GAROWE CAMPUS

FACULTY OF MANAGEMENT SCIENCE

DEPARTMENT OF BUSINESS ADMINISTRATION

COURSE NAME: PRINCIPLES OF MARKETING

COURSE CODE: MKT 3010

CLASS: BBA 2022

LECTURE NOTE

MOHAMED HASSAN

CLASS: BBA 2022 @ PSU GAROWE; MAIN CAMPUS

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Course Purpose
This course seeks to equip students with the knowledge to appreciate the role of marketing function
in an organization.
Course Objectives
At the end of the course the students should be able to:
1. Understand how marketing contributes to the overall business strategy for an organization
2. Marketing Information System And Marketing Research
3. Develop effective communication in the business environment.
4. Understand the implications of marketing management to an organization.

Course Description
1. Overview of marketing;
2. Marketing Philosophies:
3. Marketing Environment;
4. Marketing Research,
5. Marketing information system,
6. Consumer Behaviour;
7. Market Segmentation, Targeting and Positioning;
8. Product Classification and Services Marketing

Teaching Methodology
1. Lectures,
2. Case Analyses,
3. Group discussions,
4. Guest speakers

Instructional Materials:
These will include: Tablet, Smart board, LCD projector & Computers, Flipcharts, televisions, videos

Course Evaluation
CATs/Assignment/Presentation 50 %
Final Examination 50 %
Total 100%
Course Text books
Kotler, P. and Armstrong, G. (2008). Marketing Management, Prentice-Hall, New Delhi.
Kibera, F.N. and Waruingi, B.C. (1998). Foundations of Marketing: An African Perspective, Kenya
Literature Bureau, Nairobi.
Reference Text books
Raju, M.S. and Xardel, D. (2006). Marketing Management: International Perspective Mc-Graw-Hill,
India.
Saxena, R. (2008). Marketing Management, Mc-Graw-Hill, India, 3rd Ed.
Course Journals
Journal of International Business Studies
Journal of Marketing
Journal of Management

Reference Journals
Journal of Consumer Behaviour
Harvard Business Review Journal
Journal of Marketing Research

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 LECTURE ONE

INTRODUCTION AND OVERVIEW OF MARKETING

1.1 INTRODUCTION
There are several good reasons for studying marketing. First of all, marketing issues are important in
all areas of the organization—customers are the reasons why businesses exist! In fact, marketing
efforts (including such services as promotion and distribution) often account for more than half of
the price of a product. As an added benefit, studying marketing often helps us (consumers) become
savvier, knowledgeable, and aware of our rights, dictating to buy high quality goods and services at
low (affordable) prices.

What image comes to mind when you hear the word “marketing”? Some people think of
advertisements or brochures, while others think of public relations (for instance, arranging for clients
to appear on TV talk shows). The truth is, all of these—and many more things—make up the field
of marketing. The Knowledge Exchange Business Encyclopedia defines marketing as “planning and
executing the strategy involved in moving a good or service from producer to consumer.”

With this definition in mind, it’s apparent that marketing and many other business activities are
related in some ways. In simplified terms, marketers and others help move goods and services
through the creation and production process; at that point, marketers help move the goods and
services to consumers. But the connection goes even further: Marketing can have a significant impact
on all areas of the business and vice versa.

Understanding Marketing:
Marketing: It is the process of creating consumer value in the form of goods, services, or ideas
that can improve the consumer’s life.
Marketing is the organizational function charged with defining customer targets and the best way
to satisfy needs and wants competitively and profitably. Since consumers and business buyers face an
abundance of suppliers seeking to satisfy their everyday need, companies and nonprofit
organizations cannot survive today by simply doing a good job. They must do an excellent job if they
are to remain in the increasingly competitive global marketplace. This is what we say that survival of
the fittest. Many studies have demonstrated that the key to profitable performance is to know and
satisfy target customers with competitively superior offers. This process takes place today in an
increasingly global, technical, and competitive environment.

1.3. CRITERIA THAT MUST BE MET FOR MARKETING TO OCCUR.

Several criteria must be met for marketing to occur:

 There must be two parties, each with unsatisfied needs or wants. This want, of course, could
be money for the seller.
 Each must have something to offer. Marketing involves voluntary “exchange” relationships
where both sides must be willing parties.

1.4. WHAT IS MARKETING?

Marketing is defined in different ways by Authors and Scholars. Almost every marketing textbook has
a different definition of the term “marketing.”

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Marketing is not only restricted to selling and advertising as is perceived but is More than it
advertising it identifies and satisfies customers needs. it functions revolve around wide variety
and range of tasks and activities mostly termed as functions related to 4ps i.e. Product, price, place
and promotion. Marketing is:
Creating customer value and
satisfaction are at the very
heart of modern marketing
thinking and practice.
b. A very simple definition of
marketing is that it is the delivery of customer satisfaction at a profit.
c. Sound marketing is critical to the success of every organization.

Marketing can also be defined as process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual
and organizational objectives.”

1.4.1. American Marketing Association (AMA 1964)

They defined marketing as performance of business activities that directs the flow of goods and
services from producers to consumers or users through the exchange process.

From this definition, we see that:

 This process involves both planning and implementing (executing) the plan.
 Some of the main issues involved include:
o Marketers help design products, finding out what customers want and what can
practically be made available given technology and price constraints.
o Marketers distribute (available/Accessible/convenient/reliable/efficient) products—
there must be some efficient way to get the products from the factory to the end-
consumer.
o Marketers also promote (effective) products, and this is perhaps what we tend to think
of first when we think of marketing. Promotion involves advertising—and much
more. Other tools to promote products include trade promotion obtaining favorable
and visible shelf-space, and obtaining favorable press coverage.

Marketing is applicable to services and ideas as well as to tangible products. For example, accountants
may need to market their tax preparation services to consumers.

1.4.2. Stanton William in 1984

Defined marketing as the creation and delivery of the standard of living.
Marketing also involves:
 Finding out what the consumer wants.
 Planning and developing a product and services that can satisfy those wants.
 Determining the best way to price, promote and distribute goods and services
satisfying needs and wants to both current and potential customer.
Stanton considered marketing as a system of business activities like: production, pricing,
promotion and distribution and they work together to achieve a certain goal.

1.4.3. Kotler Philip (2000)

Marketing is social and a management process by which individuals and groups obtains their need
and want through creating and exchanging products and services of values with others.
 There are managerial functions involved and human beings deals in marketing.
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1.4.4. Research Studies in U.S.A 1986
(i) That marketing is bridge bring between the producers and consumers.
(ii) That marketing forms an important link between the people’s needs and the means of
satisfying those needs.
(iii) That marketing is an activity that satisfies human needs through an exchange process.
(iv) That marketing is a civilized form of “warfare” in which battles are fought with words,
ideas and civilized thinking.
(v) Research studies regarding definition of marketing were conducted among laymen,
academicians and businessmen and findings were;

1.5. Implications
1) Marketing is a managerial process (a specialized field in management) i.e. planning,
organizing, controlling, directing, implementing.
2) The entire system of activity must be ‘Target market or customer driven’. This means that
the needs and wants must be identified from customer’s point of view and satisfied effectively.
3) Marketing is a dynamic process. It is not a static event. The process responds to changes in
the environment which is dynamic. The consumer’s needs keeps on changing therefore
marketing is dynamic.
4) The marketing mix programs (4P’s) starts with the product, service and an idea which
comes from the customers and does end until the targeted customers are satisfied which may
be after the sales are made. The customers are followed up to know how the product is doing
or insist on after sales services guarantees and warranty.
5) Customers must be satisfied in order for the company to make a repeat business. The
success of the company is the profitability (the bottom line) through customer satisfaction.
6) Marketing is not limited to business organization alone. Even non-business organizations
practice marketing e.g.
 Educational istitutions
 Non-governmental organization NGO’s- social marketing non-smoking campaign.
 Politicians- they campaign to get the votes.

Simple Marketing System

The concept of Marketing System brings one full circle to the concept of marketing.
Simple marketing system comprises of different actors and factors like producer/seller,
product/service something valuable to exchange in return of product/service (money),
consumer/customer, communication process to have two way communication like to provide
information about product or service to customer or consumer and to have
feedback in same regard from the customer. Marketing system has following basic activities:
1) Sellers must search for buyers, identify their needs, design good products and services, set
prices for them, promote them, and store and deliver them.
2) A modern marketing system includes all of the elements necessary to bring buyers and
sellers together. This might include such activities as product development, research,
communication, distribution, pricing, and service..
3) Each of the major actors in a marketing system adds value for the next level of the system.
There is often critical interdependency among network members.
To learn more about marketing fist we should learn about some basics that are sometime termed
as 4ps(Product, price, place, promotion) and sometimes even 6 or 7ps (Product, price, place
promotion, position, personal relations, people and profit) lets have some definitions in this regard:

Product—what are you selling? (It might be a product or a service.)

• Price—what is your pricing strategy?
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• Place or distribution—how are you distributing your product to get it into the
marketplace?
• Promotion—how are you telling consumers in your target group about your product?
• Positioning—what place do you want your product to hold in the consumer’s mind?
• Personal relationships—how are you building relationships with your target consumers?
• People: public who can have impact on organization or can be affected by organization.
• Profits: the basic objective of organization that to have something valuable in return of product
or service mostly it is in form of money.
Marketing assumes that it will proceed in accordance with ethical actives. It Identifies the 4
Marketing variables i.e. product, price, promotion, and distribution it also states that the public, the
customer, and the client determine the marketing program. Marketing mainly emphasizes on creating
and maintaining relationships and applies for both non-profit organizations and profit- oriented
businesses. Major activities that are performed in marketing process include:
Personal selling Advertising, Making products available in stores and maintaining inventories.
Anything like goods, services, experiences, events, persons, places, organizations, information and
ideas can be marketed to the customers in return of something of value.

How Does an Organization Create a Customer?

Organizations (producer/ seller) can create the customers by Identifying customer needs,
designing goods and services that meet those needs than communicating information about those
goods and services to prospective buyers Making the goods or services available at times and
places that meet customers’ needs Pricing goods and services to reflect costs, competition, and
customers’ ability to buy and finally providing for the necessary service and follow-up to ensure
customer satisfaction after the purchase.

Reasons for Studying Marketing: Marketing is part of all of our lives and touches us in
some way every day. To be successful each company that deals with customers on a daily
basis must not only be customer-driven, but customer-obsessed. The best way to achieve this
objective is to develop a sound marketing function within the organization. Major reason to study
marketing is:
• Marketing plays an important role in society
• It is Vital to business
• Marketing offers outstanding career opportunities
• Marketing effects your life every day

What do Marketers think about?

To have clearer concept in this regard lets consider an example of Opening a Book Shop on
campus. To do so we have to answer different questions like:

1. Is there a need? (Of having book shop)

2. What is my target market? (Who will be buying products from your book shop)
3. What is my product?(Basic items to be sold)
4. How can I produce and deliver a “product” better than my competitors?
5. How shall I promote my product?
6. How can I insure customer loyalty?
Mostly before starting any activity of above-mentioned type marketer performs an analysis termed
as SWOT (Strength, Weakness, Opportunity and Threat). Marketing is a process of getting the
right products to the right people at the right price and at the right place and time with the right
promotion. But this requires solution to certain simple question: like

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Simple Questions, Hard Answers
1. Who are our customers? (Target Market)
2. What important & unique benefits do we provide? (Product/service)
3. Are these benefits sustainable? (Long-term competitive advantage)
These questions are apparently very simple but are very difficult to be answered theses questions
like it is really difficult to define basic characteristics to be produced in product and services as per
demands and requirements pf the customers; and then to precisely define your target market and
to have long-term competitive advantage through customer satisfaction.

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 Principles of Marketing, Lecture Notes

The core concepts of Marketing

From the foregoing definitions, it is evident that the definition of marketing rests on the following
core concepts.
i) Needs, wants and demands.
ii) Products (goods + services)
iii) Utility, values and satisfaction.
iv) Exchange, transactions and relationships.
v) Markets.
vi) Marketing and marketers.

Needs wants
and demands

Products

Utility, value and

satisfaction

Exchange,
transactions and
relationships

Markets

Marketing and Marketers.

Needs, Wants and demands.

The study of marketing begins with the understanding of human needs and wants.

Needs.
A human need is a state felt deficiencies of some basic satisfaction. People acquire food, shelter,
clothing, safety, belonging, e.t.c. for survival.
 These needs are not created by the society for marketers.
 They exist in their very texture of human biology and conditions.

Wants.
Are desires for specific satisfiers of these deeper needs?

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 Principles of Marketing, Lecture Notes
 While people’s needs are fewer, their wants are many.

Demands.
Are wants for specific products that are backed up by an ability and willingness to buy them.
 Wants become demands when backed up by the purchasing power.
 Marketers influence demands.
 They try to influence demand by making the product attractive, affordable and easily available.

Product
1. People satisfy their needs and wants with products.
A product is anything that can be offered to someone to satisfy a need or want. Products may
take different forms, e.g.
 Physical products
 Persons – as service providers
 Places – vacation land
 Activities – Physical exercise.
 Organizations
 Ideas – E.g. family planning or safe driving
When we buy a physical product or any of the above, we are buying a service. Therefore, a
product is necessarily a service.

Utility, Value and Satisfaction

Utility.
Utility answers the question – “How do consumers choose among alternative products (Product
choice set) in order to satisfy his needs and wants?” Utility is the overall estimate of a product’s
capacity a consumer’s needs or wants. This is the basis on which consumers choose particular
products from product choice sets.

Value.
Value is equated with price. A product is said to be of better value if it is more for the price.
Marketers should provide value to customers.

Satisfaction.

Occurs when a product conforms to a consumer’s needs.

Exchange, Transactions and Relationships.

Exchange.
Marketing emerges when people decide to satisfy their needs and wants through exchange. Exchange
is one of the four ways that people can acquire products they need. Other ways include:
 Self production
 Inheritance
 Coarse
 Begging
 Stealing.

