Marketing Management

Chapter.1 An Overview of Marketing and Marketing

Management

Learning Objectives:
 Define marketing management and discuss its
core concepts;
 Examine how marketers manage demand and
build profitable customer relationships.
 Compare the six marketing management
philosophies;
 Discuss the importance of marketing;
 1.1 Definition of Marketing and Marketing
Management

 Marketing must be understood not in the old

sense of making a sale - 'selling' - but in the
new sense of satisfying customer needs.
 Many people think of marketing only as selling
and advertising.

Marketing can be defined in different ways:

 The very heart of modern marketing thinking
and practice says marketing is creating
customer value and satisfaction.
 Marketing is thus defined as the delivery of
customer satisfaction at a profit.
American Marketing Association (AMA):
Marketing is the activity, set of institutions, and
processes for creating, communicating, delivering,
and exchanging offerings that have value for
customers, clients, partners, and society at large.

Social definition of marketing:

Marketing is a societal 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.
…

Marketing Management: as the art and science

of choosing target markets and getting, keeping,
and growing customers through creating,
delivering, and communicating superior customer
value.

(The aim of marketing is to know and understand

the customer so well that the product or service fits
him and sells itself)
Peter Drucker

Marketing begins and ends with the

customers!!!
1.2 The Scope of Marketing (what is
marketed?)
…

Goods, Places,
 Services, Properties,
Experiences, Organizations
Events, Information
Persons, Ideas.
1.3 Core Concepts of Marketing /Basic Marketing
Terms

1. Needs, Wants, and Demands;

2. Market offerings (Goods, services, and
experiences);
3. Value and satisfaction;
4. Exchanges, Transactions, and relationships
and
5. Markets
…Needs
 Human needs are the basic reasons for the
emergence and existence of marketing.
 A need is a necessity or basic for human being.
They are states of felt deprivation.
 Marketing process starts when the individual
comes to know of a particular need…esp.
Unsatisfied Needs.
 If this need is not satisfied it creates a state of
tension within the minds of the person. This state
will drive the people to adopt a behavior that will
help reduce the tension.

 Needs are naturally endowed and marketers

cannot create them
 But marketers can identify them and respond to
…
Some customers have needs of which they are not
fully conscious or that they cannot articulate. The
marketer must probe further.
We can distinguish five types of needs:
•Stated needs (The customer wants an inexpensive
car.)
•Real needs (The customer wants a car whose
operating cost, not initial price, is low.)
•Unstated needs (The customer expects good service
from the dealer.)
•Delight needs (The customer would like the dealer to
include on board GPS navigation system.)
•Secret needs (The customer wants friends to see him
or her as a savvy consumer.)
…Wants

 Human wants are the form taken by human

needs as a result of socio-cultural and individual
personality, they are shaped by culture and
individual personality.
 Needs are general and common to all human
beings whereas wants are specific which differ
between and/or among people.
 Wants are best described in terms of objects.
For example, all people have a need for food but
not all people try to satisfy their hunger or
thirsty with identical products.
 Enjera is a favorite food for Ethiopians; rice is a
staple food for Indians; pourage is a favorite
food for Kenyans; etc.
…Demand

 Demand refers to the quantity of a particular item

which customers are willing and able to buy at a
given price level.
 Human wants become demands when supported by
buying power.

