want their products, but also how many would actually
able to buy it. Thus, the demand for a given product is therefore a function of need, want
and the ability to buy.

1.4 Hierarchy of Needs

Figure 5.2 Maslow’s Hierarchy of Needs

Self Actualisation
Needs
1 SelfRealisation

Esteem Needs
2 Self-esteem, Recognition

Social Needs
3 Sense of belonging, Love

4 Safety Needs
Security, Protection

5
Physiological Needs
Hunger, Thirst

Abraham Maslow sought to explain why people are driven by particular needs at particular
times. Why does one person spend much time and energy on personal safety and another
on gaining the esteem of others? Maslow's answer is that human needs are arranged in a

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hierarchy, as shown in Figure 5.2, from the most pressing at the bottom to the least
pressing at the top. They include physiological needs, safety needs, social needs, esteem
needs, and self actualization needs.

A person tries to satisfy the most important need first. When that need is satisfied, it will
stop being a motivator and the person will then try to satisfy the next most important need.
For example, starving people (physiological need) will not take an interest in the latest
happenings in the art world (self-actualisation needs), nor in how they are seen or
esteemed by others (social or esteem needs), nor even in whether they are breathing clean
air (safety needs). But as each important need is satisfied, the next most important need
will come into play.

1.5 Customer/Consumer

Customer: The individual or organisation who actually makes a purchase decision.

Consumer: The individual or an organisation who actually uses the product or consumes it.
In many cases the customer is also the consumer, such as when you buy and eat a
hamburger. For example, in a household a parent frequently makes purchase decisions for
products that the children consume.

2. CONSUMER BUYING BEHAVIOUR

2.1 Consumer Buying Behaviour

Consumer Market

All the individuals and households who buy or acquire goods and services for personal
consumption. (Philip Kotler)

Consumer Buying Behaviour

The buying behavior of final consumers – individuals and households who buy goods
and service for personal or household consumption. (Philip Kotler)

Buying behaviour is the decision process and actions of people involved in buying and
using products. (Michael J Baker)

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2.2 The Stages of Consumer Buying Decision Process
Consumer buying decision process consists of five stages: Problem recognition, Information
search, Evaluation of alternatives, Purchase decision, and Post purchase evaluation.
Figure 5.3

Figure 5.3 Consumer Buying Decision Process

Post
Problem Information Evaluation of Purchase
Purchase
Recognition Search Alternatives Decision
Evaluation

a) Problem Recognition

Problem recognition occurs when the consumer becomes aware that there is a difference
between an actual/current state and a desired/expected state big enough to trigger an
action.

The problem or need can be triggered by internal stimuli or drive when one of the person’s
normal needs such as hunger, thirst - rises to a level high enough to become a drive. A need
can also be triggered by external stimuli or drive. A person passes a bakery and sees freshly
baked bread that stimulates his hunger; he watches a television advertisement for a
vacation in Singapore or he admires a neighbour’s new car.

Marketers need to identify the circumstances that trigger a particular need. By gathering
information from a number of consumers, marketers can identify the most frequent stimuli
or drive that spark an interest in a product category in order to develop appropriate
marketing strategies to trigger consumer interest.

b) Information Search

Having become motivated to seek a solution to the need problem, consumers engage in
search for more information about various alternatives that exist to satisfy that need.

There are two aspects to information search, such as;

Internal Search: Involves remembering previous experience of the product category,

and thinking about what he/she has heard about the product category. (search their
memory for information)

External Search: Obtaining information from sources such as newspapers, catalogues,

TV advertisements, friends/colleagues, sales force and of course the internet.

An organisation must design its marketing mix strategies to make prospects aware of and
knowledgeable about its brand. It should carefully identify consumers’ sources of formation
and the importance of each source.

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c) Evaluation of Alternatives

Having recognised the need and collected the information, the consumer will evaluate the
alternatives, based on the information collected. How consumers go about evaluating
purchase alternatives depends on the individual consumer and the specific buying situation.
For instance, in certain situations, consumers use careful calculations and logical thinking
and at times they purchase on impulse and rely on intuition and at times they seek advice
from friends or sales staff for purchase advice.