Meaning

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 Principles of Marketing, Lecture Notes
1. Exchange is the act of obtaining a desired product from someone by offering something in
return.
2. Exchange is the defining concept underlying the discipline of marketing.
3. For exchange to take place, five conditions must be satisfactory.
 There has to be at last two parties to the exchange
 Each party has something that might be of value to the other party
 Each party is capable of communication and delivery
 Each party is free to accept or reject the offer.
 Each party believes it is appropriate or desirable to deal with the other party.
4. If these conditions exist, there is a potential for exchange.
5. Whether exchange actually takes place, depends upon whether the two parties can agree on
the terms of exchange that will leave them both better off than before the exchange.
6. Exchange must be seen as a continuous process rather than an event.
7. Two parties are seen to be engaging in exchange if they are negotiating and moving towards
an agreement

Transaction.
If an agreement is reached, we say that a transaction has taken place.
A transaction consists of a trade of values between two parties.
It involves several dimensions:-
 At least two things of value
 Agreed upon conditions
 A time of agreement
 A place of agreement
 Usually a legal system arises to support or enforce compliance on the part of the transactions.

Markets.
The concept of exchange leads to the concept of markets.
A market consists of all the potential customers sharing a particular need or want who might
be willing and be able to engage in exchange to satisfy that need or want.

 The size of the market therefore depends on the number of persons who exhibit the need;
have resources that interest others and are willing to offer these resources in exchange for what
they want.
 Sellers constitute the industry and
 Buyers constitute the market.

Marketing and Marketers.

Marketing consists of human activities taking place in relation to markets.
Marketing means working with marketers to actualize potential exchanges for the purpose of
satisfying human needs.

A marketer is someone seeking a resource from someone else and is willing to offer something of
value for exchange. The marketer can therefore be the buyer or the seller.

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 Principles of Marketing, Lecture Notes
MARKETING MANAGEMENT.

Marketing management takes place when at least one party to a potential for exchange gives thought
to objectives and means of achieving desired responses from other parties.
A.M.A. (1985) defines marketing management as:
“The process of planning and executing the product, pricing promotion and distribution of
ideas, goods and services to create exchanges that satisfy individual and organizational
objectives”
 The definition recognizes that marketing management in a process involving analysis,
planning, implementation and control.
 It covers ideas, goods and services.
 It rests on the notion of exchange,
 The goal is to produce satisfaction for the parties involved.

Task of marketing managers.

Marketing managers cope with the tasks of carrying out
 Marketing research
 Planning
 Implementation and
 Control.
Within marketing planning, marketers must make decisions on:
 Target market,
 Market position
 Product development
 Pricing
 Promotion
 Channels of Distribution/Place
Marketing management has the task of influencing the:
 Level,
 Timing and
 Composition of demand
in a way that will help the organization achieve its objectives. Marketing management is essentially
demand management.

Demand states and marketing task

1. Negative demand – This arises when a major part of the market dislikes the product and
may pay a price to avoid it.
Task of a marketer:-
 Analyze why demand is negative and whether the product can be modified or more
positive promotion done to change a market’s attitude.

2. No demand
Target customers may be uninterested or indifferent to the product. E.g. College students may
not be interested in a foreign language.

Task - Find ways to connect the benefits of the products with the person’s natural needs and
interests.

3.Latent demand.
Many consumers may share a strong need that cannot be satisfied by any existing product.
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 Principles of Marketing, Lecture Notes
Task - Conduct a survey to identify the unmet needs
4.Falling demand.
Every organization, sooner or later faces failing demand for one or more of its products. E.g.
 Decline in private college enrolment.
Task
 Analyze causes of falling demand
 Determine whether demand can be re-stimulated by finding new target markets
 Changing products features.
 Reversing the declining demand through creative remarketing of the product.
5.Irregular demand
Many organizations face demand that varies on a seasonal, daily or even hourly basis,
causing problems of idle capacity or over-worked capacity.
Task - This calls for synchro-marketing. i.e. find ways to alter the same pattern of demand
through promotion, flexible pricing and other incentives.
6.Full demand
Organizations face full demand when they are pleased with their volume of business.
Task - Maintain the current level of demand in the face of changing customer preferences and
increasing competition; improve or maintain quality, continuously measure customer
satisfaction to make sure it’s doing a good job.
7. Overfull demand
Some organizations face a demand level that is higher than they can or want to handle.
Task – De-marketing – Finding ways to reduce the demand temporarily or permanently e.g.
raising prices or reducing promotion.
8. Unwholesome demand
Unwholesome products will attract organized efforts to discourage their consumption.
Un-selling campaigns have been conducted against cigarettes, alcohol, hard drugs, hand guns.
Task - Get people who like something to give it up.
You can use fear communication, price hikes and reduced availability.

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 Principles of Marketing, Lecture Notes

MARKETING MANAGEMENT PHILOSOPHIES

INTRODUCTION

Marketers need guidance regarding their conduct in the market place. This is because conflicts are
bound to arise between the needs of the society. Customers and the company. This guidance are
known as the marketing principles, rules, concepts or philosophies.
There are five competing concepts that may govern the operations of companies, namely;
1. The production concept
2. The product concept
3. The selling concept
4. The marketing concept and
5. The societal marketing concept.

THE PRODUCTION CONCEPT

This concept holds that “consumers will favor those products that are widely available and low in
cost.” Management focuses on high production efficiency and wider distribution coverage.

This concept makes sense under the following circumstances;

1. When the product is a basic necessity
2. The customers are low income earners
3. When the production costs are high and have to be brought down through high production
efficiency
4. When demand for the product exceeds the supply and some other means have to be used to
allocate the products to the customers.

Examples of companies guided by this concept include,

1. City Council primary schools
2. City Council health services.

This concept ensures product availability to the consumers. However, product quality is
compromised.

THE PRODUCT CONCEPT

The product concept holds that “consumers favor those products that offer the most
Quality, performance and features. Marketers assume that consumers will buy those Products of high
quality and shun those products of inferior quality.”
Management focuses on producing high quality products and improves on them over time.

This concept may apply under the following conditions;

1. When the market is not price sensitive
2. In the case of visible goods
3. Where the customers are well-off financially.

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 Principles of Marketing, Lecture Notes
Examples of firms practicing this concept are;
1. Those selling jewelries,
2. Private schools and
3. Private hospitals

THE SELLING CONCEPT

This concept holds that consumers, if left alone, will ordinarily not buy a lot of a company’s products.
The organization must therefore undertake aggressive selling and promotion effort. That is, a
company must focus on hard selling. Under hard selling, consumers are not willing to buy such
products easily.

Examples of products sold under this concept are;

1. Life insurance policies
2. Political campaigns
3. Fund raisings
4. New products

The concept may work under the following circumstances;

1. Where the company is operating under excess capacity and wishes to fully utilize its resources
with no regard to the product’s demand
2. Where the product is new in the market
3. Where the firm has adequate machinery for effective promotion
4. where the products are obsolete or are slow moving

The selling concept has some limitations. Namely:

1. Consumers may be forced to buy products that they do not have real need for
2. It is an expensive concept as it requires a lot of resources, both human and financial.

THE MARKETING CONCEPT

The marketing concept holds that “the key to achieving organizational goals lies in determining
the needs and wants of the target market and delivering the desired satisfaction more effectively
and efficiently than competitors. This concept has been expressed in many colorful ways;
 Find needs and meet them
 The customer is always right
 The customer is the king
 At Your service.
 Your problem is our business
 Have it Your way
 You are the Boss, e.t.c.

The concept rests on five main pillars;

MARKET FOCUS
The company must define the boundaries of its market. It should know those customers that are
members of their market. This can be done through a process known as segmentation.
CUSTOMER FOCUS
The company should determine the needs and wants of the customers from the customers’ point of
view but not the company’s. Customers’ needs must be identified and satisfied as this result into
customer loyalty which is a source of Co goodwill.

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 Principles of Marketing, Lecture Notes
Circumstances under which the marketing concept may be practiced by companies.

Most companies do not embrace the marketing concept until driven to it by circumstances
Various events forcing companies to adopt the marketing concept includes:-

 Sales decline: - when sales fall, companies panic and look for ways of increasing sales.
 Slow growth in sales forces some companies to search for new markets. They realize they
need marketing skills to identify new opportunities.
 Changing buying patterns –
Most companies operate in markets characterized by rapidly customer ways such companies
need more marketing know-how if they are to track buyers’ changing values.
 Increasing competition.
Complacent companies may suddenly be attacked by powerful competitors
 Increased market expenditures.

SOCIETAL MARKETING CONCEPT

Some people have questioned whether the marketing concept is an appropriate philosophy in the age
of:
 Environmental deterioration
 Resource shortages
 Exposure population growth.
 World hunger and poverty
 Neglected social services.

I.e. are companies that do the excellent job of satisfying customer needs necessarily getting in the best
long-run interest of consumers and society?
The marketing concept sidesteps the potential conflicts among consumers.
 Wants
 Interests and
 Long-run societal welfare

The societal marketing concept holds that

“Organization’s task is to determine the needs wants and interests of the target markets and to deliver
the desired satisfactions, more effectively and efficiently than competitors in a way that preserves or
enhances the consumers’ and the society’s well being.”
The societal marketing concept calls upon marketers to build
 Social and
 Ethical considerations into their marketing practices
They must balance the conflict criteria of
 Company profits
 Consumer needs and
 Public interests

DIFFERENCES BETWEEN THE SELLING AN MARKETING CONCEPTS

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 Principles of Marketing, Lecture Notes
SELLING CONCEPT MARKETING CONCEPT

Starting Point Factory Market

Focus Products Customer needs

Means Selling and promotion Coordinated Marketing

Ends Profits through sales Profits through

Volumes Customer satisfaction

Time horizon Short term Long term

(Oriental)

1. The selling concept takes an inside out prospective. It starts with the factory, focuses on the
companies’ existing products and calls for heavy selling and promotion to provide profitable
sales
2. The marketing concept takes an outside – in perspective. It starts with a well defined.

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 Principles of Marketing, Lecture Notes

LECTURE TWO

ANLYZING/MONITORING/SCANNING THE MARKETING ENVIRONMENT

Learning Objectives
By the end of this session, students should be able to:
1. Understand the difference between internal and external analyses;
2. Understand the concept of SWOT analysis;
3. Understand the types of competitive situations and how businesses compete;
4. Know basic business laws and how they affect marketing practices;
5. Explain how socio-cultural trends can impact upon businesses;
6. Understand how economic trends and trade policies can affect businesses and
their customers;
7. Appreciate the impact of technology, especially the internet, on marketing
practices;
8. Assess a given company’s strengths and weaknesses;
9. Identify the key opportunities and threats facing a given business.

“It is useless to tell a river to stop running; the best thing is to learn how to sail in the direction it is
taking”.

Introduction
 Excellent companies take an outside-in approach to their business operations.
 These companies monitor the changing environments and continuously adopt their business to
their best opportunities.
 Company managers are faced with the responsibility of identifying major changes in the
environment.
 In this chapter, the major forces in the company’s marketing environment are discussed.

Meaning Of the Marketing Environment

 A company’s marketing environment consists of actors that affect its ability to develop and
maintain successful transactions and relationships with its target customers.
 They are factors and forces that affect a company’s ability to operate effectively in providing
products and services to its customers.

Note: The process of analyzing the environment is also known as environmental scanning.

Why Scan the Environment?

(SWOT Analysis)

A business has assets, resources, competencies, skills, know-how etc. that make up its (internal)
strengths. Weaknesses include liabilities, incompetence’s, failures, faults etc. The identification and
analysis/scanning of these 4 elements is through a popular method called a SWOT Analysis.

Environmental scanning is important to a company for a number of reasons

 To identify threats spinning from the environment. A threat could be:

A new competitor in a firm’s market.
Price wars with competitors
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 Principles of Marketing, Lecture Notes
A competitor has a new, innovative product or service.
Taxation introduced or increased on a firm’s product or service.

 Identify opportunities spinning from the environment and exploiting it to the firm’s advantage.
Opportunities could be:
A developing market such as the internet.
Mergers, joint ventures or strategic alliances.
A new international market
A market vacated by an ineffective competitor.

 To identify the firm’s weaknesses. These are the lack of or inaccuracy of the firm’s resources that
should be converted into strengths. A weakness could be:
Lack of marketing expertise
Poor quality goods and services
Undifferentiated products and services

 To identify the firm’s strengths. These are capabilities (bundles of assets and skills) that can be used
to exploit opportunities, combat threats and overcome weaknesses. A strength could be:
Your specialist marketing expertise
Quality products
New innovative products or services.

 To develop strategies that can enable a company to cope with the ever changing environment.
 Try to convert the weaknesses into strengths and threats to opportunities or try to minimize the
threats and hence adopt marketing objectives and strategies

Components of the Marketing Environment

The marketing environment can be divided into two components namely:

1. The micro-environment
2. The macro-environment

The Micro-Environment
This can be subdivided into two;
a) The internal environment
b) The external environment

The internal environment

This consists of those forces within the company, i.e. a firm’s capabilities or bundle of assets and
skills possessed by the company. They include:
 Marketing programmes
 Financial resources
 Research and development
 Purchasing
 Manufacturing, e.t.c.

These reveal a firm’s strengths and weaknesses.

The external environment

These consist of the actors and forces in a company’s immediate environment that affects its ability to
serve its markets. Such forces include the company’s
 Suppliers
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 Marketing intermediaries
 Customers
 Competition and
 The publics

These comprise the core marketing system of the company in its efforts to meet its primary goal of
profitability and customer satisfaction.

