CHAPTER 5: MARKETING

5.1 INTRODUCTION
Business firms and non-profit organizations engage in marketing. Products marketed include
goods as well as services, ideas, people, & places. Marketing activities are targeted at market
consisting of product purchasers who may be individuals and groups that influence the success of
an organization. The foundation of marketing is exchange.
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.
This chapter discusses about marketing and its basic components.
5.2 Meaning and Definitions of Marketing

Thus, the essence of marketing is a transaction or exchange. In this broad sense, marketing
consists of activities designed to generate and facilitate exchange intended to satisfy human
needs or wants.
Business firms and non-profit organization engaged in marketing. Marketing has been defined in
various ways. The definitions that serve our purpose best are as follows:

Marketing is a social and managerial process by which an individual or group obtain

what they need and want through creating, offering and exchanging of product of values
with others (Philip Kotler,2012).
Marketing is the total business activity designed to plan, price, promote and distribute
want satisfying products to target market to achieve organizational goal (William
J.Stanton, 1984).
Marketing is the effort to identify and satisfy customers’ needs and wants. It involves
finding out who your customers are, what they need and want, the prices, the level of
competition. It involves the knowledge and all the processes you undertake to sell your
product.
The above definitions of marketing reset on the following core concepts: needs, wants and
demands; products (Goods, Services and Idea), value, cost and satisfaction: exchange and
transaction; Relationship and Networks; market; and marketers and prospects. Marketing
answers the following questions:
Who are my customers?

 What are my customer’s needs and wants?

 How can I satisfy my customers’?
 How do I make a profit as I satisfy my customers?

5.3 Core Concepts Of Marketing

5.3.1 Needs, Wants and Demand

A person at any given time has a need. This need arises out of physical or psychological
imbalances. Marketing starts with human needs and wants. People need food, air, water, clothing
and shelter to survive. Beyond this, people have a strong desire for recreation, education and
other services. Let see terms related with this as follow:
Need: - Human Need is a state of deprivation of some basic satisfaction. People require
food, clothing, shelter, safety and belonging and esteem.

 Wants: - Wants are desires for specific satisfiers of needs. Human wants are continually
shaped and reshaped by social forces and institutions including churches, schools,
families and business cooperation. Eg. A person needs food but wants spaghetti
Demands: - Demands are wants for specific products that are backed by ability and
willingness to buy them. Wants become demand when supported by purchasing power
 Product: - is anything that can be offered to satisfy a need or want. Products broadly
classify as tangibility and intangibility features.
 Value: - is the consumer’s estimate of the products overall capacity to satisfy his or her
needs.
According to DeRose, value is “the satisfaction of customer requirement at the lowest
cost of acquisition, ownership and use”.
 Cost: - is the amount of money that are going to be expended or already incurred to
acquire a product.
 Exchange: - is the act of obtaining a desired product from someone by offering something
in return.
 Transaction: - is the trade of values between two parties.
  Market: - consists of all the potential customers sharing a particular need or want who
might be willing and able to engage in exchange to satisfy their need or want.
5.4 Importance of Marketing

he money pays for designing the products to meet our needs, making products readily
available when and where we want them, and informing us about producers. These activities add
want satisfying ability or what is called utility, to products.

A customer purchases a product because it provides satisfaction. That something that makes a
product capable of satisfying want is its utility. The kinds of utility that marketing
provides in the process are as follows:

1. Form Utility: Form utility is associated primarily with production- the physical or chemical

changes that make a product more valuable. When timber is made into furniture, form utility is
created.

2. Place Utility: Place utility exists when a product is readily accessible to potential customers.

So physically moving the products to a store near the customers add to its value.

3. Time Utility: Time utility means having a product available when you want it.

4. Information Utility: Information utility is created by informing prospective buyers that a

product exists. Unless you know a product exists and where you can get it, the product has no
value.

5. Possession Utility: Possession utility is created when a customer buys the product-that is,
ownership is transferred to the buyer. Thus, for a person to consume and enjoy the product, a
transaction must take place. This occurs when you exchange your money for a product.