This stage involves the buyer establishing a set of attributes or criteria against which to
compare the products/brands under consideration. The attributes of interest to buyers vary
by product:
Hotels: Location, cleanliness, environment, price
Cameras: Picture sharpness, camera speeds, camera size, price.
Tires: Safety, tread life, ride quality, price
LCD TV: Contrast ratio, resolution, warranty, price, power consumption

Marketers should understand how consumers actually evaluate brand alternatives. If they
know what evaluative processes go on, marketers can take steps to influence the buyer’s
decision.

d) Purchase Decision

The purchase stage, when the consumer chooses which product or brand to buy, is mainly
the outcome of the consumer’s evaluation of alternatives, but other factors have an impact
too. The closeness of alternative stores, attitudes of the sales staff, and product availability
can influence which product or brand is purchased. Thus, preferences and even purchase
intentions do not always result in actual purchase choice.

e) Post – Purchase Evaluation

After the purchase, the buyer begins evaluating the product to check whether its actual
performance meets expected levels. If the product falls short of expectations, the consumer
is disappointed, if it meets expectations, the consumer is satisfied, and if it exceeds
expectations, the consumer is delighted.

Almost all major purchases result in cognitive dissonance, or discomfort caused by post –
purchase conflict. Cognitive dissonance – doubts that occur because the buyer questions
whether the right decision was made in purchasing the product. At this stage, the consumer
may try to seek additional information in trying to reduce the post – purchase dissonance.

The reasons why it is important for a marketer to understand the consumer decision making
process are:

The marketer can influence the stage which the consumer goes through in order to
need to purchase stage quickly favourable to the marketers’ product.

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 The marketer could reduce post-purchase dissonance to a greater extent by providing
reinforcing information.

A marketer can direct various communications at each stage the consumer goes
through to the final purchase.

3. ORGANISATION BUYING BEHAVIOUR

3.1 Organisation Buying Behaviour

Business-to-Business Market
Individuals or groups that purchase a specific kind of product for re-sale, use directly
in producing other products or use in general daily operations of its business.

Organisation or Business Buying Behaviour

The buying behavior of individuals or groups that purchase a specific kind of product
or re-sale, use directly in producing other products or use in general daily operations
of its business.

3.2 The Decision Making Unit (DMU)

The decision making unit of a buying organisation is called its buying centre. The buying
centre consists of “all individuals and units that play a role in the purchase decision –
making process.”

The buying center includes all members of the organisation who play any of five roles in the
purchase decision process. Figure 5.4

a) Users

Users are members of the organisation who will use the product or service. In many
instances, users initiate or trigger the buying process, and may also be consulted in setting
the product specifications.

For example, if the photocopier breaks and cannot be repaired, the Secretary reports it,
thus initiates or triggers the process.

b) Influencers

As term implies, influencers can affect the outcome of the decision-making process through
their influence on others. They often help in defining the specification and also provide
influence for evaluating alternatives. Technical staff members are particularly important
influences. Users may also influence in certain instances.
For example, in the case of a photocopier purchase the influencers might include technical
staff or it could be the Secretary.

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 Figure 5.4 The Buying Centre

Buyers

Influencers
Users

Buying
Centre

Gatekeepers Deciders

c) Buyers

The buyer has formal authority to select the suppliers and arrange terms of purchase.
Buyers with different levels of seniority and expertise may exist to handle different types of
transactions.
For example in the purchase of a photocopier, a member of the purchasing department
would select and negotiate the payment terms with the supplier, sets delivery date, and
issues the purchase order.

d) Deciders

Deciders have formal or informal authority to select and approve the final supplier. In
complex buying purchases involving expensive, high-risk decisions the deciders would be
the Finance Director, The Chief Executive Officer, or even the Managing Director. In
contrast, for routine re-buys the Purchasing Officer may be the decider.
In the case of a photocopier purchase, the Purchasing Officer may be the decision maker.

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e) Gatekeepers

Gatekeepers control the flow of information by denying access to key members of the
buying centre. For example, a Secretary, Receptionist, or Purchasing Manager may prevent
sales person from talking directly to deciders or users. Technical staff can also act as
gatekeepers.