 A mere interest of customers to a particular

product is not enough if they are not able to afford
the charged price.
…Eight demand states
None-existent demand: customers may be unaware of or
uninterested in the product. They neither like nor dislike
the product.
 Marketing strategy-Stimulation marketing (the
company tries to find way to associate the benefits of the
product with people’s natural needs and interests through
advertisement.
Negative demand: customers dislike the company’s product.
 Marketing strategy- Conversional marketing (making
attitudinal adjustment by promotion, features redesigning,
lowering price, etc).
Declining demand: customers begin to buy the product less
frequently or not at all may be because of product
obsolescence, stiff competition, high price, etc.
 Marketing strategy- Remarketing (changing product
features, searching for new target markets, more effective
communication, etc will re-stimulate the declining
…
Latent demand: customers may develop a strong need that
can not be satisfied by an existing product.
 Marketing strategy-Developmental marketing (the
company decides to measure the size of the potential
market and develop a product that satisfies the demand).
Irregular demand: customers purchase the company’s
product on seasonally, monthly, weekly, daily even hourly
basis.
 Marketing strategy- Synchro-marketing (the
company decides to increase price, decrease
advertisement and augmented services during peak
periods and doing the reverse during slack demand
periods).
Full demand: customers are adequately buying all the
products put into the marketplace.
 Marketing strategy-Maintenance marketing (maintain
the current level of demand in the face of changing
…
Over full demand: Sometimes a demand level that
is beyond an organization’s ability may arise.
Marketing strategy- De-marketing (marketers
facing overfull demand decide a temporary or
permanent reduction or shift of demand).
Unwholesome demand: customers may be
attracted to products that have undesirable social
consequences. These products are liked some and
disliked by others in the society.
E.g. cigarettes, alcohol, hard drugs, handguns, etc.
Marketing strategy - Destroy marketing
(marketers attach cautionary label on the package
and reduce explicit, positive and direct promotion,
fear messages, price hikes, reduce availability to
get people to give it up.
…

Markets
Traditionally, a “market” was a physical place where
buyers and sellers gathered to buy and sell goods.

Economists describe a market as a collection of

buyers and sellers who transact over a particular
product or product class (such as the housing market
or the grain market).

Marketers use the term market to cover various

groupings of customers. They view sellers as
constituting the industry and buyers as constituting
the market.
… A simple Marketing System
…

KEY CUSTOMER MARKETS

•Consumer markets
•Business markets
•Global markets
•Non-profit and government markets
…

Marketplaces, Marketspaces, and Metamarkets

The marketplace is physical, such as a store you

shop in; the marketspace is digital, as when you shop
on the Internet.

The concept of a Metamarkets to describe as a

cluster of complementary products and services
closely related in the minds of consumers, but spread
across a diverse set of industries (Proposed by North
western University’s Mohan Sawhney).
…

For example, Automobile Metamarket

•Automobile manufacturers,
•New and used car dealers,
•Financing companies,
•Insurance companies,
•Mechanics,
•Spare parts dealers,
•Service shops,
•Auto magazines,
•Classified auto ads in newspapers, and
•Auto sites on the Internet (Edmund’s
(www.edmunds.com))
… Marketing offer

 A marketing offer is anything that can be offered

to the market with a bundle of benefits to satisfy
needs and wants. Products may be tangibles or
intangibles.
 Some combination of products, services,
information, or experiences offered to a market
to satisfy a need or want.
 Market offerings are not limited to physical
products. They also include services—activities
or benefits offered for sale that are essentially
intangible and do not result in the ownership of
anything.
 Examples include banking, airline, hotel, tax
preparation, commodities, transportation, hotel,
…Customer value and satisfaction

Customer value is the difference between the

benefit that the customer gains from owning and
using a product and the costs of obtaining the
product.
Customers do not often judge product values and
costs accurately or objectively--they act on
perceived value.

Value = Benefits / Costs =

(Functional benefits + Emotional benefits)
/(Monetary costs + Time costs + Energy costs
+Psychic costs)
…Customer value and satisfaction

Customer satisfaction _ depends on a product’s

perceived performance in delivering value relative to
a buyer’s expectations.
If the product’s perceived performance equals to
customer expectation, customers are satisfied.
If the product’s perceived performance is greater
than customer expectation, customers are
delighted.
If the product’s perceived performance is less than
customer expectation, customers are dissatisfied.
Satisfied and delighted customers will make a
repeat purchase of the company’s products, they
are company’s good advertising medium.
… Exchange ,transactions, and relationship
Marketing occurs when people decide to satisfy needs and
wants through exchange.
Exchange is the act of obtaining a desired object from
someone by offering something in return.
Conditions of exchange include:
At least two parties must participate (the buyer and the
seller).
1.Each party must have a resource to provide in return for
the other party.
2.Each party must believe that he/she will be benefited
from the exchange.
3.The parties must be capable to communicate each other.
4.Each party has the right to accept or reject the offer of
the counter party.
…
Transaction (a trade of values between two parties)
is marketing’s unit of measurement. Most involve
money, a response, and action.

