Chapter 5: Marketing

5.1. Introduction
Business firms and non-profit organizations engage in marketing. In a broad sense, marketing consists of
all activities designed to generate or facilitate an exchange intended to satisfy human needs. The concept
of market is very important in marketing. The American marketing Association defines a market as “The
aggregate demand of the potential buyers for product or a product or services “. Philip Kotler defines “A
market as an area of potential exchanges”. Thus, a market is a group of buyers and sellers interested in
negotiating the terms of purchase/sale for goods or services.
Marketing management is the art and science of choosing target markets and getting, keeping, and
growing customers through creating, delivering, and communicating superior customer value. Marketing
old sense of making a sale - 'selling' - but in the new sense Marketing is meeting customers‟ needs and
wants profitably. Marketing deals with customers. Selling is an action which converts the product in to
cash whereas marketing is the process of matching and satisfying the customer needs and wants. Selling
occurs only after a product is produced. By contrast, marketing starts long before a company has a
product.

5.2. Definitions of Marketing

Marketing can be defined in various ways. The simplest definition of marketing is – “managing
profitable customer relationships”. According to Philip Kotler, Marketing is a social process by which
individuals and groups obtain what they need and want through creating, offering, and freely exchanging
products and services of value with others. American Marketing Association, also define as marketing is
the process of planning & executing the conception, pricing, promotion & distribution of ideas, goods &
services to create exchange that satisfy individual & organizational goals. The Chartered Institute of
Marketing defines Marketing as: “Marketing is the management process for identifying, anticipating &
satisfying customer requirements profitably.”
5.3. Core Concepts of Marketing
A. Needs, Wants & Demand
Needs: is a state of felt deprivation or basic human requirements. E.g. food, cloth, shelter, etc.
Wants: Wants are desires for specific satisfiers of needs. Wants are shaped by culture & individual
personality. E.g. A person needs food but wants spaghetti.
Demands: Demands are wants for specific products that are backed by ability and willingness to buy
them.
B. Value: A set of benefits promised to consumers to satisfy their needs.
C. Product: - is anything that can be offered to satisfy a need or want.

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D. Exchange - is the act of obtaining a desired object from someone by offering something in return.
E. Marketing offer – “Combinations of products, services, information or experiences offered to a
market to satisfy a need or want”.
F. Utility- is the satisfaction of customers that are getting from using the product. The level of
satisfaction is measured by using utility.
5.4. The Concept and Philosophy of Marketing
There are five alternative concepts under which organizations design and carry out their marketing
strategies.
1) Production Concept: it holds that consumers will favor products that are widely available
(accessible) and highly affordable (low in price), inexpensive. Therefore, the organization should
focus on improving production and distribution efficiency.
2) Product Concept: it holds that consumers will favor products that offer the most quality,
performance and innovative features. Therefore, the organization should devote its energy to making
continuous product improvements. „A good product will sell itself‟
3) Selling Concept: it holds that consumers will not buy enough of the firm‟s products unless it
undertakes a large-scale (aggressive) selling and promotion effort.
4) Marketing Concept: it holds that achieving organizational goals depends on knowing the needs and
wants of target markets and delivering the desired satisfactions better than competitors do. The
marketing concept has been expressed in many colorful ways:
 Meeting needs profitably
 Find wants & fills them
 Love the customers, not the product
 The customer is King!‟
5) Societal Marketing Concept: it holds that marketing strategy should deliver value to customers in a
way that maintains or improves both the consumer‟s and the society‟s well-being.
5.5. Marketing Mix and Strategies
5.5.1. Marketing Mix Elements (4P’s)
Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the
target market. The marketing mix is also referred to as the Four Ps: product, place, price, and promotion.
1) Product: refers to goods/services produced for sale. A tangible good, an intangible service, or a
combination of these.
2) Price: is the amount of money charged for a product or service. It is the sum of the values that
consumers exchange for the benefit of using the product/service. Price is the only element in the
marketing mix that produces revenue; all other elements represent costs.