THE MACRO-ENVIRONMENT (PESTEL)

 This consists of the larger societal forces that affect all the actors in the company’s micro-
environment.
 They include:-
The demographic environment (Gender, Educational, Age, M. Status,
Economic environment
The physical environment
Technological environment
Political/ legal environment
The socio-cultural forces/ environment

 These forces represent the uncontrollable marketing variables that the company must monitor
and respond to
 The Macro and the external Micro-Environment both pose threats and spin opportunities from
the environment

EXTERNAL MICRO-ENVIRONMENTAL FACTORS

1. THE SUPPLIERS
These are business firms and individuals who provide resources needed by the company to
produce goods and services.
Companies must
 Develop specifications
 Search for suppliers
 Qualify them and
 Choose those who offer the best mix of
- quality
- delivery reliability
- credits
- warranties and
- low costs
Development in the suppliers’ environment can have substantial impact on the company’s
marketing operations.
Marketing managers need to watch
i) the price trends of their key inputs
ii) supply availability i.e. continuity

Marketing managers should avoid over relying on one source of suppliers.

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2. MARKETING INTERMEDIARIES
These are firms that aid the company in promoting, selling and distributing its goods and services
to the final buyers. They include:
- Middlemen
- Physical distribution firms
- Marketing service agencies
- Financial intermediaries.

a) Middlemen
They are business firms that help the company to provide customers or *** sales with them
for example
i) Merchant middlemen - wholesalers and retailers,
ii) Agent middlemen - brokers, sales representatives

b) Physical distribution firms

These firms assist the company in stocking and moving goods from their original locations to
their destinations. For example
- Warehousing firms
- Transportation firms
Every company looks for the most effective models of transportation balancing such
considerations as
- cost
- delivery
- speed and
- safety

c) Marketing service agencies

Examples here include:-
- Marketing research firms
- Advertising agencies
- Media firms
- Marketing consulting firms
They assist the company in targeting and promoting its products to the right market.

d) Financial intermediaries.
These include
- Banks
- Credit companies
- Insurance companies etc
These intermediaries provide financial assistance and or insure risk associated with buying and
selling of products to companies or marketing organizations

3. CUSTOMERS
These are the people that the company sells their goods to, also known as the target markets. Five
types of customer markets exist, namely: -
- Consumer markets – individuals and households that buy goods and services for personal
consumption
- Industrial markets – organizations that buy goods and services needed for producing other
products and services for the purpose of making profits and/ or achieving other objectives

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- Reseller markets – organizations that buy goods and services for the purpose of reselling them
at a profit.
- Government and non profit markets – they buy goods and services in order to produce public
services or to transfer these goods and services to others who need them.
- International markets – buyers found abroad including foreign customers, producers, resellers
and governments.
Examples include:
- Banks
- Personal customer markets
- Trust department markets
- Business customers
- Profit customers – high earner members e.g. estate agents and stock brokers
- Importers and exporters.
NB
Each customer group exhibits specific characteristics that warrant careful study by the seller.

4. COMPETITORS
A company rarely stands alone in its efforts to serve a given customer market. It is surrounded
and affected by a lot of competitors. These competitors have to be identified, monitored and
outmaneuvered to capture and maintain customer loyalty.

5. PUBLICS
A public is a group of people that has actual or potential interest in or impact on a company’s
ability to achieve its objectives.
A public can facilitate or impede a company’s ability to achieve its goals.
The wise company takes concrete steps to manage successful relations with its key publics.
Every company faces several important publics
- Financial publics - Financial institutions affect the company’s ability to obtain funds.
Examples of financial institutions include banks, investment houses, stock brokerage firms
and insurance companies.
- Media publics – companies must activate the good will of media organizations, specifically
newspapers, magazines, radio and television stations in order to set more and better media
coverage in the form of favorable news features and editorial comments.
- Government publics – companies need to take government developments into account in
formulating marketing plans.
- Citizen action publics / lobby groups / pressure groups – a company’s marketing practices
may be questioned by consumer organizations, environmental groups, minority groups etc
- Local publics – every company faces local publics for example neighborhood residents and
community organizations. Companies must deal with community issues, attend meetings
answer questions and make contributions to worthwhile courses.
- General publics – a company needs to be concerned with the general public’s attitude towards
its products and practices. The public’s image of the company affects its patronage.
- Internal publics – a company’s internal publics include blue collar workers, white collar
workers, managers, etc

Companies should spend time monitoring all its publics, understanding their needs and opinions
and dealing with them constructively.

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THE MACRO-ENVIRONMENT

Demographic Factors

1. Population Size
2. Geographical distribution
3. Population density
4. Mobility trends
5. Age distribution
6. Birth rates
7. Death rates
8. Life expectancy
9. Household/ family size, makeup
10. Income/ wealth distribution
11. Socio –economic groups: occupation, ethnic groups

Political Factors

The political arena has a huge influence upon the regulation of businesses, and the spending power of
consumers and other businesses. You must consider issues such as:

1. How stable is the political environment?

2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
a. What is the government's policy on the economy?
4. Does the government have a view on culture and religion?
5. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Legal Factors

1. Legislations
2. The legal system
3. Fiscal and monetary policies
4. Employment legislation
5. Consumer protection laws
6. Pressure groups
7. Foreign trade regulations
8. Environment protection regulation

Economic Factors

Marketers need to consider the state of a trading economy in the short and long-terms. This is
especially true when planning for international marketing. You need to look at:

1. Interest rates
2. Business cycles
3. Money supply
4. Investment levels
5. Balance of payment
6. The level of inflation,
7. Employment level per capita
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8. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on

Socio-cultural Factors

The social and cultural influences on business vary from country to country. It is very important that
such factors are considered. Factors include:

1. What is the dominant religion?

2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the populations have a strong/weak opinion on green issues?
8. Demographics
9. Attitudes
10. Social class
11. Changes in consumer values and lifestyles
12. How much time do consumers have for leisure?
13. What are the roles of men and women within society?
14. How long are the population living? Are the older generations wealthy?
15. Do the populations have a strong/weak opinion on green issues?

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the
following points:

1. Does technology allow for products and services to be made more cheaply and to a better
standard of quality?
2. Do the technologies offer consumers and businesses more innovative products and
services such as Internet banking, new generation mobile telephones, etc?
3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets,
auctions, etc?
4. Does technology offer companies a new way to communicate with consumers e.g.
banners, Customer Relationship Management (CRM), etc?

Natural environment

1. Product resources
 Raw materials
 Energy resources
 Mineral resources
 Water resources
2. Climatic conditions
 Seasons
 Weather

3. Physical resources

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 Topography
 Attitude
 Waterfalls
 Altitude

4. Pollutions

 Air
 Water

5. Natural calamities

 Floods
 Earthquakes
 Disease outbreaks
 Storms
 Landslides
 Volcanic activity

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A. MARKETING PROCESS

The Marketing Process

Once the strategic plan has defined the company’s overall mission and objectives, marketing plays
a role in carrying out these objectives.
The marketing process is the process of analyzing market opportunities, selecting target markets,
developing the marketing mix, and managing the marketing effort. Target customers stand at the
center of the marketing process. There are following steps in Marketing Process:
5. Analyzing marketing opportunities
6. Selecting target markets
7. Developing the marketing Mix
8. Managing the marketing effort

a. Analyzing marketing opportunities

First step of the marketing process is analyzing market opportunities and availing these
opportunities to satisfy the customer’s requirements to have competitive advantage. The marketing
function of analyzing market opportunities is important in the marketing planning process. Any
marketing manager must analyses the long-run opportunities in the market to improve the business
unit's performance. To evaluate its opportunities firms needs to operate a reliable marketing
information system.
Marketing research is an indispensable marketing tool for this purpose. Researching the market
allows the company to gather information about their customers, competitors and any
environmental changes to determine the market opportunities. Once the market opportunities
have been analyzed then modern marketing practice calls for dividing the market into major
market segments, evaluating each segment, and selecting and targeting those market segments that
the company can best serve
b. Selecting the target Market:
To succeed in today’s competitive marketplace, companies must be customer centered. They must
win customers from competitors and keep them by delivering greater value.
• Sound marketing requires a careful, deliberate analysis of consumers.
• Since companies cannot satisfy all consumers in a given market, they must divide up the
total market (market segmentation), choose the best segments (market targeting), and
design strategies for profitably serving chosen segments better than the competition
(market positioning).

Market segmentation is the process of dividing a market into distinct groups of buyers with different
needs, characteristics, or behavior who might require separate products or marketing mixes.
Market targeting is the process of evaluating each market segment’s attractiveness and selecting one
or more segments to enter. A company should target segments in which it can generate the greatest

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customer value and sustain it over time. A company may decide to serve only one or a few special
segments, or perhaps it might decide to offer a complete range of products to serve all market
segments. Special segments may be called “market niches.” Most companies enter a new market
by serving a single segment, and if this proves successful, they add segments.
Market positioning is arranging for a product to occupy a clear distinctive and desirable place relative
to competing products in the minds of target consumers. In positioning a product, a company
first needs to identify possible competitive advantages upon which to build the position. To gain
competitive advantage, the company must offer greater competitive advantage to the target
segment. The company’s entire marketing program should support the chosen positioning strategy.
Effective positioning begins with actually differentiating the company’s marketing offer so that it
gives consumers more value than they are offered by the competition.

c. Developing the Marketing Mix

Once the company has decided on its overall competitive marketing strategy, it is ready to
begin planning the details of the marketing mix. The marketing mix is the set of controllable
marketing variables that the firm blends to produce the response it wants in the target market. The
marketing mix consists of everything that the firm can do to influence the demand for its product.
These variables are often referred to as the “four Ps.”

1). Product stands for the “goods-and-service” combination the company offers to the target
market.
2). Price stands for the amount of money customers have to pay to obtain the product.
3). Place stands for company activities that make the product available to target consumers.
4). Promotion stands for activities that communicate the merits of the product and persuade
target consumers to buy it.

An effective marketing program blends all of the marketing mix elements into a coordinated
program designed to achieve the company’s marketing objectives by delivering value to consumers.
Some critics feel that the four Ps omit or underestimate certain important activities.

1). “Where are services?” they ask.

2). “Where is packaging?”
3). The 4 Ps seems to take the seller’s view rather than the buyer’s view.
4). Perhaps a better classification would be the 4 Cs:
a). Product = Customer Solution.
b). Price = Customer Cost.
c). Place = Convenience.
d). Promotion = Communication.

d. Managing the Marketing Effort

The company wants to design and put into action the marketing mix that will best achieve its
objectives in target markets. This involves four marketing management functions. The four
functions are: analysis, planning, implementation, and control

a. Marketing Analysis:
Marketing analysis involves a complete analysis of the company’s situation. The company performs
analysis by Identifying environmental opportunities and threats. Analyzing company strengths and
weaknesses to determine which opportunities the company can best pursue. Feeding information
and other inputs to each of the other marketing management functions.

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b. Marketing Planning:
Within each business unit, functional plans must be prepared, including marketing plans. Such
plans include marketing plans which are aggregate plans consisting of plans for product lines,
brands and markets.
Marketing planning involves deciding on marketing strategies that will help the company to attain
its overall strategic objectives. A detailed plan is needed for each business, product, or brand. A
product or brand plan
should contain the following
sections: executive Contents of a Marketing Plan
summary, current marketing
situation, threats and
opportunity analysis, Executive Summary
objectives and issues, Current Marketing Situation
marketing strategies, action Threats and Opportunity Analysis
programs, budgets, and
Objectives and Issues
controls.
Marketing Strategy
Contents of Marketing Action Programs
Plan Budgets
Controls
1. Executive
summary - The
opening section
of the marketing plan that presents a short summary of the main goals and
recommendations to be presented in the plan.
2. Current marketing situation - The section of a marketing plan that describes the
target market and the company’s position in it. The current marketing situation is the
section of a marketing plan that describes the target market and the company’s position
in it. Important sections include:
1). A market description.
2). A product review.
3). Analysis of the competition.
4). A section on distribution.
3. Opportunities and Issues Analysis- This section requires the marketing manager to
look ahead for threats and opportunities that the product(s) might face. A company
marketing opportunity would be an attractive arena for marketing action in which the
company would enjoy a competitive advantage. In the threats and opportunities
section, managers are forced to anticipate important developments that can have an
impact, either positive or negative, on the firm. Having studied the product’s threats
and opportunities, the manager can now set objectives and consider issues that will
affect them.
4. Objectives - Objectives should be stated as goals the company would like to reach
during the plan’s term.
5. Marketing strategy - The marketing logic by which the business unit hopes to achieve
its marketing objectives. Marketing strategy consists of specific strategies for target
markets, marketing mix and marketing expenditure level. Strategies should be created
for all marketing mix components. The marketing budget is a section of the marketing
plan that shows projected revenues, costs, and profits. The last section of the
marketing plan outlines the controls that will be used to monitor progress. This allows
for progress checks and corrective action.

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6. Action programs - This section sets out what will be done, when, by whom and how
much will be spent doing it.
7. Projected profit-and-loss statement - The marketing budget section of the plan
shows projected revenues, costs and profits/surpluses.
8. Controls - This last section outlines the control measures that will be used to monitor
progress. Goals may be set out weekly, monthly, quarterly, annually or for all such
periods. Following evaluation of results, actions are recommended and implemented in
the next period.

c. Marketing Implementation:
Marketing Implementation is the process that turns marketing plans into marketing actions in
order to accomplish strategic marketing objectives. Whereas marketing planning addresses the and
“why” of marketing activities, implementation addresses the “who”, “where”, “when”, and “how”.
One firm can have essentially the same strategy as another, yet win in the market- place through
faster or better execution. Successful implementation depends on an action program that pulls all
of the people and activities together and forms sound formal organizational structure its decision
and reward structure (HRM functions and procedures) and the firm’s marketing strategies fitting
with its company culture (the shared system of values and beliefs).