In our photocopier example, a Secretary who controls which supplier gets appointments
with her boss is acting as a gatekeeper.

3.3 Major Types of Buying Situations

There are three major types of buying situations as follows;

Straight Rebuy
A business buying situation in which the buyer routinely reorders something without any
modifications. It is usually handled on a routine basis by the purchasing department. Based
on past buying experience and satisfaction, the buyer simply chooses from the various
suppliers on its list.

Modified Rebuy
A business buying situation in which the buyer wants to modify product specifications,
prices, terms, or suppliers. The modified re-buy usually involves more decision participants
than does the straight re-buy. The current suppliers may become nervous and feel
pressured to put their best foot forward to protect an account. Suppliers, who are not
supplying currently, may see the modified rebuy situation as an opportunity to make a
better offer and gain new business.

New Task Purchase

A business buying situation in which the buyer purchases a product or service for the first
time. In such cases, the greater the cost or risk, the larger the number of decision
participants and the greater their efforts to collect information will be. 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 but also provides help and information.

3.4 The Stages of Organisational or Business Buying Decision Process

The decision process by which business buyers determine which products and services their
organization need to purchase, and then find, evaluate, and choose among alternative
suppliers and brands.
Figure 5.5 lists the eight stages of the business buying process. Buyers who face a new-task
buying situation usually go through all stages of the buying process.

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 Figure 5.5 Organisational Buying Decision Process

Problem General Product Supplier

Recognition Need Specification Search
Description

Performance Order-routine Supplier Proposal

Review Specification Selection Solicitation

a) Problem Recognition
The first stage of the business buying process is when someone in the organisation rec-
ognises a problem or need that can be solved by acquiring a product or a service. Problem
recognition can result from internal or external stimuli.

Internally, the company may decide to launch a new product that requires new production
equipment and materials, or a machine may break down and need new parts. Perhaps the
Purchasing Manager is unhappy with the 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. In fact, in their
advertising, business marketers often alert customers to potential problems and then show
how their products provide benefits/solutions.

b) General Need Description

Having recognised a need, the buyer next prepares a general need description that
describes the characteristics and quantity of the needed item. For standard items, this
process presents few problems. For complex items, however, the buyer may have to work
with others - engineers, users, consultants - to define the item. The team may want to rank
the importance of reliability, durability, price, and other attributes desired in the item. In
this phase, the alert business marketer can help the buyers define their needs and provide
information about the value of different product characteristics.

c) Product Specification
The buying organisation next develops 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. The team decides
on the best product characteristics and specifies them accordingly. Sellers, too, can use

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value analysis as a tool to help secure a new account. By showing buyers a better way to
make an object, outside sellers can turn straight rebuy situations into new-task situations
that give them a chance to obtain new business.

d) 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 its current registered suppliers, trade
directories, doing an internet search, or consulting other organistions for recommendations.
Today, more and more companies are turning to the Internet to find suppliers. For
marketers, this has leveled the playing field - the Internet gives smaller suppliers many of
the same advantages as that of larger competitors.

e) Proposal Solicitation
In the proposal solicitation stage of the business buying process, the buyer invites qualified
suppliers to submit proposals as per to the product specifications. In response, some
suppliers will send only a catalog 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. Business marketers must be skilled in researching, writing, and
presenting proposals in response to buyer proposal solicitations. Proposals should match
the required product specifications. Presentations should inspire confidence and should
make the marketer's organisation stand out from the competition.

f) Supplier Selection
The members of the buying centre now review the proposals and short lists a few suppliers
based on meeting to the expected product specifications. During supplier selection, the
buying centre often will draw up a list of the desired supplier attributes and their relative
importance. The important factors include product quality, payment terms, warranty, repair
and servicing capabilities, technical assistance and advice, geographic location, performance
history, and reputation. The members of the buying centre will rate suppliers against these
attributes and identify the best suppliers. Buyers may attempt to negotiate with preferred
suppliers for better prices and terms before making the final selection.

g) 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 etc.

h) Performance Review
In this stage, the buyer reviews supplier performance. 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.