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3) Place: means the different ways of getting your products or services to your customers. It is also
referred to as distribution. It is about getting the goods or services to the right place at the right time
for the customer. It is the movement of goods and services from the place of producer through
middlemen to the ultimate consumers/users.
4) Promotion: Refers informing your customers of your products and services and attracting them to
buy them. It is the communication of the company and its products to customers.
What Is Marketing Strategy?
A marketing strategy combines product development, promotion, distribution, pricing, relationship
management and other elements; identifies the firm's marketing goals, and explains how they will be
achieved, ideally within a stated timeframe. Marketing strategy determines the choice of target market
segments, positioning, marketing mix, and allocation of resources.
 Pricing Strategy: - The following are some of pricing strategies mostly applicable in the real-world
scenario.
A. Price Skimming: this is a type of pricing strategy that firms use by charging the highest possible
price that buyers who most desire the product will pay. It is setting higher price initially and
lowering when new competitors enter the market.
B. Penetration Pricing: In this strategy, prices of products are reduced compared to competitors‟
price for the same product to penetrate into markets and to increase sales. It is setting low initial
price in order to penetrate the market quickly and deeply to attract large number of buyers and to
have large market share.
C. Psychological pricing: based on the belief that certain prices or price ranges are more appealing
to buyers. This method involves setting a price in odd numbers (just under round even numbers)
such as $49.95 instead of $50.00. Although not supported by any research findings, its
proponents claim that the consumers see a $49.95 price as 'just in the price range of $40‟rather
than in the $50. Setting the price of a product in a way that will alter its perception by customers.
D. Geographic Pricing: The distance between the seller and the buyer is considered. Setting prices
for customers located in different parts of the country.
E. Competition -based Pricing – It is setting price based on the prices that competitors charge for
similar products. Setting prices relative to competitors.
F. Time-based pricing- a firm varies its price by the season, the month, the day, and even the hour.
 Promotion Strategies: - Promotional strategy is choosing a target market and formulating the most
appropriate promotion mix to influence it. An organization‟s promotional strategy can consist:
Promotional mix used to inform, persuade and remind about the goods and services that they provide
to the market.

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 I. Advertising: It is any paid form of non-personal, one-way, mass communication about an
organization, good, service, or idea by an identified sponsor. Advertising is a way to bring attention to
your product or business by publishing or broadcasting a message to the public through various
media. Your choices of media include the following:
• Print media: newspapers, magazines.
• Broadcast media: radio, television.
• Outdoor media: billboards or posters placed on public and other transportation.
II. Personal selling: This is the two-way flow of communication between a buyer and seller, often in a
face to face encounter, designed to influence a person‟s or group‟s purchase decision. Personal selling
involves a personal presentation by a salesperson for the purpose of making sales and building
relationships with customers.
III. Public relations: Public relation is a form of communication that seeks to change the perceptions of
customers, stakeholders, suppliers, employees and other publics about a company and its products.
IV. Sales promotion: This promotion type involves short term incentives of value such as discounts, free
samples, and prizes to be offered to arouse interest of customers in buying the good/service.
 Distribution Strategies: - marketing channels are the most important actors for the effective and
efficient distribution of products. Marketing Channels are individuals/organizations involved in the
process of making the product available for use or consumption by consumers. Direct channels: In
this type of channel, producers and end users directly interact. Indirect channels: In this type of
channel intermediaries are inserted between seller and buyer. Intermediaries include Wholesalers,
retailers, agents, brokers.
5.6. Marketing Information System
A marketing information system consists of people, equipment and procedure to gather, sort, analyze,
evaluate and distribute needed timely and accurate information to marketing decision makers. The role of
the information system is to assess the manager‟s information needs, develop the needed information, and
distribute the information is a timely fashion to the marketing managers. The needed information is
developed through internal company records, marketing intelligence activities, marketing research, and
marketing decision support analysis.
5.6.1 Marketing Research
Marketing research is a systematic design, collection, analysis, and reporting of data relevant to a specific
marketing situation facing the company. It is the process of gathering information about consumers that
will improve marketing efforts. Accordingly, marketing research involves the identification, collection,
analysis, and dissemination of market information. Market research helps the marketer to anticipate or
respond to customer needs.