Marketing Department Organization

The company must design a marketing department that can carry out marketing analysis, planning,
implementation, and control. Formats for organizing the department include:
1). The functional organization where different marketing activities are headed by a
functional specialist (such as a sales manager, advertising manager, etc.).
2). The geographic organization where sales and marketing people are assigned to
specific countries, regions, or districts.
3). A product management organization where a product manager develops a complete
strategy for a product or brand. Today, many firms are shifting to customer equity management
where customer profitability is important.
4). A market or customer management organization where a specific market plan is
developed for each specific market or customer.
5). A combination plan where large companies many times combine elements of any of the
above.

d. Marketing Control
Marketing control is the process of measuring and evaluating the results of marketing strategies
and plans, and taking
corrective action to ensure M a r k e ti n g C o n t r o l
that marketing objectives P ro c e s s
are attained.
Implementation requires
four steps:
1). Set specific goals
(What do we want to Se M e as E v a lu Ta k
ure a te e
achieve?). t P e rfo rm P e rfo rm C orrect
2). Measure G oal anc e anc e iv e
performance (What is s A c ti
happening?). on
3). Evaluate
performance (Why is it happening?).
4). Take corrective action (What should we do about it?).

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Two broad forms of control are important:

1). Operating control involves checking ongoing performance against the annual plan and
taking corrective action when necessary.
2). Strategic control involves looking at whether the company’s basic strategies are well
matched to its opportunities. The major tool for accomplishing this form of control is the
marketing audit. The marketing audit is a comprehensive, systematic, independent, and periodic
examination of a company’s environment, objectives, strategies, and activities to determine
problem areas and opportunities. The purpose is to recommend a plan of action to improve the
company’s marketing performance.
1). The marketing plan covers all major marketing areas of a business, and not just trouble
spots.
2). If done correctly, the audit is normally conducted by an objective an

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MARKETING INFORMATION SYSTEM AND MARKETING RESEARCH

Coverage/ Outline

1. Meaning Of Marketing Information System (MIS)

2. The Role Of MIS
3. How A Firm Develops Needed Information
4. Internal Records System
5. Marketing Intelligence System
6. Marketing Decision Support System (MDSS)
7. Marketing Research

MARKETING INFORMATION SYSTEM

1. What is Marketing Information System (M.I.S.)?
M.I.S. consists of;
• People
• Equipment and
• Procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate
information to marketing decision makers.

2. What is the role of MIS?

•To assess the Manager’s information needs.
•To develop the needed information and
•To distribute the information in a timely fashion to the marketing managers.

All these are necessary because Marketing Managers need information about the
developments in the marketing environment in order to carry out their;
•Analysis
•Planning
•Implementation and
•Control responsibilities

3. How does a firm develop the needed information?

This is developed through:
•The internal records system
•The Marketing Intelligence System
•Marketing Research System
•Marketing decision support system (MDSS)

I. Internal Records System

This is the most basic source of information for marketing managers

•This includes reports in
– Orders
– Sales
– Prices

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– Inventory levels
– Receivables
– Payables
– Payables, etc

•By analyzing this information this information marketing managers can spot important
opportunities and problems.

II. The Marketing Intelligence System

While the internal record system supplies results data, MIS supplies happenings data.

 What is M.I.S.?
“M.I.S. Is a set of procedures and sources used by managers to obtain their
every day information about pertinent developments in the marketing
environment”

 How do Marketing managers carry out marketing intelligence

This is done by;
– Reading books
– Reading newspapers and magazines
– Talking to customers
– Talking to suppliers
– Talking to distributors
– From other managers and personnel within the company
– Outsiders
– Having access to competitors records

 What should a well-run company do to improve the quality and quantity of marketing
intelligence?
• Train and motivate the sales force to spot and report new developments.
• Motivate distributors, retailers and other intermediaries to pass along important intelligence
• Purchase information from outside suppliers e.g. Research firms.
• Establish internal marketing information center to collect and circulate marketing
intelligence.

The staff scans major publications, abstracts, relevant news and disseminates a news
bulletin to marketing managers.
• Having a well stocked library
• Installing the internet facilities
• Purchasing newspapers, magazines, e.t.c.
• Facilitating interaction among staff.

III. Marketing Decision Support System (MDSS)

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“It is a Co-coordinated collection of data, systems, tools and techniques with

supporting software and hardware by which an organization gathers and
interprets relevant information from business environment and turns it into a
basis for marketing action”.

The use of computer software and hardware is necessary for marketers to analyze, plan
and control their operations.

 What does a marketing manager do if he needs to analyze a problem and take action?
• He puts questions to the appropriate model, draws up data which is then analyzed
statistically.
• He then uses a program to determine the optimal course of action.
• He takes this action which (along with other forces) affects the environment and results in
the new data.

IV. MARKETING RESEARCH SYSTEM

Organizations may have an in-house research team or commission external researchers

to collect, analyze interpret and present data findings on marketing situations facing a
company.

DEFINITION

Marketing research is defined as “the systematic gathering recording and analyzing of data
about problems, relating to the marketing of goods and services”. Thus, the essential
purpose of marketing research is to provide information which will facilitate the
identification of an opportunity or problem situation and assist managers in arriving at the
best possible decisions when such situations are encountered.
Effective research involves five steps
1. Problem definition
2. Research design
3. Fieldwork
4. Data analysis
5. Report preparation

1. PROBLEM DEFINITION

The first step in the conduction of research calls for careful definition of the problem. If
the problem is stated vaguely, if the wrong problem is defined, or if the uses of the
research are not made clear, then the research results may prove useless to the manager.
The research effort is generally more efficient when the problems and the alternatives are
well defined. The cost of research is generally related to the total information gathered
while the value of research is associated only with the proportion of information that is
useful. Hence a clear definition of problem is paramount.

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2. RESEARCH DESIGN

The problem definition stage should lead to the development of a clear search of
objectives stated in writing if possible. The marketing research manager faces a choice
among many alternative ways to collect the information that will satisfy the research
objectives. He must decide on:
a) Data collection methods
b) Research instruments
c) Sampling plan

a) Data collection methods

I. Secondary data:
Exist in an accessible form and merely have to be found. They might be present
in the organizations’ internal records in advertising agencies or professional
associations, in government, commercial or trade publications, or purchasable
from marketing research firms. If the data are found in existing sources, the
researcher has saved the time and expense. Secondary data must be checked for
impartiality, validity and reliability. When satisfactory data are not available, the
researcher must collect primary data. Data that can be gathered from:
 Customers
 Middlemen
 Salesmen
 Competitors, e.t.c.
Three basic primary data collection methods:

 Observation: In which case the researcher attempts to learn about the

problem by observing the relevant actors. The observational method can be
used to study:
- Sales techniques
- Customer movements
- Customer responses
Its main advantage is that it generally leads to a more objective picture of
overt behavior than can be expected from relying on people’s accounts of
how they behave. On the other hand, this method yields no information
about:
- The state of mind
- Buying motives or
- Brand images of those being observed.

 Experimentation: The experimental method consists of introducing selected

stimuli into a controlled environment and systematically varying them. The
purpose of control is to eliminate competing hypotheses that might also
explain the observed phenomena. Marketers have applied this data collection
method to such marketing problems as:
- Finding the best sales-training method
- The best incentive scheme
- The best price level and
- The best advertisement campaign

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 Surveys: Most common method – compared with either direct observation

or experimentation, surveys yield a broader range of information and are
effective for greater number of research problems. Surveys can produce
information on:
- Socio-economic characteristics
- Attitudes, opinions, motives and
- Overt behavior of different kinds
Surveys are an effective way of gathering information for:
- Planning product features
- Advertising copy
- Advertising media
- Sales promotions
- Channels of distribution and
- Other marketing variables.

b) Research instruments

The researcher has to use or design a reliable research instrument to gather the
information he is seeking. The observational methods make use of such instruments
such as:
- Tape recorders
- Cameras and
- Tally sheets

The experimental method might involve similar instruments if the subjects are put
through a task. The survey method, and to some extent the experimental method,
commonly rely on questionnaires.

Questionnaire: the construction of a good questionnaire calls for considerable skill.

Every questionnaire should be presented on a pilot sample of person before being
used on a large scale.

A common type of error occurs in the:

a) Types of questions asked: The inclusion of questions that cannot be answered,

and the omission of other questions that should be answered. Each question
should be checked to determine whether it is necessary in terms of the research
objectives.

b) The form and working of questions can make a substantial difference to the
response. An open ended question is one in which the respondent is free to
answer in his own words. A close-ended question is one in which the possible
answers are supplied. Note:
Dichotomous questions (Yes/No)
Multiple choice questions (Yes/No/Don’t know)
Scaling questions (Placing marks along a scale)

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The choice between open-ended and close-ended questions affects the

thoughtfulness of responses, the costs of interviewing and the quality of the
subsequent analysis.

c) Choice of words calls for considerable care. The designer should strive for:
- Simple
- Direct
- Unambiguous and
- Unbiased wording
A good rule is always to pretest the questions on a sample of respondents before
they are used on a wider scale.
Other “do’s” and “don’t” arise in connection with the sequencing of questions in
the questionnaire. The lead questions should create interest, if possible. Open
questions are usually better here. Difficult questions or personal questions should
be used towards the end of the interview.
The body of questions should be asked in as logical an order as possible in order
to avoid confusing the respondent.

c) Sampling plan

This is the third element of research design:

The sampling plan answers four questions
 Who is to be surveyed? (Sampling Unit)
 How many are to be surveyed? (Sampling size)
 How are they to be selected? (Sampling procedure)
 How are they to be reached? (Sampling media)

1) Sampling Unit – The proper sampling unit is not always obvious from the nature
of the information sought. The researcher must determine not only what
information is needed but also who is more likely to have it (Husband, wife,
children, supermarket, specialty store, and e.t.c.)

2) Sampling size – Large samples obviously give more results than a small sample
but it is not necessary to sample the entire population. Much insight about
marketing processes and attitudes can be gained from a sample of fewer than 100
persons. In motivation – research studies, fewer than 30 depth interviews usually
suffice to uncover significant attitudes.

3) Sampling procedure – Depends upon the research objective. For exploratory

research, non-profitability-sampling procedure may be adequate. However, to
make an accurate estimate of population should be drawn. Random (Probability)
sample of the population should be drawn. Random sampling allows the
circulation of confidence limits for sampling error. But random sampling is
always more costly than non-random sampling. Some marketing researchers feel
that the extra expenditure for profitability. Sampling could be put to better use
by reducing non-sampling errors which can be just as fatal as sampling errors.
This is a real issue.

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4) Sampling media – Whether the target population should be reached by

telephone, mail or personal interview.

Telephone interviewing: Sands out as the best method for gathering

information quickly. It permits the interviewer to clarify his questions if they are
not understood.
Drawbacks
a) Only people with telephones can be interviewed
b) Only short, not too personal interviews can be carried out.

Mail interviewing: May be the best way to reach persons who would not give
personal interviews or who might be biased by interviewers. On the other hand,
mail questionnaires require simple & clearly worded questions, and the return
rate is usually low and/or slow.

Personal interviewing: Is the most versatile of the three methods. The personal
interviewer can ask more questions and an supplement the interview with
personal observations. Personal interviewing is the most expensive method and
requires much more technique and administrative planning and supervision

3. FIELDWORK

After the research design has been finalized, the research department must supervise, or
subcontract, the task of collecting the data. This phase is generally the most expensive
and most liable to error. Four major problems arise:

Not-at-home – call back or substitute the house to house next door – substitution may
be biasing.

Refusal to co-operate – After finding the designated individual at home, the interviewer
must interest the person in co-operating.

Respondent bias – giving socially accepted answers; “helping the researcher”

Interviewer bias – Interviewers are capable of introducing a variety of biases into the
interviewing process, through the mere fact of their age, sex, manner or intonation –
there is problem of conscious interviewer bias or dishonesty (cheating)

4. DATA ANALYSIS

The fourth step in marketing research procedure is to attempt to extract meaningful

information from the data. The first step is to calculate relevant averages and measures
of dispersion. The second step is to cross tabulate the data to produce useful
relationships. The third step is to measure correlation coefficients and perform
goodness-of-fit tests. The fourth step is to attempt multivariate analysis of the data, using
such statistical techniques as multiple – regression analysis, factor analysis and cluster
analysis

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5. REPORT PREPARATION

The last step is the preparation of a managerially oriented report presenting the major
findings and recommendations coming from the analyzed data.
a) The report should begin with a short statement of the study, problem and the major
findings.
b) This should be followed by an elaboration of the findings
c) A brief description of the research should then be given with more technical details
being saved for an appendix. Many of the data should also be appendices.

CONCLUSION
The objective of this MARKETING RESEARCH was to give you an overview of
marketing research procedure (process). Needless to say each of the five stages contains a lot
that has omitted. However, one needs to understand the “forest” first before embarking on
studying the “trees”.

Need for marketing research

•Competitive pressure.
Need to develop new products more quickly that before in order to be successful. This
requires research to monitor consumer needs and to find out what competitors are doing.

•Expanding markets
Marketing activities are becoming increasingly compels and broader in scope as more
firms operate in both domestic and foreign markets. Before designing a marketing
programme the firm needs to conduct research so as to understand what goes on in
foreign markets.

•Cost of mistake
Marketing is expensive. A failed marketing effort can cause severe damage to a firm.
Before undertaking a marketing programme, a firm should analyze the market, the
competition and other environmental factors.

•Growing Customer expectations

Firms need to research, identify customer problems and solve them before they result in
lost business.

•Rising costs of production

Research is necessary to identify the cost-effective production methods.

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LECTURE THREE

CONSUMER BEHAVIOUR

 Meaning
 Types of consumer entities
 Why study consumer behaviour?
 The stimulus response model of consumer behaviour
 The buying decision process
 Factors influencing buying behaviour.

1. MEANING

It a study of how individual, groups and organizations select, buy, use and dispose of goods
and services they expect to satisfy their needs and wants.

Is that behaviour exhibited by consumers when searching, purchasing and disposing of

products they expect to satisfy the needs and wants?
It is a study of how consumers make decision of how consumers spend their available
resources time, money and efforts on consumption items.

Summary
It’s a study of what to buy
Why they buy it
Where buy it
When they buy it.