5.5 Marketing Philosophies

There are five competing concepts under which organizations can choose to conduct their
marketing activities:
namely, the production concepts, the product concept, the selling/sales concept, the marketing
concept, the societal marketing concept and the Relationship Marketing Concept.

1. The Production Concept

The production concept is one of the oldest concepts in business. The production concept holds
that consumers will favor products that are widely available and low in cost.
2. The Product Concept
Other businesses are guided by the product concept. The product concept holds that consumers
will favor those products that offer the most quality, performance or innovative features.
Managers in product oriented organization focus their energy on making superior products and
improving them over time.
3. The Selling Concept/Sales Concept
The selling concept (or sales concept) is another common approach. The selling concept holds
that consumers, if left alone, will ordinarily not buy enough of the organization product. The
organization must therefore undertake an aggressive selling and promotion effort.
4. The Marketing Concept
The marketing concept is a business philosophy that challenges the three concepts we just
discussed. Its central tents crystallized in the mid-1950s.
The marketing concept holds that the key to achieving organizational goals consists of being
more effective than competitors in integrating marketing activities toward determining and
satisfying the needs and wants of target markets.
The marketing concept has been expressed in many colorful ways:
“Meeting needs profitably”
“Find wants and fills them”
“Love the customers, not the product etc.”
5. The Societal Marketing Concept
The societal marketing concept holds that the organization should determine the needs, wants
and interests of target markets. The societal marketing concept holds that the organization’s task
is to
determine the needs, want, and interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors in a way that preserves or enhances the
consumers and the society’s wellbeing.
Summary of marketing concept

6. Relationship Marketing
Relationship marketing is the practice of building long term satisfying relations with key parties
customers, suppliers, distributors- in order to retain their long term preferences and business. The
ultimate outcome of relationship marketing is the building of a unique company asset called a
marketing network.
5.6 Marketing Information Systems
Every firm must organize the flow of information to its marketing managers. Companies are
studying their manager’s information needs and designing marketing information system to meet
these needs.
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 marketing managers to carry-out their analysis, planning, implementation, and control
responsibilities, they need information about development in the marketing environment.
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.
MIS: - consists of equipment and procedure together, sort, analyze, evaluate and distribute
needed timely and accurate information to marketing decision makers.
5.6.1 Marketing Research
Why market research will conduct ?
Marketing research is the systematic and objective identification, collection, analysis, and
dissemination of information for the purpose of assisting management in decision making related
to the identification and solution of problems and opportunities in marketing.
Market research is the systematic design, collection, analysis and reporting of data relevant to
a specific marketing situation facing an organization.
 Basic vs. Applied Research
 Basic research, also called “pure” research is the task of scholars and academicians. Its
goal is to further the knowledge of mankind.
 Applied research, while calling upon basic research as its foundation, is meant to answer a
specific question concerning a real world problem. Ultimate goal is to enhance decision
making.
There are three Functional Roles of Marketing Research. These are:
 Descriptive role
 Diagnostic role and predictive role
5.6.1.2 Marketing Research Components
Marketing researchers deal with many aspects of a market including the following:
Market size: this deals with the number or value of units sold to a market in a given
period.
Market Share: this one is about a specific corporation’s share of the market size out of
the whole market of a product or products of the same purpose.
Market penetration: this is a marketing strategy which is used to know when a company
enters/penetrates a market with current products to get better market share by lowering the
price of a product.
Brand equity research – this research is conducted to know how favorably consumers
view the brand.
Buyer decision processes research – this part of marketing research activity is used to
determine what motivates people to buy and what decision-making process they use.115
5.6.1.3 Customer Satisfaction Research
In this type of research there are different types of research that are used to assess about
customers.
Distribution channel audits
Marketing effectiveness and analytics
Mystery consumer
Positioning research
Price elasticity testing
Sales forecasting
5.6.1.4 Marketing Research Process
Since research is a process which consists of a number of steps to be accomplished in a logical
and systematic manner marketing research consists of the following related phases:
Step 1: Define the research purpose or objectives
The following questions help to establish objectives:
 Where potential customers buy the product?
 Why they purchase there?
 What is the size of the market? How much of it can your business capture?
 How does your business compare with competitors?
 The impact of promotion on customers.
 What types of products are desired by potential customers?
Step 2: Research Design Formulation
The research design is a blueprint for conducting the marketing research. More formally,
formulating the research design involves the following steps:
Study period and place determination.
Qualitative data collection methods.
Methods of collecting quantitative data (survey, observation, and experimentation).
 Definition of the information needed.
Questionnaire design.
Measurement and scaling procedures.
Sampling process and sample size.
Plan of data analysis.
Step 3: Gather at this stage secondary data,
A data which is originally collected by others for their own purpose, but such data can be used
by the researcher when it is relevant to the current study.
Step 4.Gather Primary Data
Primary data collection techniques can be categorized as;
Observational techniques-do not involve contact with respondents.
Focus groups.
Experimentation-investigates cause and effect relationships.
Survey techniques- generate data by asking people questions and recording their
responses.
The following are examples of survey techniques.
A. Mail questionnaires: The researcher may send the questionnaires to research
Participants.
B. Telephone interviews: Using the telephone numbers from telephone directory, the
researcher may ask research participant via the telephone.
C. Personal interviews. The researcher may go to the research participants’ address and
may drop and pick the questionnaire or may interview the research participants.117
Step 5: Data Processing and Analysis
6. Data Analysis
Involves the conversion of data to information. Includes data entry, coding, and cleaning.
SPSS, SAS, Excel,
Research results should be evaluated and interpreted in response to the research objectives.
Step 6: Report Preparations and Presentation
At the end the research results will be written in a report form and presented to the concerned
parties. Interpret analysis to make decisions that will directly apply to the research problem
defined in the first stage.
The report includes:
The specific research questions identified,
Describes the research approach,
The research design,
The data collection methods, and sampling procedures,
The data processing and analysis procedures,
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.
5.6.2 Marketing Intelligence
Market intelligence is the systematic process of gathering, analyzing, supplying and applying
Information about market environment.
5.6.2.1 The Importance of Marketing Intelligence
Marketing intelligence provides the following benefits;
 Market and customer orientation – promote external focus.
 Identification of new opportunities.
 Smart segmentation.
 Early warning of competitor moves.
 Minimizing investment risks.
 Quicker, more efficient and cost-effective information.
5.6.2.2 Ways to Undertake Marketing Intelligence
 Unfocused scanning:
 Semi focused scanning
 Informal and formal research