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Marketing Research Process
The marketing research process follows six basic steps:
1. Define the problem
The foremost decision that every firm has to undertake is to find out the problem for which the research is
to be conducted. It represents the single most important step to be performed. A well-defined problem is
half-solved problem. An accurate problem formulation specifies the types of information needed to help
solve the marketing problem. In order to define the problem appropriately, each firm must have a clear
answer to the questions. These are: What is to researched? (content and the scope), Why the research is to
be done? (decisions that are to be made).
2. Develop the research plan
This step involves gathering the information relevant the research objective. It includes:
 Data sources: the researcher can collect the data pertaining to the research problem from either
the primary source or the secondary sources or both the sources of information. The primary
source is first-hand data that does not exist in any books or research reports whereas secondary
data is the second-hand data which is available in the books, journals, reports.
 Sampling plan:, the researcher has to design a sampling plan and have to decide on the
following.
 Sampling unit: whom shall we survey?
 Sample size: how many units in the population shall be surveyed?
 Sampling procedure: how the respondents shall be chosen?
 Contact methods: the researcher has choose the medium through which the respondents can be
contacted. Mediums- emails, telephone, in person.
3. Collect the information: the researcher has to adopt the methods to collect the information.
4. Analyze the information: the researchers apply several statistical techniques to perform the analysis.
5. Present (report) the findings: finally, all the findings are presented to the top management these are;
managing director, CEO, or board of directors to make the marketing decisions in line with the
research. The report includes the major findings and suggestions for actions. In addition, an oral
presentation should be made to management using tables, figures, and graphs to enhance clarity and
impact.
6. Make the decision: this is the last step of marketing research.
5.6.2. Marketing Intelligence
A marketing intelligence is a set of procedures and sources used by managers to obtain their everyday
information about pertinent developments in the marketing environment.

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 Marketing managers often carry on marketing intelligence by:
 Reading books, newspapers, and trade publications;
 Talking to customers, suppliers, distributors and other outsiders; and
 Talking with other managers and personnel within the company.
Marketing intelligence is carried out by the manager him/herself rather than a professional researcher.
Marketing research is more company specific whereas marketing intelligence encompasses marketing research.
Marketing research is done by professional researcher but not marketing intelligence.
Ways to Undertake Marketing Intelligence
i. Unfocused scanning: Any information that may be useful is gathered without any specific purpose in
mind.
ii. Semi-focused scanning: no specific purpose. The manager is not in search of particular pieces of
information that he/she is actively searching but does narrow the range of media that is scanned. For
instance, the manager may focus more on economic and business publications, broadcasts etc. and
pay less attention to political, scientific or technological media.
iii. Informal search: - limited and unstructured attempt to obtain information for a specific purpose. For
example, entering the business of importing frozen fish from a neighbouring country may make
informal inquiries as to prices and demand levels of frozen and fresh fish.
iv. Formal search: - The information will be required to address a specific issue. Whilst this sort of
activity may seem to share the characteristics of marketing research it is carried out by the manager
him/herself rather than a professional researcher. Moreover, the scope of the search is likely to be
narrow in scope and far less intensive than marketing research.

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 Chapter 6: Business Financing (Financing the New Venture)
6.1. Sources of Financing
Financing means more than merely obtaining money; it is very much a process of managing assets wisely
to use capital efficiently. There are several sources to consider when looking for start-up financing. But
first you need to consider how much money you need and when you will need it. Finance is needed
throughout a company‟s life. The type and amount of finance required for a business depends on many
factors: type of business, success of firm, and size of the business. The financial needs of a business will
vary according to the type and size of the business. For example, processing businesses are usually capital
intensive, requiring large amounts of capital.
Retail businesses usually require less capital. There are many sources of funding available for
entrepreneurial ventures. These alternatives can be generally grouped in two major sources of finance
which are equity financing and debt financing.
6.1.1. Equity Financing
Equity financing- is the process of obtaining funds for the company in exchange of ownership. It is
obtained through investment made by investors in exchange for ownership. Equity financing means
exchanging a portion of the ownership of the business for a financial investment in the business. The
ownership stake resulting from an equity investment allows the investor to share the company‟s profits.
Equity involves a permanent investment in a company and is not repaid by the company at a later date.
Equity capital is money given for a share of ownership of the company. Unlike debt financing, it does not
have to be paid back with interest. Instead, investors receive dividends based on the company‟s
performance. Equity capital is also referred to as a risk capital because the investors bear the risk losing
their investment if the business fails. The basic characteristics of equity financing are:
 No maturity dates.
 Dividends payments depend on firm‟s performance.
 Shareholders are owners and can influence firm management.
 Shareholders are having claims on assets after the creditors‟ claims.
Source of equity financing
1. Personal savings - the first place an entrepreneur should look for money. The most common source
of equity capital for starting a business.
2. Friends and family members - After emptying their own pockets, entrepreneurs should turn to those
most likely to invest in the business: friends and family members.
3. Venture Capital - Venture capital refers to financing that comes from companies or individuals in
the business of investing in young, privately held businesses. They provide capital to young
businesses in exchange for an ownership share of the business. Venture capital firms usually don‟t