2. TYPES OF CONSUMER ENTITIES

i) The personal consumers

Who buy goods and services for personal uses, gifts or for household
consumption? He referred as the end user of the ultimate consumer.
ii) Organizational consumers.
Profit making organizations
Non-profit making organizations.
Institutions e.g. schools, hospitals, prisons

Organization consumers buy goods to convert into other products or for use in
the company. They buy in bulk.

Note: The personal is very pervasive because of the following of demographic

factors;
i) Ages Brackets: 12-17=Teens, 18-35=Youths, 36-50=old and >50=very
old.
ii) Income level;
iii) Education Level; Primary, Secondary, College and University.
iv) Marital Status: Single or Married.
v) Gender: Male or Female

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Therefore marketers have to understand the personal consumer to develop the good and
services according to his/her design.

3. WHY STUDY CONSUMER BEHAVIOUR?

Why should marketers be concerned with consumer behaviour?

i) To make better strategic decision.

- For appropriate, product, price, promotion and place/distribution strategy.

ii) To predict how consumer are likely to react to various informational and
environmental issues and shape marketing strategies accordingly.

iii) Understanding of consumer behaviour offers marketers a better competitive edge.

iv) In order to satisfy the needs of the customers more effectively.
Time utility
v) Customers’ loyalty is a source of a company’s goodwill.
vi) For effective market segmentation
- What they buy
- Various demographic characteristics

Why scholars need to understand why the behaviour.

i) In order to appreciate the behaviour of others consumption related items.
ii) As scholars need to understand consumer behaviour, in order to gain insight of
individual behaviour or act in certain consumption related ways.
iii) As scholars, we need to appreciate the theory behind consumer behaviour in
order to identify gaps open for research.

4. BUYING DECISION PROCESS.

To be successful, marketers have to understand the buying decision process.

i) Buying roles: Who make the buying decisions
ii) Types of buying decisions – or buying behaviors
iii) Stages in the buying decision process.

BUYING ROLES
Marketers have identified 5 roles
i) Initiator: The person who first suggest the idea of buying the product.
ii) Influencer: A person whose views or advice carries a greater in making a buying
decision.
iii) Decider: A person who ultimately determines any of the entire buying decision.
iv) Buyer: A person who make the final purchase.
v) User: A person who uses or consumes the product.

NOTE: The roles can be played by one person or shared. Marketers have to understand the
roles since they affect the design strategies depending on the nature.

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TYPES OF BUYING DECISIONS.

Marketers have to know the types of buying behaviour.
They are based on.
a) The degree of involvement in the purchases and
b) The significant differences among brands.

The buying behaviour has been classified into four.

i) Complex buying behaviour
ii) Assonance – reducing buying behaviour
iii) Habitual buying behaviour
iv) Variety – seeking buying behaviour.

(1) COMPLEX BUYING BEHAVIOUR

i) When is a high degree of involvement of purchases?
Reasons: It’s an expensive product.
A product that is influently bought
The product may be highly self expressed
Risky – not ready to make a mistake
Risk loosing a lot of money.

ii) There are significant brand differences of which the consumers are aware of
however they lack details information regarding different attributes of different
grands.
Example
T.V. attributes
a) Sonny
b) Panasonic.

Role of a marketer.
1. Engage Educative promotional campaign like – sales presentation
Sales conferences
Educative advertising – in the advert.

2. Ensure that you have a high quality product

- Good performance
- Offer guarantees / warrantees
- Proceed based on the quality of the product.
- Distribution one engage exclusive distribution strategy. The showrooms have the
products only.
- Highly trained personnel.

(2) DISSONANCE – REDUCING BUYING BEHAVIOUR

i.Consumers experience this behaviour when there is high involvement.

ii.Reasons – expensive
iii.Not frequently bought
iv. Risky to buy.
v. There is a significance difference among brand. The consumers don’t know the
difference of the brands.
vi. A consumer has to learn a lot before buying.
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vii. However consumers buy fairly quickly in response to convince to a good price and
purchasing of that commodity a time and place.
viii. After the purchase, the buyer may experience post –purchase dissonance because of
hearing other things of products elsewhere.
ix. With time, having had experience with the product, the state of dissonance – reduces
and the buyer develops interest slowly.

How marketers handle dissonance.

i) Engage I after sales service
ii) Assurance of performance through guarantees / warrantees
iii) Engage in re-assurance advertising; Using some well personalities.
iv) Customer flows up – call them by name and ask questions – Email them.
v) Clinics for the products
vi) Buying back arrangement or drawback arrangements.
vii) Money back guarantee
viii) Education
ix) Traded sales personnel
x) Sales personnel to be objective.

(3) HABITUAL BUYING BEHAVIOUR.

When there is low involvement in the purchase.

Reasons – Cheap product
- Frequently bought
- Less risk like a cheap thermo flask
- Most highly – like salt.

There is a significant difference among brands. This is because consumers buy the product
out of habit since they are Loyal to the brand.

Marketer actions
i) He needs to create low markets.
ii) Widens the market share
iii) Ensure that you have no royalty

Actions
a) Ensure product quality, product of various sizes, more uses.
b) Improve of design
c) Price: change slightly low prices than competition
 Engage in price competition (psychological e.g. 4000/= and 3999/=
 Promotional prices i.e. “the was” is pricing
 Was – 1000
 Is -999 psychological

(D) VARIETY SEEKING BUYING BEHAVIOUR.

There is low involvement in the purchase
Reasons – cheap product.
Less risky product
There are significant differences among brands and the consumers are well informed about.
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However, brand switching is common for the sake of variety.

E.g. Sodas: Coke, Fanta, Sprite…

Marketer Action plan.

In order to
i) Great man markets
ii) Widens the market share
iii) Ensure that you are loyal to the product.

Identify the type of buying behaviour

Complex Dissonance Habitual Variety
(expensive (not ( Habit (cheap)
product) frequently products
bought ) e.g salt)
Buying a drink at the cafeteria X
Buying a wedding gown / dress X X
Buying a vehicle spare part X X X X
Deciding on the University to pursue your X
B.COM programme
Buying a car. X X

5. STAGES IN THE BUYING DECISION PROCESS

Introduction:

Marketers sell their goods and services to either the final consumer or to organizational
buyers. It is necessary to understand the process followed in making purchase decisions and
the main factors which influence and the outcome of that decision for the final consumer
and for the organizational buyers.

Marketers have identified 5 stages Model

 Problem (need) recognition
 Information search
 Evaluation of alternatives
 Purchase decisions
 Post purchase behaviour

Final consumers buy goods and services through the consumer decision-making process
whose steps are shown below:

Informat Evaluati Purch Post-

Need ion purcha
(Proble on of ase
search alternati decisi se
m) behavio
Recogn ves on
r or
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 Principles of Marketing, Lecture Notes

1) Problem (Need) Recognition

A need is a state of lack or deprivation. A consumer must develop a feeling of deprivation

before buying goods or services i.e. there is a difference between the current state and the
desired state of the consumers. Needs can be triggered by internal stimuli (such as hunger,
thirst, head pain) or by external stimuli (seeing products that are being sold, advertised or
that other people have).

Sometimes people recognize needs but postpone their satisfaction due to more urgent needs;
lack of finances etc. marketers must show them the dangers of postponing their needs and
wants.

There are many types of needs that human beings have according to Maslow Hierarchy of
needs. These include:
i) Basic needs
ii) Social needs
iii) Security safety needs
iv) Self esteem needs
v) Self actualization needs

When consumers have needs, they look for ways and means of satisfying them. It is only
when the needs have arisen above threshold levels that consumer satisfying them.

Marketers have the duty of awakening needs in people so that they buy their goods and
services. Marketers should also show how the goods and services they sell will satisfy the
needs of the customers better than the goods and services of competitors.

2) Information Search

Information processing involves the search for information and its perception, organization,
and retention. Consumers start searching for information when they recognize a need for
which they have no predetermined buying solution. They may turn to information they
already have. For example they may recall prior experience or the experience of friends in
making a similar decision.

The more similar the previous decision, the more likely the present decision will be based on
it. But if the decision is not similar, they search for more information from external sources
such h members, ads, and salespeople. In general, consumers will seek more information
when believe a decision is important in terms of economic, Psychological, and time
considerations.

The more money involved relative to one’s disposable income, the greater the perceived
logical risk in making the decision, and the longer the period during which the product will

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used, the more information the consumer will seek. Also, more information is sought when
a ‘s prior experiences do not fit the decision at hand

Once the consumer recognizes their needs, they look for information concerning products
that will satisfy those needs. E.g. where a consumer has transport problems and needs to
buy a car, he or she looks for information concerning cars.

The main sources of information are:

i) Internal sources (from the customer him/herself);

ii) External sources e.g. friends and relatives, dealers, newspapers, agents, brokers,
technical experts etc.

The amount of information sought depends on:

• Whether the consumer is buying the product for the first time;
• Cost of the product;
• Durability;
• How often the product is bought;
• Importance of the product; and
• Image of the product.

3) Evaluation of Alternatives

Consumers typically get information about products in bits and pieces and from different
sources. They must sort this information into categories such as price, durability, and safety.
The categories they use depend on their prior experiences and on what they learn in
gathering information. Suppose you want to buy a riding lawn mower.

Consumers may bring to the decision situation some habitually used categories to sort
information such as price, service, and warranty. Talking with other people and comparing
models may add additional categories such as motor horsepower and number of gears.

Information from different sources may be treated differently. For example, friends may be
more or less important source of information than ads, depending on how reliable and
credible the friends have been in the past. A consumer may rely on ads to learn about new
products but rely on a friend’s advice about product durability. Information in ads may also
be discounted if it is inconsistent with that provided by Friends whose opinions are highly
valued.

Each buyer must arrive at a decision as to what attributes are important and the evaluative
criteria that must be used to compare different alternatives. Consumers evaluate products
based on a number of criteria namely: Beliefs, attitudes and intentions.

Evaluative
criteria
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i) Evaluative criteria

These are dimensions used by consumers to compare or evaluate products or brands e.g. for
a car it is the:
• Cost;
• Economy;
• Service availability etc.

ii) Beliefs

These are the degree to which the consumers believe that the product has certain
characteristics e.g. safety, quality etc.

iii) Attitudes

These are the degree of liking or disliking for a product which in turn determines whether
the customer will buy it or not.

iv) Intentions

These measure the probability of buying the product. A marketer should assist consumers
to acquire information that will help them to make the purchase decision.

4. (a)Purchase Decision
At some point, the consumer must stop searching for and evaluating information and must
choose a buying alternative. A buying alternative for a consumer product includes the
product itself, the package, the store, and the method of purchase. The consumer makes a
“satisfying compromise” regarding product features and other factors — for example, a
person may be willing to pay a higher price to get a washing machine with a gentle cycle.

The consumer goes ahead and acquires the preferred choice.

At the point of sale, consumers can change their purchase decision depending on the
information they receive at the point of sale e.g. if the consumer needs a well informed sales
person who convinces them to buy an alternative product, the consumer may acquire the
alternative.

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Where the product is not available, or the consumer is not convinced by the sales person,
he/she may delay the purchase.

4. (b) Purchase

A purchase decision is not the same as the actual purchase. The time delay between the
decision to purchase and the actual purchase may depend on a variety of circumstances, such
as a shortage of cash. When the purchase is made, the original purchase decision may not be
followed because of any number of variables, such as the unavailability of the chosen brand
or a price increase.

5. Post Purchase Behaviours, Evaluation or Outcome

The final stage in making a complex decision involves an evaluation of the decision. In other
words, the decision- making process does not end when the purchase is made; the consumer
evaluates the decision and uses this evaluation for future decision-making.
Consumers use the product they bought and will either be satisfied or dissatisfied depending
on their expectations.

Above expectations (delighted)

Expectations (satisfied)

Below expectations (dissatisfied)

Where the product meets the expectation of consumers, the consumers will be satisfied.
Consumers are delighted where the product is above their expectations. They are however
dissatisfied if the product is below their expectations. Marketers should endeavor to delight
consumers because such consumers will bring more business to the marketer.

Dissatisfaction of consumers should be avoided at all costs. A dissatisfied consumer can

react in a number of ways:
•S/he can decide not to buy again;
•The consumer can talk negatively - negative publicity;
•Demand a refund;
•Take legal action

COGNITIVE DISSONANCE

In evaluating a decision, consumers often experience post-purchase doubt. Cognitive

dissonance is the state of psychological tension or post-purchase doubt that a consumer
experiences after making a difficult purchasing choice. It is a feeling of uneasiness that arises
when the buyer chooses one purchase alternative and rejects others although each has some
desirable features/ unique features. Thus the rejected alternatives will have desirable features
that the selected alternative (the product that the consumer purchased) does not have.

The consumer, in effect, asks,’ did I make the right decision?” Buyers of Suzuki samurai
who subsequently saw the June 1988 issue of Consumer Reports likely experienced cognitive

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dissonance- it had criticized the product. The greater the economic and psychological
importance of the decision and the greater the similarity between the product purchased and
one or more of the rejected alternatives, the greater the amount of dissonance the buyer is
likely to experience. Furthermore, the less the opportunity for the buyer to reverse the
decision (return the product), the greater the amount of dissonance experienced.

Generally consumers experience cognitive dissonance i.e. a feeling of dislike for what they
have and a liking for what they left behind. This results from the consumer seeing the
positive aspects of what they do not have and negative aspects of what they have.

i. How consumers reduce dissonance.

Many decisions produce dissonance. Consumers try to reduce dissonance by re-evaluating
the information they obtained prior to the decision and by searching for more information.
They may:

1 Deny or distort information

2 Seek confirming opinions from others,
3 Discredit the information source
4 Minimize the issue’s importance, or
5 Change the overall evaluation of the chosen alternative.
Example
Suppose you believe Toyota, Hondas, and Nissans are equally attractive. But you buy a
Toyota. You may lower the overall appearance that the Honda and Nissan had for you by
changing their positive characteristics to negative ones and rejecting some of the positive
information because of its source. You may turn to other Toyota owners to reinforce your
decision, or you may simply conclude that there are no real difference s among the three
makes.