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4. KEY CHARACTERISTICS OF ORGANISATIONAL/BUSINESS BUYING
BEHAVIOUR

Business buyers or business markets have several characteristics that contrast sharply with
consumer buyers or consumer markets.
The key characteristics are as follows;

Fewer, larger Buyers: The business market usually deals with far fewer, much larger
buyers than consumer markets.

Geographically Concentrated: Most business buyers are geographically concentrated

and easily identifiable.

Derived Demand: The demand for business products is ultimately derived from the
demand for consumer products. For example, a washing machine manufacture demand
electric motors from an engineering factory, and that is a business to business market.
The number of electric motors demanded, however depend on predictions of future
consumer demand for washing machines.

Close Supplier - Customer Relationship: The relationship of a supplier and an

organization will be very close as against a consumer market. Suppliers usually
customize their offering to suit particular buyers, leading to long term relationship.
Organisational buyers and suppliers often depend on each other.

Professional Purchasing: Business products are often purchased by trained purchasing

staff members, who must follow their organisation’s purchasing policies and
requirements.

Multiple Buying Influences: More people typically influence business buying decision
process (DMU or the buying centre).

Direct Purchasing: Business buyers often buy directly from manufactures rather than
through intermediaries, especially products that are technically complex.

Motives for Purchase: Consumer buyers purchase primarily for their own or household
consumption. In other words they are purchasing for personal motives. Industrial
buyers, on the other hand, purchase primarily in pursuit of the achievement of their
organisation’s objectives and goals.

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CHAPTER 6
SEGMENTATION, TARGETING AND POSITIONING
“Finding the most revealing way to segment a market is more an art than a
science. ….Any useful segmentation scheme will be based around the needs of
customers and should be effective in revealing new business opportunities”
(Peter Doyle)

1. WHAT IS A MARKET?
1.1 Market – Viewpoint
The term “market”, like marketing is used loosely by many people with consequently
varying meanings. Economists, historians, marketers, retailers all take the term “market” to
mean different things. The economist may define it solely in terms of supply and demand,
whilst the average consumer may view it in physical terms as a location to purchase goods.
A Marketer’s Viewpoint: A market means an aggregate of people, who as individuals or
organisations have a need for a certain product and the ability, willingness and authority to
purchase such products for consumption.
For a group of people to be a market, the members of the group must meet the following
requirements:

They must need or want a particular product.

They must have the ability to purchase the product - the necessary financial
requirements to purchase the product - purchasing power.

They must be willing to buy the product - the readiness, liking or desire to buy the
product.

They must have the authority to buy the specific product. (Children under 18 are not
permitted to purchase alcoholic beverages or cigarettes by law)

1.2 Types of Markets

Markets can be divided into two categories: consumer markets and Industrial or Business-
to-Business markets. These categories are based on the characteristics of the individuals
and groups that make up a specific market and the purpose for which the products are
purchased.

Consumer Market: All the individuals and households who buy or acquire goods and
services for personal consumption.

Industrial/Business-to-Business or Organisational Market: Individuals or groups that

purchase a specific kind of product for re-sale, use directly in producing other products
or use in general daily operations of its business.

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2. TARGET MARKETING
Organisations today recognise that they cannot appeal to all buyers in the market place 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 organisations themselves
vary widely in their abilities to serve different segments of the market. Rather than trying to
compete in an entire market, sometimes against superior competitors, each organisation
must identify the segments of the market that it can serve best and most profitably. It must
design customer-driven strategies that build the right relationships with the right
customers.
Thus, most organisations are being choosier about the customers with whom they wish to
build relationships. Most have moved away from mass marketing and toward target
marketing - 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), organisations are focusing on the buyers who have
greater interest in the values they create best (the "rifle" approach).
Organisations have not always practiced market segmentation and targeting. For most of
the past century, major consumer products organisations held fast to mass marketing -
mass-producing, mass-distributing, and mass-promoting about the same product in about
the same way to all consumers. For example, Coca-Cola at one time produced only one
drink for the entire market, hoping it would appeal to everyone. These organisations argued
that mass marketing creates the largest potential market, which leads to the lowest costs.
This, in turn, can translate into either lower prices or higher margins.
However, today marketers find it very difficult to create a single product or program that
appeals to all these diverse groups, thus many organisations are retreating from mass
marketing and turning to segmented marketing.
Figure 6.1 shows the three major steps in target marketing. The first step is market
segmentation: the organisation identifies different ways of segmenting the market and
develops profiles for each of the resulting market segments. The second step is target
marketing: evaluating each market segment’s attractiveness and selecting one or more
segments to enter. The third step is market positioning: setting the competitive positioning
for the product and creating an appropriate detailed marketing mix for each of the selected
segment(s).