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: - this is a purposeful search for information in some systematic way.
Marketing intelligence is carried out by the manager him/herself rather than a professional
researcher. Scope of the search in this case is likely to be narrow and far less intensive (less
rigorous) than marketing research.

5.6.3 Competitive Analysis

Competitive analysis refers to determining the strengths and weaknesses of competitors and
designing ways to take opportunities or tackle threats posed by competitors.
Competitive analysis is important for businesses since it has the advantages stated as
follow:
It helps management understand its competitive advantages/ disadvantages relative to
competitors.
It generates understanding of competitors’ past, present and future strategies.
It provides an informed basis to develop strategies to achieve competitive advantage
in the future
It helps forecast the returns that may be made from future investments.
Competitive analysis is a method of gathering data about competitors from different sources.
5.6.3.2 Steps of Competitive Analysis

1. Identify your competitor

2. Gather information about competitors:

3. Gather information on competitors:

4. Analyzing the Competition

5. Develop pricing
The goal of your competitive analysis is to identify and expand upon your competitive
advantage. To make your competitive analysis effective, transfer the weaknesses of your
competitors into potential strengths for your business.

5.7. The 4 P’s Of Marketing/The Marketing Mix

These are marketing variables that the marketing manager can manipulate as controllable
variables. They include product, pricing, place (channel) and promotion.

1. Product: refers to goods/services produced for sale, the product /service should relate to the

needs and wants of the customers. Product strategies: Include product design, packaging,
branding, support services, and product variations and features.