If you cannot distort, re-evaluate, or discredit the information you obtained before making
the decision, you may seek new information. But your search for and use of new information
will be biased. Favorable information will be readily used, but positive information about
Honda and Nissans and negative information about Toyotas will be ignored or discounted.
You will notice more Toyotas on the highway and pay more attention to Toyota ads.

ii. How marketers reduce dissonance

Marketers can help consumers reduce dissonance by providing information that consumers
can use to reduce it and ensuring that poor product performance is corrected as soon as
possible. Marketers can use post-purchase communication such as letters and brochures to
help buyers reduce dissonance. Many car dealers send reassuring letters to new-car buyers.

The money-back guarantees for cars and appliances that are mentioned earlier are another
example. Dissonance that is not reduced or eliminated leads to future complex decisions
about products in that category. On the other hand, the more times a consumer make a
buying decision that produce satisfaction, the greater the chance that the decision will
became programmed.

Marketers have a duty to reduce this cognitive dissonance by:

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i) Writing congratulatory letters to the customers for the wise choice they made in
purchasing that particular brand;
ii) Having trade-in arrangements;
iii) Visiting the consumer to see how they are getting on with the product;
iv) Guarantees and warranties;
v) Providing after sales service.

PROGRAMMED DECISIONS

Consumers, of course, make many purchases routinely, without engaging in the complex
decision-making described. Programmed Decision is routine decision that results from the
learning process consumers engage in making complex decision. Programmed decisions
differ from complex decisions in that they usually

(1) Are not difficult to make

(2) Do not involve high economic, performance or psychology risk; and
(3) Are made frequently.

Deciding among brands of toothpaste, bath soap, cigarettes, and breakfast cereals are
programmed decision for most consumers. These items are simple — decision products
because of the low risk involved in using them and the high frequency of their purchase
(convenience products). In other words, they are low-involvement products.

Consumer behavior in programmed decision

Decisions to buy frequently purchased products are usually handled in a programmed way to
save time and effort. The programmed decision sequence is much shorter and simpler than
that for complex decisions. Consumers making programmed decisions tend to exhibit three
characteristics
1) Their behavior is under external stimulus controls
2) They are not receptive to new information, and
3) Their behavior is relatively consistent in making these decisions.

External stimulus control

If one is aware of a need, one buys the product that satisfies the need. But in making a
programmed decision, you may be aware of the need before going shopping, or you may not
realize the need until you see the product while shopping. The same brand may be bought
on either basis at different times. The programmed decision sequence is very short and
shows that need awareness results from seeing the normally purchased brand.
1. Problem recognition
2. Search (minimal)
3. Choice
4. Post purchase evaluation

Thus the consumer’s behavior is under external stimulus control.

Not receptive to new information.

A programmed decision does not involve much thinking by the consumer. The consumer is
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not actively receptive to new information but buys out of force of habit. Product loyalty is
well- developed programmed decisions to buy in a particular store. Switching brand for loyal
customers is hard because they either do not look at ads or point-of purchase displays of
competing brands or they consider them irrelevant. The information seeking and processing
that do occur in programmed decision making usually are limited to cursory checks of
different sizes and styles of the product or of nearby competing brands. Minimal effort is
not real consideration of alternate products. It is a casual check to make sure that price and
other product features are within a reasonable range. In making programmed decisions, a
person’s behavior is relatively consistent, no matter what the product category. Buying
several types of toilet articles at discount stores instead of at supermarkets or drugstores may
be characteristic of buying habits it may reflect your strategy of finding the lower price for
normally purchased products or your desire to find a convenient place to buy a number of
items at one time.

SHIFTS IN TYPES OF BUYING DECISIONS

The division between programmed and complex buying decisions is not permanent.
Programmed decisions can become complex if:

(I) New products become available,

(2) The consumer has used one brand for a long time and wants variety,
(3) People whose opinions the consumer respects suggest new ways of doing
something,
(4) The consumer’s living situation changes a great deal or
(5) Outstanding advertising attracts the consumer’s attention.

Successful complex decisions also can become programmed. The process through which
buying decisions are changed from complex to program is called learning. Learning is one of
the personal influences on consumer behaviour.

6. FACTORS AFFECTING THE CONSUMER DECISION MAKING PROCESS

There are 3 major factors:

1. The buying situation

2. Personal influences
3. Social influences

1. THE BUYING SITUATION

There are 3 types of buying situations:

a) Extensive problem solving situation (EPS)

b) Limited problem solving situation (LPS)
c) Automatic response

a) Extensive problem solving situation

It refers to the purchase of expensive items e.g. expensive stereo, clothing, automobiles; in
these cases one needs to make the right choice.

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In buying such items, careful reasoning and information is necessary. All the stages of
consumer decision-making process have to be followed.

To buy such products, consumers look for information from internal and external sources.

External information is preferred where:

‫٭‬One has little or no previous experience to draw from;

‫٭‬Previous choices have resulted in dissatisfaction;
‫٭‬A long time has expired since the product was purchased last;
‫٭‬Benefits offered by current product differ from earlier product;
‫٭‬The consumer has little or no confidence in himself/herself;

Future purchases are based on inertia.

b) Limited problem solving situation

This is the purchase of products that have one or a few uses e.g. bread, detergents. These
items are bought often. For these items, information sought is very little. They are not
bought necessarily by planning. Future purchases of such item are based on habit.

c) Automatic response

Once a consumer has bought for the first time future purchases will be dictated by habit (for
limited problem solving product) and inertia (for extensive problem solving products).

2. PERSONAL INFLUENCES

i) Personality;
ii) Motivation;
iii) Perception;
iv) Learning;
v) Taste and preferences

i) Personality

This refers to a person's way of life e.g. extroverts, introverts, conventional, modern
(charismatic).

Extroverts are outgoing, exposed to a lot of information, interact with many people and buy
unique products that many people do not have.

Introverts are reserved to themselves.

Conventional people buy things that have been in existence for a long period of time e.g. the
Peugeot 504 car.

ii) Motivation
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Consumers have different motivation e.g. using Maslow's Hierarchy of Needs, different
people have different needs. Purchasing patterns reflect somebody's need level.

iii) Perception

This is the interpretation of the world around us. People see things depending on their
needs. People see what they want to see.

There are 3 perceptual processes:

a) Selective exposure - people expose themselves to only certain kinds of information;
b) Selective perception - only certain ideas/messages/information will be perceived or
listened to.
c) Selective attention - consumers remember only what they want to remember.

iv) Learning
It is a situation where purchasing depends on what consumers have learned. Learning
means acquiring new information

3 SOCIAL INFLUENCES
They depend on:
a) Social class - which social class does the consumer belong to (lower, Middle or upper
social class).
b) Reference group - the group of people the consumer associates with e.g. friends,
workmates, and family. If a product is conspicuous, the product has to get approval from
the reference group.
c) Family - it is a primary reference group and plays a significant role in consumer
purchasing. Some purchases are made jointly by members of a family.
d) Culture
This refers to:
‫٭‬Traditions ‫٭‬Values ‫٭‬Taboos ‫٭‬Attitudes ‫٭‬Religion ‫٭‬Beliefs
all these factors have a bearing on hat consumers buy.

Differences between consumer markets and business markets

Consumer markets Business markets
Consists of final consumers who buy for final Consists of resellers (wholesales, retailers, agents),
use. manufacturers, and government agents.
There are many customers who buy in small Few customers but who buy in large quantities (refer
amounts. to 80/20 Pareto rule)
Not always led by economic considerations. Always led by rational/economic factors.
Buy goods of general specifications. Buy goods, which are to specific specifications. The
products or services are typically technical in nature.
Organization does not need to buy anything from Organization may need to buy other goods/services
them. from them i.e. reciprocal buying.
Negotiations may not always be involved. Negotiations may be involved.
Geographically dispersed Geographically concentrated.
Long-term relationships may not be necessary. Long-term relationship may be necessary.

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The purchase is less risky The purchase is risk because of the large sums of
money used.
It is done by one or a few individuals It is done by a Buying Centre or a Decision Making
Unit
Demand is not dependent on the demand for Demand for industrial products is derived from the
industrial goods. demand for consumer goods.
Indirect and direct channels may be used. Mostly, Direct channels of distribution are used.

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FACTORS INFLUENCING BUYING BEHAVIOUR

CULTURE

1. CULTURAL FACTORS SUB-CULTURE

SOCIAL CLASS

REFERENCE GROUPS

DIRECT INFLUENCE

 MEMBERSHIP GROUPS

 PRIMARY GROUPS

 SECONDARY GROUPS

INDIRECT INFLUENCE

 ASPIRATION GROUP

2. SOCIAL FACTORS

FAMILY

 FAMILY OF ORIENTATION
 FAMILY OF PROCREATION

ROLES AND STATUSES

OPINION LEADERS

3. PERSONAL FACTORS LIFESTYLE

AGE AND STAGE IN THE LIFE CYCLE
OCCUPATION
ECONOMIC CIRCUMSTANCES
PERSONALITY AND SELF CONCEPT.

4. PSYCHOLOGICAL FACTORS 1. MOTIVE

2. PERCEPTION
3. LEARNING
4. BELIEFS AND ATTITUDES

PERSONALITY

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LECTURE FOUR

MARKETING SEGMENTATION, TARGETING AND POSITIONING

LEARNING OBJECTIVES,
After this session, you should be able to:
1. Understand the need to segment the market;
2. Conduct a market segmentation exercise;
3. Identify market segment opportunities for a given business;
4. Develop and justify a target market approach;
5. Understand the concept of product positioning;
6. Develop a product positing statement for a given product.

CONTENT OF SEGMENTATION
1. Introduction
2. Meaning of market segmentation
3. Benefits of market segmentation
4. The process of market segmentation
5. When segmentation should be employed by a firm
6. Variables for segmenting consumer markets
7. Variables for segmenting industrial markets.

INTRODUCTION OF SEGMENTATION
A market is an aggregate of buyers who have the need, ability, willingness and authority to purchase
products. The business recognises that its product cannot appeal to all buyers in that market. Each
company has to identify the groups of buyers with similar needs and requirements so that its
products can serve each group separately and more effectively. The process of dividing the market
into groups of buyers with similar needs is known as market segmentation. The group, or segment,
at which a particular product is aimed, is referred to as the target market or the target segment

Markets consist of buyers and buyers differ in one or more respects.

They may differ in their:-
 Wants,
 Resources,
 Geographical locations
 Attitudes and
 Buying practices.
It is therefore necessary for a marketer to segment his /her market.

MEANING OF MARKET SEGMENTATION

Marketing segmentation is;
“The act of dividing a market into distinct groups of buyers who might
require separate products and /or marketing mixes. Or it is the sub-division
of a market into smaller homogenous sub-markets which the organization
might successfully satisfy.”

BENEFITS OF MARKET SEGMENTATION

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The following benefits may be derived by a company from market segmentation.

 It may enable a company to select a potentially most profitable segment.
 It enables a company to concentrate resources on the chosen segments.
 The analysis gives a company the opportunity to review developments and anticipate
changes in its chosen segment from competitive activity, legal/political changes etc.
 Sales opportunities are more likely to be effectively and fully exploited by staff when
target audience is properly defined.
 Better services tailored to the needs of particular market segments are offered.
 Prices are tailored to consumer situations and circumstances.
 It may lead to improved level of services both in terms of sophistication and general
standards.
 Assists in identifying gaps. Market segmentation involves marketing research. During
this process, the marketer can also engage in ‘Gap Analysis”. Gap analysis is:
A process which aims to seek out differences between what the market needs and wants
and what is actually being supplied – the gap.
Hence gap analysis will uncover:-
 Market needs for existing services not fulfilled.
 Other needs where no services currently exist.

THE PROCESS OF MARKET SEGMENTATION

In identifying market segments, three stages are involved:-
1. Survey,
2. Analysis and
3. Profiling
Survey Stage
1. The researchers initially conduct informal interviews with groups of consumers to find
out about their;
- Motivation,
- Attitudes and
- Behaviour.
2. Based on the preliminary work, the researchers conduct more formal research by use of
a structured questionnaire using a representative sample of consumers.

Information sought includes;

 The importance and ratings consumers give to certain attributes of products.
 The extent to which people are aware of the existence of different brands of the
product.
 If brand awareness exists, how people rate different brands
 How, when, where and by whom the product is used.
 Attitudes towards the product category.
 Demographic, psychographics, behavioural and geographic profiles of consumers of
the product.

Analysis stage
The researcher can then use an appropriate statistical method to analyse data in order to
categorize the segments based on the identified characteristics.

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Profiling stage
 Each segment is profiled with respect to its distinguishing attitudes, behaviour,
demographics, psychographics and geographic habits.
 Segment characteristics vary over time, so the procedures have to be periodically carried
out.

STAGES FOR IDENTIFYING MARKET SEGMENTS

SURVEY ANALYSIS PROFILIN

G

CRITERIA FOR MARKET SEGMENTATION

A marketer should ask himself the following questions if market segmentation is to work
effectively. The answers of which must be ‘yes’.

1. IDENTIFIABLE

Can the market be identified?

The marketer should be able to identify which consumers are members of a particular
market segment. There must be some common characteristics that the consumers have. The
segment must be capable of being identified as a separate section of the overall market and
must display some common characteristics which set it apart from the overall market.

2. MEASURABLE

b) Can the market identified be measured?

The characteristics that are common to the groups of consumers should be measured in terms of
size, purchasing power and other characteristics. The marketer needs to know the size of the
segment before, during and after the marketing activities.

3. SUBSTANTIAL

c) Is the market substantial?

The market should be large enough to generate sales volume that ensures profitability; otherwise it
will not be economical to design a unique marketing mix for it. That is, is the market worth the
effort? It must be large enough to warrant activity on the part of the marketer e.g. a single person
consumer may not be a substantial segment.

4. ACCESSIBLE

Is the market accessible?