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 want to participate in the initial financing of a business unless the company has management with a
proven track record. Generally, they prefer to invest in companies that have received significant
equity investments from the founders and are already profitable.
4. Public stock sale - “going public”- initial public offering- when a company raises capital by selling
shares of its stock to the public for the first time.
6.2.2. Debt Financing
It is financing that must be paid back with interest. It is stated as a liability in a company‟s balance sheet.
Debt financing involves borrowing funds from creditors with the stipulation of repaying the borrowed
funds plus interest at a specified future time. For the creditors (those lending the funds to the business),
the reward for providing the debt financing is the interest on the amount lent to the borrower. Debt
financing may be secured or unsecured. Secured debt has collateral (a valuable asset which the lender can
attach to satisfy the loan in case of default by the borrower). Conversely, unsecured debt does not have
collateral and places the lender in a less secure position relative to repayment in case of default.
The basic characteristics of debt financing are:
 Debits have specific dates by which it must be repaid.
 Interest must be paid regardless of operating results.
There are numerous sources of debt financing.
1. Bank loans (commercial banks): the commercial banking system is always relied upon as a source
of credit for small businesses. Commercial banks are by far the most frequently used source for short
term debt by the entrepreneur. In most cases, commercial banks give short term loans (repayable
within one year or less) and medium-term loan (maturing in above one year but less than five years),
long term loans (maturing in more than five years).
Bank Lending Decision: -The small business owner needs to be aware of the criteria bankers use in
evaluating the credit worthiness of loan applications. Most bankers refer to the five C‟s of credit in
making lending decision. The five C‟s are capital, capacity, collateral, character, and conditions.
1. Capital: A small business must have a stable capital base before a bank will grant a loan.
2. Capacity: The bank must be convinced of the firm‟s ability to meet its regular financial
obligations and to repay the bank loan.
3. Collateral: The collateral includes any assets the owner pledges to the bank as security for
repayment of the loan.
4. Character: Before approving a loan to a small business, the banker must be satisfied with the
owner‟s character. The evaluation of character frequently is based on intangible factors such as
honesty, competence, willingness to negotiate with the bank.

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 5. Conditions: The conditions surrounding a loan request also affect the owner‟s chance of receiving
funds. Banks consider the factors relating to the business operation such as potential growth in the
market, competition, location, and loan purpose. Another important condition influencing the
banker‟s decision is the shape of the overall economy including interest rate levels, inflation rate,
and demand for money.
2. Government financing programs: the government has a variety of financing programs for small
businesses.
3. Other: trade credit which entrepreneurs can extend their credit in the form of delayed payment.
Asset based lenders who are willing to provide loans to entrepreneurs with a condition that idle
assets to pledge as collaterals.

6.1.3. Other Source of Financing

 Lease Financing
Lease financing is one of the important sources of medium- and long-term financing where the owner of
an asset gives another person, the right to use that asset against periodical payments. The owner of the
asset is known as lessor and the user is called lessee. The periodical payment made by the lessee to the
lessor is known as lease rental. Under lease financing, lessee is given the right to use the asset but the
ownership lies with the lessor and at the end of the lease contract, the asset is returned to the lessor or an
option is given to the lessee either to purchase the asset or to renew the lease agreement.
 Government Programs
Federal, state, and local governments have programs designed to assist the financing of new ventures and
small businesses. The assistance is often in the form of a government guarantee of the repayment of a
loan from a conventional lender. The government also provides finance to companies in cash grants and
other forms of direct assistance, as part of its policy of helping to develop the national economy,
especially in areas of high unemployment.
 Crowd Funding
Crowd funding is a method of raising capital through the collective effort of friends, family, customers,
and individual investors or even from the general public. This approach taps into the collective efforts of a
large pool of individuals primarily online via social media and crowd funding platforms and leverages
their networks for greater reach and exposure. Ex. GoFundMe