2. Pricing: refers to the process of setting a price for a product/service. Your prices must be low
enough to attract customers to buy and high enough to earn your business a profit.
3. Place: means the different ways of getting your products or services to your customers. It is
also referred to as distribution. If your business is not located near your customers, you must find
ways to get your products/services to where it is easy for customers to buy.
Distribution (place) strategies: How, when, and where the product is available to targeted
customers
4. Promotion: Refers informing your customers of your products and services and attracting
them to buy them. Promotion includes advertising, sales promotion, publicity (non-paid
promotion) and personal selling.
Some useful ways of advertising include signs, boards, posters, handouts, business cards,
pricelists, photos and newspapers.
You can use sales promotion (short term incentives) to make customers buy more when they
come to your business.
5.7.2 What Is Marketing Strategy?
A marketing strategy is a process that can allow an organization to concentrate its limited
resources on the greatest opportunities to increase sales and achieve a sustainable competitive
advantage.
Marketing strategy is a method of focusing an organization's energies and resources on a
course of action which can lead to increased sales and dominance of a targeted market.
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.
1. Pricing Strategy
Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction
and utility, includes tangible (functional) and intangible (prestige) factors.
Pricing strategies: Include setting prices for final consumers, wholesalers, and retailers based on
costs, demand, or competitors’ prices.
The following are some of pricing strategies mostly applicable in the real world scenario.
i) Price Skimming: this is a type of marketing strategy that firms use by charging the highest
possible price that buyers who most desire the product will pay. It attracts a market segment that
is more interested in quality, status, uniqueness etc. In this case, consumers’ demand must be
inelastic.
ii) 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. However,
the quality of the product should not be lower as compared to other competitors’ product. It
should be again noted that the cost of production should be lower to the extent that can enable
the firm to get the desired profit. This is appropriate when the demand is elastic.
iii) Cost-plus pricing: Any amount that is above unit cost may be considered
iv) Mark-up pricing: A certain percentage of the selling price is added to unit cost.
v) Competition Oriented Pricing: Considers competitors prices primarily; but the
market type matters.
vi) Odd-even pricing: This is Psychological pricing method 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.
2. Promotion Strategies
Promotion is the communication of the company and its products to customers. Promotional
strategy is choosing a target market and formulating the most appropriate promotion
mix to influence it. An organization’s promotional strategy can consist:
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.
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.
iii) Public relations: Public relation is a form of communication that seeks to change the
perceptions of customers, shareholders, 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.
3. Distribution Strategies
A successful product or service means nothing unless the benefit of such a service can be
communicated clearly to the target market.
Marketing Channels are individuals/organizations involved in the process of making the product
available for use or consumption by consumers. It is divided into Direct and Indirect channels.
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 Merchant Wholesalers, retailers, dealers, agents, brokers; and
manufacturer’s branches and offices.
The following factors should be considered to select the best channel under the condition of
using best distribution strategy.
Company Factors: financial, human and technological capabilities of a company to do
its business activities.
Market Characteristics: Geography, market density, market size, target market
Product Attributes: perishability, value and sophistication of the product
Environmental Forces: those forces that affect the business like competition,
technology and culture.
5.8. The Concept of Service
Service refers to any activity undertaken to fulfill customer’s needs. It is any act or performance
that one party can offer to another that is essentially intangible and does not result in the
ownership of anything. Distinctive features of services include intangibility, inseparability,
variability, and perishability as opposed to goods.
Customer is a person or organization that buys a product or service either for use or for resale.
Customers can be internal (e.g. member of the organization) or external (customers coming from
outside).
Organizations should identify important strategic activities to ensure consistent, efficient and
excellent customer service delivery using continuous improvement philosophy.
Customer handling and satisfaction is a key for successful organizations. Managers and
employees should work hand-in-hand to improve their service delivery programs. Existing
customers must be satisfied with the existing service.
Also take into account that the major reasons to lose customers are:
o Poor service,
o Poor quality and
o Rude behavior
. Consider also the following research findings about customer satisfaction:
91% of customers who have major complaints decide they will never come back. But if
the complaint is resolved quickly, 82% of them will return.
Quick complaint resolution drops customer defection rate from 91% to 18%. It is better
to have a complaining customer than no customer at all. It pays to resolve complaints
quickly.
There is no investment like investment in customer satisfaction.
Therefore, organizations should start tracking the cost of customer dissatisfaction to convince
employees and management about the importance of keeping customers satisfied. Your
competitive advantage will lie in retaining the customer longer than your competition.
Because of a few disloyal customers, you cannot lose your faith in all your customers.