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Can the market be reached effectively using such promotion media as well as distribution media?
The marketer must be able to reach the segment and to serve it. It is no good identifying a potential
segment if you cannot serve it because of government regulations or location etc.

e) Is the market responsive?

Market segments must be defined in their willingness to purchase a product in response to
variations in the marketing mix.

f) Compatibility with corporate image.

The market must be compatible with the firm’s objectives and corporate image.

If the six criteria for effective segmentation are met, marketers should choose some means
(bases or variables) for segmenting the market.

VARIABLES FOR SEGMENTING CONSUMER MARKETS.

The following variables are commonly used to segment consumer markets.
 Geographic
 Demographic
 Psychographics and
 Behavioural variables.

1) Geographic segmentation
This calls for dividing the market into different geographical units such as.
- nations,
- states,
- regions –west, north, central, south e.t.c
- countries,
- cities or
- neighborhoods.
Attention should be paid to variations in geographical needs and preferences.
Geographical segmentation assists the seller to position retail outlets in most appropriate
locations as well as simply identifying the needs on the basis of the consumers own location.

2) Demographic segmentation
This consists of dividing the market into groups on the basis of demographic variables such
as:- Age, sex, family size, family life, cycle, income, education, occupation, religion, race and
nationally. These variables are the most popular for distinguishing customer groups because,
 Consumer’s wants and preferences are closely related to them.
 They are easier to measure than most other types of variables.

a) Age
Consumer needs and wants change with age. Hence the market should be segmented as
young, old, etc.
b) Sex
This can be employed to segment such markets for clothes deodorants, lotions, magazines,
etc. Thus the markets can be for either men or women, male or female.

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c) Family Life Cycle (FLC)

The product needs for a household vary according to marital status and the present ages of
children. Thus family life cycle can be divided into:-
 Single
 Young, married with no children,
 Young, married with young children,
 Older married with children, e.t.c.
d) Income
Marketers can segment the market according to the distribution of income e.g. under 1000
shillings per month, 2000/= 4000/= per month e.t.c.

e) Occupation
Variables include; bankers, teachers, farmers, clerks, students, housewives, secretaries, e.t.c.
A marketer can choose to specialize in the needs of one occupation group.

f) Education
e.g.
 Some primary education
 Some high school education
 College education
 University education e.t.c.

g) Religion – e.g. Muslims, Christian e.t.c

h) Race – e.g. white, black e.t.c.
i) Nationality – e.g. Asians, Africans e.t.c.
j) Ethnicity groups
k) Generation
Each consumer is profoundly influenced by the generation in which it grows up. This
influences one’s inclination to Music, politics, e.t.c.

3) Psychographics segmentation
Psychographics are psychological profiles of different consumers developed from research,
sometimes referred to as A.I.O. (Attitudes, interests and opinion profiles)
In psychographics segmentation, buyers are divided into different groups on the basis of
their:-
 Social class,
 Lifestyle and / or
 Personality characteristics.

People within the same demographic group can exhibit very different psychographics
profiles.
Consumers can thus be sub-divided on the basis of the following psychographics variables.

i) Social class

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Social class has a strong influence on people’s preferences, marketers designing products and
/or services for specific social classes build in those features that appeal to the target social
class.

ii) Lifestyle
Consumers’ lifestyles are derived from their activities, interests and opinions. Each life style
group is influenced by different marketing mixes.

iii) Personality
Type of personality groups may include;
Type of personality groups may include;
 Comparative authoritarian
 Ambitious
 Alert to change
 Self-confidence
 Prestige conscious
 Self image
 Self-concept.

4. Behavioural segmentation
Buyers are divided into groups in the basis of their,
 Knowledge,
 Attitude,
 Behaviour,
 Use or
 Response to a product.
In this respect, behavioural variables that are used to segment consumer markets include:-
 Occasions benefits,
 Benefits
 User status,
 Usage rate,
 Loyalty status,
 Buyer readiness stage,
 Attitude,
 Individual segmentation

i) Occasions benefits
Buyers can be distinguished according to occasions when they
- have a need,
- purchase a product or
- use a product.
E.g. Occasion when public transport is used mostly.

ii) Benefits
Buyers are classified according to different benefits they seek form the product. Variables
here include:-
 Economy (Low price)

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 Medical (Decay prevention)

 Bright teeth
 Good taste, e.t.c. for toothpaste.
Benefit segmentation requires determination of:
 The major benefits that people seek from the product
 The kind of people who look for such benefit
 The major brands that delivery each benefit.

iii) User status

Many markets can be segmented into
- non –users
- ex – users
- potential users
- first time users and
- regular users of a product.
All these people require different marketing approaches.

iv) Usage rate

 Markets can be segmented into
 Light
 Medium and heavy user of products.

v) Loyalty status
A market can be segmented by customer loyalty patterns. According to the loyalty status, the
buyers can be divided into: -

 Hard core loyals – consumers who buy one brand all the time.
 Soft core loyals – consumers who are loyal to two or three brands
 Shifting loyals – Consumer who shift from favouring one brand to another.
 Switchers – Consumers who show no loyalty to any brand.

A company should
 Study the characteristics of its hard-core customers e.g. whether middle class, larger
families, e.t.c.
 by studying soft-core loyals, the company can pinpoint which brands are most
competitive with its own.
 By looking at customers who are shifting away from its brands, a company can learn
about its marketing weaknesses.
 The company should be aware that what appears to be brand loyalty purchase may
reflect.
 Habits
 Indifference
 A low price or
 Non-availability of other brands.

vi) Buyer readiness stage

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At any given time, people are in different stages of readiness to buy a product;
 Some people are aware,
 Some are informed,
 Some are desirous of buying,
 Some intend to buy.
All these make a big difference in designing the marketing programme.

vii) Attitude
people in a market can be classified according to their degree of enthusiasm for a product.
Five attitude classes can be distinguished e.g.
 Enthusiastic,
 Positive,
 Indifferent,
 Negative and
 Hostile.

vii) Volume segmentation

Involves grouping businesses by size and individual type.

 Market segmentation reveals the market segment opportunities open to the firm.
 It has now to evaluate the various segments and decide how many and which one to serve.
 In evaluating the segments, the firm should look at:-
i) The segment size and growth
ii) Segment structural attractiveness. This is determined by:-
- Threat of intense segment rivalry
- Threat of new entrants.
- Threat of substitute produce.
- Threat of growing bargaining power of buyers.
- Threat of growing bargaining power and suppliers
iii) Company objectives and resources.
Selecting the market segments.
The company can go for
i) Single segment concentration
ii) Selective specialization - Selects a number of segments
iii) Product specialization - makes one product and sells to a variety of customer groups.
iv) Market specialization - firm concentrates on serving many needs of a particular customer group.
v) Full market coverage - serves all customer groups with all the products that it might need

VARIABLES FOR SEGMENTING INDUSTRIAL MARKETS

Industrial markets can be segmented using the same variables for consumer markets e.g. geographic,
demographic and behavioral. Other variables that may be used include volume segments.
1) Demographic
 Industry - Which industries buy the product
 Company size -Size of companies to focus on the product
 Location - What geographic areas should we focus on?
2) Opening variables

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 Technology - What customer technologies should we focus on?

 User-non-user status - Should we focus on heavy, medium, light users or non-users?
3) Purchasing approaches
 Nature of existing relationship.
 Power structure - Should we focus on industries that are financially dominated, engineering
dominated? E.t.c.
 Purchasing criteria i.e. focus on quality, price, and e.t.c.
4) Situational factors
 Urgency - Quick and sudden delivery
 Specific application of products or rather all applications.
 Size of order.
5) Personal characteristics
 Buyer-seller similarity - Should we focus on companies whose people and values are similar
to ours?
 Attitude towards risk - Should we focus on risk takers or risk averse group?
 Loyalty - Should we focus on companies that show high loyalty to their suppliers?

How marketing mix has been adapted for corporate customers

 Product - Higher level of complexity, frequently with a high technological content e.g. treasury
management.
 Pricing individually negotiated with the bargaining power usually on the customer's side
 Place - Little or no reliance on retail network other than for money transmission. Sales and
servicing activity usually on the consumer's premises
 People - Specialists with higher levels of autonomy and perhaps less frequent turnover than retail
staff.
 Promotion - Communication system - selective, personalized and bespoke.

Personal markets for financial service segmentation.

Key financial needs are:-
i) New-to-banking (0-21) convenience in branch, simple saving and products, basic
transmission, ease of access to funds,
ii) Mass market (21-44) typically heaviest borrowing segment, short and long term finance
vehicles, some form of insurance offering protection and wealth acquisition.
iii) Pre-retirement and the retired (45+) - vehicle for excess savings and capital, lump sum
investments, pensions, retirement planning.
iv) High net worth customers - independent personalized advice, estate planning, portfolio
management at national and international level.

2. MARKET TARGETING
Market targeting involves the evaluation and selection the most profitable segment that the firm can
serve. In evaluation of the various segments the firm considers several factors.

Evaluation of market segments

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 Segment size and growth the No. of potential customers in that segment and also has the
growth potential – E.g. in the Blanket industry, the segment has the old and the young.
 Segment structural attractiveness. This is equivalent to Michael Porter Industry. \

Structural factors
a) Threat of intense segment rivalry. The nature of competition in that industry, if there are
stiff competitors that segment is not favourable.
b) Threat of new entries. There are barriers or No barriers.
c) Threat of substitute products – favourable where substitutes are less.
d) Threat of growing bargaining power of buyers
e) Threat of growing bargaining power of suppliers – of materials etc. the suppliers may be
strong asking for higher prices of the materials.
 Company resources and re sources. A co to select that match with its objectives.
 Segment interrelationships on costs, performance and technology.
This is where the firm choose more than one segment. They should be similar and there has to be
kind of relationship.

SELECTING MARKET SEGMENTS.

(MARKET COVERAGE PATTERNS)
1. Single segment concentration.
- Firms select one market segment and concentrate on it.
- For blankets we can select on children and concentrate on that.

Reasons
a) Limited resources.
b) A segment without competitors.
c) The single segment many be used as a logical launch plan for further segments.
d) The segment may have a natural in the market.
e.g. Volkswagen have concentrated in the small cars.
Note
The single segment the firm many concentrate on a smaller portion of the segment.
e.g. Coca – Cola have identified Niche market who like diet coke.

ii) Selective specialization (Mutli –segment coverage)

The firm select a No. of segment which are attractive each of which are attractive which match the
firm objectives and resources.
e.g. Blanket industry - Boarding schools
- Colleges
- Universities etc.
This increase the sales volume. You fail in one.

iii) Product specialization

- The firm concentrates in making one product and sells to a variety of customer groups.
E.g. Unilever can come up with a product and sell to Bidco Refineries Ltd and others.
A firm may concentrate on the needs of the customer groups.
e.g. U.O.N. Education
Health facilities.

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b) Westland’s (Sarit Centers)

 Adverts
 Banking
 Bookshop /Uchumis /Restaurants /AAR

iv) Full market coverage

The firm tends to serve all customer groups with all customer groups.
Two ways:
a) Undifferentiated marketing: the firm ignore market segment differences and goes after the whole
market with offer.
It focus on what is common in the needs of the customers rather than what is different.
b) Differentiated marketing: The firm operates in most segments of the market but designs a tailed
programmed for each significantly different market e.g. Unilever co.
Kimbo 2kg, 1 kg, ½ kg, ½ kg, ¼ kg, 1/8 kg
Unga: 1 Bundle, 1 packet, 1kg.
* differentiated marketing (product proliferations where competitors come up with products.

MARKETING TARGETING

INTRODUCTION
• Market segmentation reveals the market segment opportunities facing the firm.
• The firm therefore has to evaluate the various segments and
• Decide on how many and which one to serve.

EVALUATING THE MARKET SEGMENTS

In evaluating different market segments, the firm must look at the following factors
1) Segment size and growth
 Marketing segment has to be 'right size'. Size can be measured in terms of sales volume.
 Companies should not only concentrate on sales volume but also on the growth potential of
the segment.
2) Segments structural attractiveness
A segment might have desirable size and growth characteristics and still not profitable.
 It should evaluate the long-run profitability of the market segment.
 It has to appraise its impact on profitability. Michael Porter has identified five forces that
determine the intensive long-run attractiveness of the whole market or any other segment within
it.
o Industry competitors,
o Potential entrants,
o Existence of substitute products.
o Bargaining power of buyers and
o Bargaining power of suppliers.
The five threats they pose are:-
 Threat of intense segment rivalry
A segment is unattractive if it already contains strong or aggressive competitors.
 Threat of new entrants

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A segment is unattractive if it is likely to attract new competitors who will bring in new capacity,
substantial resources and a drive for market share growth.
• Threats of substitute products
A segment is unattractive if there exists actual or potential substitutes for the product.
• Threats of growing bargaining powers of buyers
A segment is unattractive if the buyers posses strong or increasing bargaining power. Interested
in low prices but high quality.
• Threat of growing bargaining power and suppliers
A segment is unattractive if the suppliers posses a strong or increasing bargaining power. They
can raise prices or reduce the quality and quantity of products and services offered.
3) Company objectives and resources
 Even if the segment has positive size and growth and it is attractive, the company has to
consider its own objectives and resources.
 The segment can be dismissed because it does not fit in the company's long-run objectives.
 Even if segments fit the company's objectives, it must consider whether it has the required skills
and resources to succeed in that segment.
4) Segment interrelationships
Segments selected should be inter-related in terms of costs, performance and technology for
effectiveness.

SELECTING THE MARKET SEGMENTS

From the results of segment evaluation, the company may select one or a few segments worth
entering.
It must decide which ones and how many to serve.
Five possible market coverage patterns should be considered:-

1. Concentrated marketing g/single segment concentration

The company selects only a single segment to concentrate on. This is because;
- The company may have a natural match to the segment's success requirements.
- The company may have very limited resources
- It might be u segment with no competitor
- Can be a segment that is a logical launching pad for further segment expansion.
E.g. Volkswagen has concentrated on a small car market.