Figure 6.1 Major steps in Target Marketing

Market Segmentation Market Targeting Market Positioning

Identify bases for Evaluating each segments Develop positioning for
segmenting the market attractiveness target segments
Develop segment profiles Select target segments • Develop marketing mix
for each segment

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3. MARKET SEGMENTATION
3.1 Definition of Market Segmentation

Market segmentation is defined as:

Dividing a market into smaller groups with distinct needs, characteristics, or

behaviour that might require separate marketing strategies or mixes.
(Philip Kotler – 13th Edition)

Market segmentation is a process of dividing or grouping a diverse, heterogeneous market

into a number of smaller, more similar sub markets or market segments. Rather than offer
the same marketing mix to vastly different customers, market segmentation makes it
possible for firms to tailor the marketing mix for specific market segments, thus providing
better customer satisfaction/delight.

Market segment is a subgroup of customers or prospective buyers that result from market
segmentation, who share similar needs and wants that cause them to have the same
product needs. The objective is to identify subgroups of customers or prospective buyers
with similar requirements so that they can be served more efficiently and effectively with
products and services that match their unique needs.

The assumptions underlying segmentation are;

Different needs and wants – Not all buyers have similar needs

Sub-group of people with similar needs, values can be identified

The sub-groups will be smaller and more homogeneous than the market as a whole

It is easier to satisfy a small group of similar customers than to try to satisfy large
groups of dissimilar customers.

3.2 Segmenting Consumer Markets

Consumer markets could be segmented using four main variables, which will have several
sub-variables within them. The major bases or variables are as follows: Figure 6.2

a) Demographic Segmentation: consists or dividing the market into groups based on

demographic variables such as age, gender, family size, family life cycle, income,
occupation, education, religion, race, and nationality. Demographic factors are the most
popular bases for segmenting customer groups. One reason is that consumer needs,
wants, and usage rates often vary closely with demographic variables.

b) Geographic Segmentation: calls for dividing the market into different geographical units
such as nations, states, regions, counties, cities, or neighborhoods. An organisation may
decide to operate in one or a few geographical areas or to operate in all areas but pay
attention to geographical differences in needs and wants.

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Figure 6.2 Bases/Variables for Segmenting a Consumer Market

Bases/Variables
for
Segmenting a
Consumer
Market

Demographic Geographic Psychographic Behavioural

Segmentation Segmentation Segmentation Segmentation

c) Psychographic Segmentation: buyers are divided into different groups based on social
class, life style, or personality characteristics. People in the same demographic group
can exhibit very different psychographic profiles.
d) Behavioural Segmentation: buyers are divided into groups on the basis of their
knowledge, attitudes, uses, or responses to a product. Many marketers believe that
behaviour variables – occasions, benefits, user status, usage rate, loyalty status are
the best starting points for building market segments.

3.3 Segmenting Industrial/Business-to-Business Markets

Bases or Variables used to segment Industrial or Business-to-Business Markets are different
to Consumer Markets due to the differences of behaviour. Major segmentation variables for
Industrial or Business Markets are:

a) Demographics: Industry: which type of industry should we serve?