 Relationship Marketing _ Marketing is part of a

larger idea of relationship marketing. Beyond
creating short term transactions, marketers need to
build long-term relationships with valued customers,
distributors, dealers, and suppliers.
… Marketing management philosophies

There are Six alternative concepts based on which

organizations design and carry out their marketing
strategies. These include

1.Production Concept (Up to 1940’s)

2.Product Concept (Until 1960’s )
3.Selling Concept (1950-1970’s)
4.Marketing Concept (1970 to date)
5.Societal Marketing Concept (1990’s to date)
6.Holistic Marketing Concept (Recent philosophies)

The weight given to the interests of customers,

organization’s objectives and the society’s interests
vary in each philosophy
Production concept

• Production concept holds that customers prefer

products that are highly available and affordable.
• Management focuses highly on improving
production and distribution efficiency.
• This philosophy works better when there is
excess demand in the market.
• Again if producing the product at a small quantity
is costly and producing it in a high volume brings
the high unit production cost, this philosophy is
preferred.
… Product concept

This philosophy holds that customers prefer

quality products, performance, and innovative
features.
Management focuses on continuous product
quality and feature improvement.
Both production and product concept lead to
marketing myopia (focusing too narrowly on their
own operations and losing sight of satisfying
customer needs and building customer
relationships.
 … Selling concept
 Assumes that customers will not buy enough of
the firm’s products unless it undertakes large-
scale selling and promotion effort.
 Practiced highly for unsought/new products and
when the company faces excess unsold inventory.
 Focuses on creating sales rather than building
long-term customer relationships.
 Follows make and sell philosophy (inside out
perspective)-starts from the company’s existing
products.
 Looking for the right customers for the company’s
product
…Marketing concept
• Holds that achieving organizational goals
depends on knowing the needs and wants of
target markets and delivering superior value
than competitors.
• It is an outside-in perspective-starts from a well
defined market
• Find the right products to the right customers
• Sense and respond philosophy
• Considers marketing as gardening (cultivating
customers to grow as a gardener cultivates his
crops in order to reap high volume).
 … Difference between Selling and Marketing
Selling Marketing
• Starts and focuses with the • Starts and Focuses on the
seller existing products and needs of the buyer. Buyer is
needs the center of the business
• preoccupied with the seller’s • Emphasizes on
need to convert his product identification of a market
into cash; emphasizes on opportunity, fulfilling the
profit needs of the customers.
• views business as a ‘goods • views business as a
producing processes’ ‘customer satisfying
processes.
• The firm makes the product
first then decides how to sell • customer determines what
it and make profit. is to be offered as a
‘product’ and the firm
offering product that would
match the needs of the
 …
Selling Marketing
• Emphasizes accepting the • Emphasis’s on innovation of
existing technology and adopting the most innovative
reducing the cost of technology.
production. • Marketing communications
• Seller’s motives dominate acts as communicating the
marketing communications. benefits of the product
• Costs determine price. • Consumer determines price.
• views the customer as the last• views the customer as the
link in the business very purpose of the business.
• Seller’s convenience • Buyer determines the shape
dominates the formulation of of the ‘marketing mix’.
the ‘marketing mix’.
…Societal Marketing concept
 This concept questions whether the pure
marketing concept overlooks possible conflicts
between consumer immediate wants and
consumer long-run welfare.
 Societal concept is marketing strategy that
deliver value to customers in a way that
maintains or improves both the consumers and
the society’s well-being.
 In doing so, companies should balance three
considerations in setting their marketing
strategies: company objectives, consumer wants
and society’s interests. (Society) human welfare
putting people before profit , (consumers) want
…

The Considerations Underlying for the

 …The Holistic Marketing Concept
• The holistic marketing concept is based on the
development, design, and implementation of
marketing programs, processes, and activities
that recognize their breadth and
interdependencies.