Advantages:-
 A firm achieves strong market position in the segment owing to its greater knowledge of the
segments needs and special reputation it builds.
 A firm enjoys many operative economies through product specialization, distribution and
promotion.
 It can earn high returns on interest.
Disadvantages:-
 Particular segment can turn sour.
 Competitor may decide to enter same market.

2) Selective specification
(Multi-segment coverage)
 A firm selects a number of segments

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 Each of which is objectively attractive and matches its objectives and resources.

Advantages:-
 A firm's risks are diversified and even if the segment is unattractive, it can still make profits in
other segments
 It may result in synergistic effects.
 Promotion costs are lowered.
 More customers are captured.
Disadvantages:-
 Losses
 Expensive
 Needs more resources

3) Product specialization
A firm concentrates on making one product and selling it to a variety of customer groups
This strategy works when;
- Demand is continuous
- There are homogenous goods
- Same resources are used

Disadvantages:-
- A lot of expenditure on advertisements
Advantage:-
- A firm avoids putting all eggs in one basket
4) Market specialization
A firm concentrates on serving many needs of a particular customer group.

5) Full market coverage

Here, the firm attempts to serve all customer groups with all the products that they may need.
Large firms can cover a whole market in two broad ways, namely:-
- Un differentiated marketing and
- Differentiated marketing

Undifferentiated marketing
(Market Aggregation)
The firm ignores market segment differences and goes after the whole market with one product
offer.

Focus
It focuses on what is common in the needs of buyers rather than what is different.

Design
It designs a product and a marketing programme that will appeal to the broadest number of buyers.

Reliance
It relies on mass distribution and mass advertising.
The aim is to give a product a superior image in people's minds.

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Advantages:-
 The narrow product line keeps down production, inventory and transportation cost.
 The absence of segmentation lowers the cost of marketing research and product management.
 The undifferentiated advertising programmes keep down advertising costs.
Disadvantages:-
- Lack of personal touch.
- New entrants.
- There may be intense competition in the large market segments.
- It may be unprofitable operating in large segments.

Differentiated marketing
Here, the firm operates in most segments of the market but designs tailored programmes for each
significantly different segments.

Advantages:-
- Creates more total sales than undifferentiated marketing.
- Customer satisfaction
- Better defined marketing programmes
Disadvantages:-
It increases the cost of doing business E.g.
- Product modification.
- Production,
- Administrative.
- Inventory.
- Promotion and
- Distribution costs.

MARKET POSITIONING

Meaning
This is the act of designing a company's offering and image to occupy a
Distinctive place in the target market's mind. i.e. The act of creating a difference between a
company's offer from those of competitors.

A difference is worth establishing to the extent that it satisfies the following criteria.
1) Important: - The difference delivers a highly valued benefit to a sufficient number of buyers.
2) Distinctive:- The difference is delivered in a distinctive way
3) Superior: The difference is superior to other ways of obtaining the benefit.
4) Pre-emptive: The difference cannot be easily copied by competitors.
5) Affordable - The buyer can afford to pay for the difference.
6) Profitable - The Company will find in profitable to introduce the difference.

Positioning strategies:-
1) Attribute positioning
A company positions itself on an attribute e.g. size, number of years in existence.

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2) Benefit positioning
The product is positioned as the leader in a certain benefit.
3) Use or application positioning
Positioning a product as the best for some use or application.
4) User positioning
Positioning a product the best for some user group e.g. Bic pen. Food for consumption.
5) Competitor positioning
The product claims to be better in some way then a named competitor.
6) Product category positioning
The product is positioned as the leader in a certain product category
7) Quality or price positioning.
The product is positioned as offering the best value

How many differences to promote

1) Single benefit positioning
E.g. best quality, best service, lowest price, best value, safest, fastest, most convenient, most
advanced technology
2) Double benefit positioning
May be necessary if two or more firms claim to be the best on the same attribute.
3) Triple benefit positioning
E.g. Smith Kline Beecham promotes its Aquafresh toothpaste as offering these benefits
- Anticavity protection
- Better breath
- Whiter teeth.
The challenge is to convince the consumer the product offers all three.

As companies increase their number of claims for their brands, they risk disbelief and loss of clear
positioning
Companies must avoid four major positioning errors.
1) Under Positioning
When buyers have only a vague idea of the brand The brand is seen as just another entry in a
crowded marketplace. E.g. When Pepsi introduced its clear crystal Pepsi in 1993 (U.S.A.)
customers were distinctively unimpressed. They didn't see "clarity" as an important benefit of a
soft drink.
2) Over Positioning
Buyers may have too narrow a image of the brand.
These buyers might think that suits at Sir Henrys’ start at I5000/= when in fact it offers
affordable suits started at 3000/=
3) Confused Positioning
Buyers might have a confused image of the brand resulting from the company making too many
claims or changing the brands positioning too frequently e.g. omo
4) Doubtful Positioning
Buyers might find it hard to believe the brand claims in view of the products features, price or
manufacturers.

DEVELOPING POSITIONING STRATEGY

Positioning is the act of creating of difference between company’s products and those of the
competitors in the minds of customer.

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Kotler: is the act of designing the co. image so that it occupies the distinct place in the
customer’s mind.
Positioning can be psychological (mind) and repositioning (company)

CRITERIA FOR DIFFERENTIATION

i) Importance: That difference is highly valued by a sufficient No. of buyers. The
difference also delivers a value.
ii) Distinctive: the difference is offered in a unique way
iii) Superior: superior to other ways to other ways of obtaining the same benefits.
iv) Communicable: the difference should be communicated understood by the
customers.
v) Pre-emptive: the difference should not be easily copied by competitors.
vi) Affordable: the buyers should afford
vii) Profitable: The difference to be profitable to the firm.

POSITIONING STRATEGIES

i) Attribute position strategy.

The company position itself on the attribute e.g. the no. of years in existence e.g. KCB Bank
102 years.
UON – longest existence.
Alliance high school

ii) Benefit positioning

The product is positioned as a leader in a certain benefit e.g. if you overeat you take Eno, –
Action.

iii) Use /Application positioning

Involves positioning of product for the use and application e.g. to Bic is always best for
students.

iv) Competitor positioning

A product is positioned in better than supplied or renamed than competitors.
Kencell better option
Change in seconds others change in minutes.

v) Product category positioning

Product positioned as a leader in that category e.g. Airline – The pride of Africa - - Kenya
Airway.

vi) Quality /price positioning

The product is positioned as offering the best value.
The product is experience suggesting high value

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LECTURE FIVE

PRODUCT CLASSIFICATION AND SERVICES MARKETING

LEARNING OBJECTIVES
After this lecture, students should be able to:
1. Understand how products are classified;
2. Classify products and develop marketing strategies for each class;
3. Understand the characteristics of services and compare them with goods;
4. Appreciate the problems associated with the intangibility, variability and perishability of services;
5. Develop market strategies that address these service characteristics.

INTRODUCTION
From this session onward, the emphasis changes to marketing decision-making. Marketing as a business
function and its decisions are concerned with developing the marketing mixes (4Ps) for the chosen
target markets. We begin by understanding that there are different types of products and that these
are marketed differently. Services marketing will also be examined in this session.

What is a product?
A product is anything an idea (a good idea put into use e.g. safe driving, family planning etc), a
services e.g. haircuts, (supporting services such as installation, delivery, warranty and after-sales
services & parts or a physical good and persons, organization activity (dancing at night to satisfy the
needs,) that can be offered to a customer or market in order to satisfy a want or need through
exchange for some consideration. It is the most important.

LEVELS OF A PRODUCT

Core product (Benefit) The fundamental service or benefit the customer is really buying e.g. a
hotel. Hotel guest is buying the following:
- Comfort, sleeps, rest and security.
- Account holder: access to funds convenience,
- Food – satisfaction

Note: marketers have to sell benefits and not physical products.

Basic product.
Is the physical / tangible product
- Security is ensured by the room, the bell, bed.
- Account holder benefits can be converted into visa-card.
- Basic products have features and consumers make their choices bases on the features.

In the hotel the features are: single beds, double beds.

Expected product

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A set of attributes and condition buyers normally expect and agreed to when they purchase a
product.
Hotelier – telephone, clean beddings, Korans, Table TV.

Augmented product: This is what customers’ desire beyond their expectations competition
essentially takes place at the product.
- augmentation level
- these include: free samples etc
- marketers need to be innovative cooking for new differentiators
- The augumentated product therefore there is need for a continuous different.
- The augmented product should be at affordable prices.

Potential product: This encompasses all the augmentations and transformations that the products
might ultimately undergo in the future. We want the customer to come back.
e.g. African Hotel Dar-es-salaam
prepared cake, sent follow up letters thanking for booking in the hotel etc.

PRODUCT CLASSIFICATIONS
It is important to classify products because different types of products require different marketing
strategies

A) BY DURABILITY AND TANGIBILITY.

i) Non durable goods: Are tangible goods that normally are consumed in one or more uses. These
goods are consumed quickly and purchased frequently. Example: Food stuff, edibles.
Price: such products require low mark-ups and discounts are offered
Place: such products are available in every distribution outlet. The marketer engages intensive
distribution between strategies.
Promotion: Require more advertising to build trials and brand preferences. They may require some
sales promotions.
Product: Products are available at different packaging to fit the consumer needs. They should also
have attractive packaging.

ii) Durable goods.

Are tangible goods that are normally serves many uses like TV and clothing?
Appropriate strategies.
Price: charged high mark-ups.
Place: Selective distribution or inclusive strategy.
Promotion: such product requires more personal selling and seller guarantee. Advertising should
also do in creating awareness.
Product: Marketers make sure that they meet the quality needs of the customer. The product should
be modified with change in technology.

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SERVICES

Services are intangible, variable and perishable.

The word of the mouth as the quality of market. Location (place) in the markets needs to provide
the physical evidence of process people: The barber should be smart to the styles that the people can
admire.

(i) Intangibility.
Most services are experienced during or after consumption but not before.
Problem: Hard for marketer to demonstrate service quality before consumption. Hard for customer
to evaluate service quality before consumption.
Solutions:
Indicators of service quality
 Brand reputation/association
 Appearance of premises etc.
 Price charged
 Length of establishment
 Past customers & testimonials
 Focus on benefits (end-result): after-sales assurances/ warranties/ money-back guarantees

(ii)Services are highly variable / heteroganisms.

Service quality varies and depends on WHO the provider is, WHEN the service is provided and to
WHOM (the customer). Not two persons can offer the same quality service and no one man can
offer different qualities at the same service.
Problem Hard for marketer to assure service quality in advance and also for customers to determine
service quality in advance
:
Solutions (Actions – Marketers’ implication). How the marketer should minimize the variability?
Establishing the quality standards
 Employee training: Staff training after recruiting the “right” ones, develop and motivate
them.
 Conducting regular customer feedback and give employees Employee feedback – to be
announced in the bulletin.
 Standardise operation procedures, delivery and administration.
 Mechanisation of services machines etc Management by objective – the employee to be
responsible of their actions.

(iii)Perishability/Inseparability
Most services cannot be stored. They are produced and consumed at the same time. It is not
possible to separate the service provider and the service and the person offering the service.
Example: The service provider has to be present at the point of delivery.

Problem: Unused service (supply > demand) is a irrecoverable cost and Under-service (demand >
supply) is lost customer (income)
Solutions Actions – Marketers’ implication
Change supply

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 Flexible staffing
 Flexible capacity
 Mechanisation of the services provision
 Offering multiple services
 Change demand
 Flexible pricing
 Reservation / booking
 Cultivate low demand

CONSUMER GOODS CLASSIFICATIONS

Convenience goods
They“Consumer Durables” “FMCGs” (Fast Moving Consumer Goods are purchased and
consumed frequently and purchased with a minimum time or effort and low involvement or priced.
Stable goods – regular purchased. Impulse goods and emergency goods- like umbrellas during rainy
seasons. Note: actions are the same, check with the buying behaviour notes.

Shopping goods
They are “Consumer Durables”. They are those products that are infrequently purchased because
they last longer (Durable). The consumers shop around to compare features suitability, quality, price
and style. Consumer’s ppurchases after spending time, in the process of selection and purchase.
Action (marketer) durable goods.
Low brand loyalty (unless specialty brand)/Medium-High involved products

Specialty goods
They are goods with unique characteristics, have unique and desirable attributes/Willing to spend +
time/efforts and / or brand identification for which a significant group of buyers is habitually
willing to make special purchasing efforts. Not concerned with comparison Buyers insist on these
products

Example: Wedding gown dress, Designer clothes, Vehicles.

Marketers need to ensure that consumers are aware of the location.

Unsought goods “No compromise”

Are goods that the consumer does not know about or knows but does not normally think buying
e.g. life insurance policy. Can be convenience or shopping products/consumers do not think of
buying them until there is a turn of events. Brand insistence (high brand loyalty)/Products that are
new in the market. Must-have brand for the target market
Example: Invitation of fund raising and Funeral plots (coffins).
.
Such products require hard selling, personal selling and advertising. The products should be available
at the point of need e.g. mortuary to be next to hospital.

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Industrial goods classification

Materials and parts: These are products that are contrary in the production process i.e. they can be
traced in the final products. e.g. Raw materials, mineral resources.
Action: Locational factors: If the raw material is bulky, the factory should be located at he source of
the raw materials and the reverse is true. The product requires direct selling of opposed to use of
intermediaries.

Capital items
Partly consumed in the production process. Consumed in the process of depreciation e.g. machines,
equipments, building and land.
Action: Requires leasing installment buying and also involve direct selling – requires more personal
selling as opposed to use of intermediaries.

Supply and business services

Products that facilitate production process but they are not consumed in this process.
Examples: Office stationeries, duplicators, legal services, banking services, research services,
management consultant services, auditor services.
Action: They require direct selling. They require a more seller guarantee.
http://www.marketingteacher.com/answer-value-chain-analysis/

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