Company Size: What size companies should we serve?
Location: What geographical areas should we serve?
b) Purchasing Organisation: should we serve centralized or decentralized organisations?
c) Situational Factors: Size of order/urgency/specific application
e) Personal Characteristics: Buyer-seller similarity/Loyalty

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3.4 Benefits of Market Segmentation
The key benefits of Market Segmentation are as follows;

Satisfying and delighting customers

Market segmentation helps the marketers to understand the specific needs of
customers better, thus able to satisfy and delight them by tailoring a distinctive
marketing mix for each segment(s) also increases the overall sales turnover of the
organisation.
• Customer Retention
In addition, by satisfying a n d delighting the customers, the organisation would be
able to retain them.
• Better opportunities for growth
Creative segmentation may result in the identification on new segments or
opportunities that have not been served adequately.

Target marketing communications

By segmenting markets, the communication media can be more effectively used
because only the media that reach the segments could be employed, thus its result
oriented and cost effective.

Expanding the market segment

Good segmentation can also increase the overall size of the market by bringing in new
customers who fit the profile of the typical customer, but were previously unaware of
the product.
• Better understanding of the competitors
The use of segmentation will help the organisation to achieve a better understanding of
its competitors and the kind of competitive advantage to seek.

Creates competitive advantage

By creating a differential advantage over the competitors, the organisation is providing
the customer many reasons to buy from them rather than from its competitors.

Effective Resource Allocation

Organisation’s scarce resources can be concentrated more effectively on target
segment(s), rather than spread thinly across the masses.
• Increases profitability
Effective resource allocation allows the organisation to increase its profits. In addition
customer retention, increased sales, customer satisfaction/delight, competitive
advantage, identifying new market opportunities and targeted marketing
communications, all these factors enhances the profitability of the organisation.

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3.5 Requirements (Criteria) for Effective Segmentation

Measurable: The degree to which the size, purchasing power and segment profiles can
be measured.

Accessible: The degree to which the chosen segment could be effectively reached and
served with an appropriate marketing mix.

Substantial: The degree to which the chosen segments are large or profitable to serve.

Differentiable: Segments should be conceptually distinguishable and respond differently

to different marketing mix elements and programs.

Actionable: The degree to which effective programs can be designed for attracting and
serving the segment(s).

4. MARKET TARGETING
Market segmentation reveals the firms market-segment opportunities. The organisation
now has to evaluate the various segments and decide how many and which ones to serve.

4.1 Evaluating Market Segments

When evaluating market segments, the organisation should examine three factors: segment
size and growth, segment structural attractiveness and the company objectives and
resources.

a) Segment size and growth: The organisation must first collect and analyze data on
current segments sales, growth rates and anticipated profitability for various segments. It
will be interested in segments that have the right size and growth characteristics.
b) Segment structural attractiveness: The organisation also needs to examine major
structural factors that affect long-run segment attractiveness. For example, a segment is
less attractive if it already contains many strong and aggressive competitors. In addition, the
availability of substitute of products may limit prices and the profits that can be earned in a
segment.
c) Company Objectives and Resources: Even if a segment has the right size and growth
and is structurally attractive, the organisation must consider its own objectives and
resources in relation to that segment. Some attractive segments could be dismissed quickly
because they do not mesh with the organisation’s long-run objectives. The organisation
must also, consider whether it possesses the required skills and resources it needs to
succeed in that segment and whether it could create a competitive advantage.

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4.2 Target Marketing Strategies

After evaluating different market segments, the organisation must now decide which and
how many segments it will target. A target market consists of a set of buyers who share
common needs or characteristics that the organisation decides to serve.

There are four target marketing strategies from which to choose such as: undifferentiated
marketing, differentiated marketing, concentrated (focused) marketing and individual
(customized) marketing. Figure 6.3

Figure 6.3 Target Marketing Strategies

Differentiated Concentrated Micromarketing

Undifferentiated
(segmented) (niche/focused) (local or individual
(mass) marketing marketing)
marketing marketing

Targeting Targeting
broadly narrowly

1. Undifferentiated Marketing
A strategy, in which an organisation decides to ignore market segment differences and
target the whole market with one offer: Figure 6.4.