• Holistic marketing acknowledges that everything

matters in marketing—and that a broad,
integrated perspective is often necessary.
…Holistic Marketing Dimensions
… Importance of Marketing

 Marketing process brings goods and services to

satisfy the needs and wants of the people.
 It helps to bring new varieties and quality goods to
consumers.
 By making goods available at all places, it brings
equipment distribution.

 Marketing converts latent demand into effective

demand.
 It gives wide employment opportunities.
 It creates time, place and possession utilities to
the products.
 It creates to keep the standard of living of the
society.
 Chapter Two
Scanning the environment

 A company’s marketing environment consists

of the actors and forces (outside marketing) that
affect marketing management’s ability to develop
and maintain successful relationships with its
target customers.
 Changes in the marketing environment are often
quick and unpredictable.
 Being successful means being able to adapt the
marketing mix to trends and changes in this
environment.
 …
 The marketing environment offers both
opportunities and threats.
 The company must use its marketing research
and marketing intelligence systems to monitor
the changing environment.
 Systematic environmental scanning helps
marketers to revise and adapt marketing
strategies to meet new challenges and
opportunities in the marketplace.
 2.1 Types of Marketing Environment

The marketing environment can be divided into two

areas:
1. Internal environment and
2. External environment.
The internal environment is concerned with those
marketing factors that happen within the
organization and the external environment is
concerned with everything that happens outside the
organization.
The marketing environment is composed of two
type of factors: those that the organization can
control and those that it cannot control.
…
The success of the firm in achieving its goals
depends on the ability to understand the impact of
uncontrollable factors, and the effective
management of controllable factors in response.

The external marketing environment is made up of:

1.Micro-environment
2.Macro-environment
 Micro-environment

The micro-environment includes all the actors

close to the company that affect, positively or
negatively, its ability to create value and
relationships with its customers.

The micro-environment consists of five components

To enjoy sustainable success, marketers need to build

harmonious relationships with
other company departments
Suppliers
Marketing intermediaries
Customers
Competitors and various publics
 Compan
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Publics Forces Supplie
affecting a r
company's
ability to
Competit serve Intermedia
ors customer ries
Custom
ers
The Company’s Micro-
environment
 The Company

• The first is the company itself/organization’s

internal environment—its several departments
and management levels
• Top management is responsible for setting the
company’s mission, objectives, broad strategies,
and policies.
• Marketing managers must also work closely with
other company departments.
• Areas such as finance, R & D, purchasing,
manufacturing, and accounting all produce better
results when aligned by common objectives and
goals.
• All departments must “think consumer” if the firm
is to be successful. The goal is to provide superior
 Suppliers

• Suppliers are firms and individuals that provide

the resources needed for the company
• They are an important link in the company’s
overall customer “value delivery system.”
1) One consideration is to watch supply availability
(such as supply shortages).
2) Another point of concern is the monitoring of
price trends of key inputs.
Rising supply costs must be carefully monitored.
 Intermediaries
 Marketing intermediaries are firms that help the company to
promote, sell, and distribute its goods to final buyers.
1) Resellers are distribution channel firms that help the
company find customers or make sales to them.
 These include wholesalers and retailers who buy and resell
merchandise.
2) Physical distribution firms help the company to stock
and move goods from their points of origin to their
destinations.
Examples would be warehouses (that store and protect goods
before they move to the next destination).
3) Marketing service agencies (such as marketing
research firms, advertising agencies, media firms, etc.)
help the company target and promote its products.
4) Financial intermediaries (such as banks, credit
companies, insurance companies, etc.) help finance
transactions and insure against risks.
 Customers
The company must study its customer markets closely
since each market has its own special characteristics.