Figure 6.4 Undifferentiated Marketing Strategy

Marketing Mix Whole Market

Occasionally, a market analysis will show no strong differences in customer characteristics

that have implications for marketing strategy. Under these circumstances an organisation
may decide to develop a single marketing mix for the whole market. This absence of
segmentation is called undifferentiated marketing.
Undifferentiated marketing or mass marketing strategy focuses on what is common in the
needs of consumers rather than on what is different. The organisation designs a product and
a marketing strategy that will appeal to the largest number of buyers. It relies on mass
distribution and mass advertising, and it aims to give the product a superior image in
people's minds.
As discussed earlier, most modern marketers have strong doubts about this strategy.
Difficulties arise in developing a product or brand that will satisfy all consumers. Moreover,
mass marketers often have trouble competing with more-focused firms that do a better job
of satisfying the needs of specific segments and niches.

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2. Differentiated Marketing

A strategy in which an organisation decides to target several market segments and designs
separate offers for each: Figure 6.5.

Figure 6.5 Differentiated Marketing Strategy

Marketing Mix 1 Segment 1

Marketing Mix 2 Segment 2

Marketing Mix 3 Segment 3

When market segmentation reveals, several potential segments with different needs and
wants, specific marketing mixes have to be developed to appeal to all or some of the
segments. This strategy is called differentiated marketing.

This strategy is also known as segmented marketing. By offering product and marketing
variations to segments, organisations hope for higher sales and a stronger position within
each market segment. Developing a stronger position within several segments creates more
total sales than undifferentiated marketing across all segments. For example, General
Motors tries to produce a car for every "purse, purpose, and personality." While Nike offers
athletic shoes for a dozen or more different sports, from running, fencing, golf, and aerobics
to bicycling, basketball and airlines design different marketing mixes for its first class and
economy passengers, including varying prices, service levels, quality of food, in-cabin
comfort and waiting areas in airports.

3. Concentrated Marketing

A strategy in which an organisation goes after a large share of one or few segments or
niches: Figure 6.6

With this strategy, the organisation decides to attempt to cater for one, or possibly a few
market segments. It concentrates on a limited group of customers and aims to serve them
more effectively and efficiently than competitors. When an organisation develops a single
marketing mix aimed at one target market (niche) it is practicing concentrated or focused
marketing. A niche is a more narrowly defined customer group seeking distinctive mix of
benefits.

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 Figure 6.6 Concentrated Marketing Strategy

Segment 1

Marketing Mix Segment 2

Segment 3

Through concentrated marketing, the organisation achieves a strong market position

because of its greater knowledge of consumer needs in the segments it serves and the
special reputation it acquires. It can market more effectively by fine-tuning its products,
prices and programs to the needs of carefully defined segments.
When segments are large, it would normally attract several competitors, whereas niches
are smaller and may attract only one or few competitors. Niching lets smaller organisations
focus their limited resources on serving niches that may be unimportant to or overlooked
by larger competitors. Concentrated marketing can be highly profitable and at the same
time, it involves higher than-normal risks. (Examples: Porsche, Rolls Royce, Rolex)

4. Individual or Customized Marketing

Individual or customized marketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations. Figure 6.7

In some markets the requirements of individual customers are unique and their purchasing
power is sufficient for an organisation to develop separate marketing mix for each customer
viable. Segmentation at this disaggregated level leads to the use of Individual or customized
marketing.

Figure 6.7 Individual Marketing Strategy

Marketing Mix 1 Customer 1

Marketing Mix 2 Customer 2

Marketing Mix 3 Customer 3

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Individual marketing has also been labeled customized marketing, one-to-one or local
marketing. For example, Citibank provides different mixes of banking services in its
branches, depending on neighborhood demographics, Wall-Mart customizes its
merchandise store to meet the needs of local shoppers and Dell Computer delivers
computers to individual customers loaded with customer specified hardware and software
and automobile companies such as Audi, BMW, Mercedes and Renault have the capacity to
build to order where cars are manufactured only when there is an order specification from
a customer. For example, promotional campaign for the BMW mini claims that there is only
a 1 in 10,000 chance that any two Minis are the same. Even trainers can be customized with
Nike offering this service.

5. POSITIONING

Positioning is the final stage in the overall process of target marketing. Once the
organisation has established its product positioning strategy, it is then in a position to plan
its marketing mix strategies.

Positioning is arranging for a market offering to occupy a clear, distinctive and

desirable place relative to competing products in the minds of the target
consumers. (Philip Kotler – 13th Edition)

A product’s position is the way the product is defined by consumers on important

attributes: the place the product occupies in consumers’ minds relative to competing
products. “Products are created in the factory, but brands are created in the mind” says a
positioning expert.

Positioning is not that something an organisation does with its products; it’s what you do
with the customer’s mind. For example, a credit card from American Express might sound
prestigious than a credit card from a local bank even though both products are similar. In
the automobile market Mercedes and Cadillac are positioned on luxury, BMW on
performance, and Volvo on safety, while Toyota positions its fuel efficient, hybrid Prius as a
high-tech solution to the energy shortage. (How far will you go to save the planet?)

5.1 Product Positioning using Perceptual Maps

In order to determine the product’s position, research has to be carried out with a target
group of consumers, and a perceptual map as shown in Figure 6.8 will be produced.

Organisations can find the most desirable image of the customer by analyzing the perpetual
mapping process. This process frames the mind of the customer and analyses where the
competitors have already based their slots. Following is an example of a perpetual map
being used to strategise the market positioning of a product.

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From the Figure 6.8 it can be seen that Brand B has the image of being both high price and
high quality: this is probably the Rolls-Royce of the products (top-of-the-range factor).
Brand D is perceived as being low price, but low quality: this would be a cheap, everyday
brand. Brand A has a problem: although tending towards a high price, this product is
perceived as being below-average quality. Sales are likely to be low, or will take place only
when the consumer has no other choice available. Brand C, on the other hand, enjoys a low
price and good quality, so is probably the top-selling brand (value-for-money factor).

Figure 6.8 Perceptual Mapping

High Price
Brand
B
Brand
A

Low Quality High Quality

Brand
E Brand
C

Brand
D

Low Price

It should be noted that these positions are based on perceptions of consumers in the target
groups. They are not objective, nor are they based on the firm's view of the quality of its
products. For this reason, they can sometimes be changed by promotional efforts.
One of the most useful tactical aspects of positioning maps is that they can be used to
identify gaps in the market. Using Figure 6.8 as an example, there is clearly a gap next to
Brand A and below Brand B for a medium-to-high quality product at a medium-to-high
price. Currently this market seems to be dominated by lower-priced brands; a brand
entering this market would need to be perceived as higher quality than Brand C, but at a
lower price than Brand B.
Thus, perceptual maps are useful in order to identify how consumer’s perceive competing
products or brands and take necessary actions to try to change the product offerings and
the image it projects to consumers or in order to identify gaps in the market.

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5.2 Positioning Variables
A company has a wide range of positioning tools that they can use to gain a slot in the
customer's mind. Some of the variables are;

Benefit positioning: Closely connected to the features and attributes of the product.
This will enable the customer to associate a product, which is in line with customer's
expectations and benefits sought. The benefit can be either emotional or functional.
Emotional values are difficult to copy than functional benefits.
o Ceylinco Insurance - “On the spot claims payment”
o Mortein coil - a good night sleep for 12 hours
o Signal – strong teeth and prevention of decay
o Volvo - safety

Product category leader: this is where the company clearly addresses the specific
requirement of the category and then builds a positioning around it.
o Prima Noodles is the leader in the instant noodles market
o Panadol is the leader in the pain reliever market
o Vim is the leader in the scouring powder market

Against the competitor: Positioning against competition should be handled with care
due to legal implications.
o Paracetol and Panadol
o Coke and Pepsi
o Samsung and Apple (smartphones)
o Dialog and Mobitel
o Avis rental cars – we are number 2, we try harder

Unique Selling Proposition - If the product has a unique feature or characteristics that
are unique only to that brand then why not tell the customers about it.
o LG Door Cooling Refrigerators - This technology is a patent for LG.
o Apple Macintosh – for graphic users

Quality/price positioning: In the customer's mind, the price and quality have a positive
perceptual correlation.
o IBM
o 3M
o Rolex
o Apple iPod

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