These markets normally include:

1) Consumer markets (individuals and households
that buy goods and services for personal use and
consumption).
2) Business markets (buy goods and services for
further processing or use in their production process).
3) Reseller markets (buy goods and services in order
to resell them at a profit).
4) Government markets (agencies that buy goods and
services in order to produce public services or transfer
them to those that need them).
5) International markets (buyers of all types in
foreign countries
 Competitors

Those company that share the same customer

groups and target market
Every company faces a wide range of competitors.
A company must secure a strategic advantage
over competitors by positioning their offerings to
be successful in the marketplace.
 Publics
A public is any group that has an actual or
potential interest in or impact on an organization’s
ability to achieve its objectives.
Publics can be identified as being:
1) Financial publics-influence the company’s ability to
obtain funds.
2) Media publics-carry news, features, and editorial
opinion.
3) Government publics-take developments into
account.
4) Citizen-action publics-a company’s decisions are
often questioned by consumer organizations.
5) Local publics-includes neighborhood residents and
community organizations
 Marketing Macro-Environment

The company and all of the other actors operate in a

larger macro environment of forces that shape
opportunities and pose threats to the company.
There are six major forces (outlined below)
a. Demographic
b. Economic
c. Natural
d. Technological
e. Political
f. Cultural
 Demographic

Suppli
Politic er
al Public
Compa s
ny Compa
ny Econom
Competit
Cultur ic
ors
al Custom
ers Intermedia
ries

Natural
Technological

The Company’s Micro and Macro-

environment
 Demographic Environment

Demography refers to the study of human

population in terms of size, age, gender, density,
location, occupation, income, education level,
religion etc. The demographic environment is the
major interest to marketers because it involves
people and people makeup markets.

• Population size _ as population size moves up,

new market segments emerge and existing
market expands, the demand of various products
grows..
 …
Age structure _ The products which people buy are
different at different age levels.
For instance, different garment factories decide to
target kids, teenagers, adults and old age
people separately. Hair styling, recreational centers,
the clubs and associations people join, etc are age
dependent.
Gender - not both genders respond the same way in
product preference. E.g. clothes, shoes, cosmetics
etc.
 …
Educational level _ the educational level of people
highly influences their consumption pattern in that
more educated people are impressed with high
quality products and new innovation, need much
recreation and visit, etc than less educated people.
Occupation _ Some jobs require people that obeyed
by certain rules. E.g. bank employees, hotel
servants, employees in hospitals use formal wear
while they are in duty.
• Unlike the past, this time women equally
participate to apply for job vacancies in various
professions.
• This trend has resulted in time squeezed families
who haven’t time to prepare families’ food and
treating children. So, people tend to buy constantly
fast foods and go to the labor market to search for
 …

Religion-the edibles we eat, the beverages we drink,

the clothes we wear, the styles we follow, the festivals
we celebrate are religion dependent.
Income- people are different in their earning and
wealth possession. So, their buying decisions are
guided by their income level and wealth status.
Climate and weather-. People living in desert
regions do not react the same way as people living in
tropical and temperate regions.
E.g. the clothes and shoes we wear, public transports
we use in Ambo differ from the clothes and shoes we
wear, public transports we use if we would live in
Gambela.
 …
Family size and structure _ the traditional family
includes husband, wife, children and retired
parents or old age people. The volume of purchase
and the type of products being purchased vary
when human beings live alone, live with spouse,
bear one child, have many children and retired
parents.
Diversity _ countries vary in their ethnic and racial
make up. As a result, very diverse markets exist.
These diverse markets respond to the marketing
stimuli uniquely.
 Economic Environment

• The economic environment includes those factors

that affect consumer purchasing power and
spending patterns.
Stages of economic development
• Subsistence economy: It is the level of economic
development where production is lower than or
equal to consumption. Countries with subsistence
economy have no marketable surplus. These
countries offer few market opportunities because
they have no enough surpluses to transact with
others.
• Industrialized economy: constitutes rich markets
for many different kinds of commodities.
Specialization of production and shortage of capital
is not the problem. Industrialized countries try to
increase production through the use of modern
 …
Business cycle is the measure of the economy rise
and fall cyclically.
Prosperity: is the period of economic growth, high
employment and high income. Strategy is to expand
market program, introduce new products, enter new
market.
Recession: is a period of retrenchment for
consumers and business. Consumers are
discouraged, scared and angry which has an
implication for organizational operations.
Depression: is the period of economic stagnation,
where unemployment is high, income is low and
spending is low
…

Inflation: Inflation is a rise in price levels. When

prices rise faster than personal incomes customer
buying power declines.

Interest Rate: When interest rate are high,

consumers hold back long term purchases such as
housing.
 …
Distribution of income
Income between and among people and nations is
unevenly distributed. Based on income distribution
the society is classified in to three groups.
• Upper class consumers-this class comprises
affluent society members whose spending pattern is
not affected by current economic events and they
are major markets for luxury products.
• Middle class consumers-have moderate income
and are careful about their spending but can still
afford good life some of the time.
• Lower class consumers- are all buyers who stick
close to the basics of food, clothing.
 Natural Environment
• Natural environment _ the natural resources that
are needed as inputs by marketers or that are
affected by marketing activities.
• Marketers should be aware of several trends in the
natural environment which include growing
shortage of raw materials, increased pollution and
increased government intervention in natural
resource management.
• Environmentally sustainable strategies: Green
movement has encouraged and demanded that
firms produce strategies that are not only
environmentally friendly but are also
environmentally proactive.
 Technological environment

• The technological environment is perhaps the most

dramatic force now shaping our destiny.
• It has released such innovations as laptop
computers, the internet, nuclear missiles, chemical
weapons, etc.
• The technological environment changes rapidly. All
today’s common products were not available some
centuries ago.

• Therefore, the advent of such technologies

resulted in the obsolescence of the past ones. E.g.
before the emergence of desktop and laptop
computer, type writing machine was the common
technology used by the larger society as a writing
 Political environment

Political environment_ laws, government agencies

and pressure groups which influence or limit various
organizations and individuals.
• Governments develop public policy (sets of laws and
regulations to govern businesses for the good of the
society as a whole.
• Marketing activity is subject to the influence of a
wide range of laws and regulations covering
competition (patent and copy right, protecting home
land industries from abroad competitors’ attack,
protecting illegal trade practice like contraband),
fair trade practices, environmental protection,
product safety, consumer privacy, packaging and
 Cultural Environment

• Cultural environment is made up of institutions and

other forces that affect a society’s basic values,
perceptions, preferences and behaviors.
Persistence of cultural values
• People in a given society hold many believes and
values. Among these, some are core ones which
have high degree of persistence.
• Core believes and values are passed on to the new
generation from parents and society and are
reinforced through various institutions (schools,
churches, mosques, business government agencies).
e.g. getting marriage and getting child are core
believes.
 …
Shifts in secondary believes
Secondary believes and values are more open to
change
1.Believing in marriage is a core belief whereas
believing in early marriage is a secondary belief.
2.Believing in getting child is a core belief whereas
considering many children as wealth is a secondary
belief.

Marketers have some chance of changing secondary

believes but have little chance of changing core
believes.
 Responding to the Marketing
environment
• Many companies view the marketing environment
elements as an uncontrollable to which they must
react and adapt. They analyze the environmental
forces and design strategies that will help the
company avoid the threats and take the advantages
of the opportunities in the environment provide.
• Other companies take a proactive stance by taking
proactive actions to affect forces in their marketing
environment.
• For example, importers and exporters face
merchandises’ delay in the shore until they are
cleared by the nations’ customs authority. To ease
this impact, importers and exporters may negotiate
with the government and contribute help to the
Chapter Three

Analyzing Consumer & Business Markets Buying

Behavior
• Consumer markets_are including those
individuals and households who buy and consume
goods and services for their own personal use.
They are not interested in reselling the product or
setting themselves up as a manufacturer.
• Business markets _ are including those firms
who buy products either to use in the production of
other products or reselling them at a profit.
Consumer Buying Behavior

Consumer behavior is the study of how

individuals select, buy, use, and dispose of goods,
services, ideas, or experiences to satisfy their
needs and wants.
...

• The aim of marketing is to meet and satisfy

target customers’ needs and wants better than
competitors.

• Marketers must fully understand both the theory

and reality of consumer behavior.
• Mean that a thorough understanding of how
consumers think, feel, and act and offer clear
value to each and every target consumer.
• Or Marketer research consumer buying decisions
to answer questions about what consumers buy,
where they buy, how and how much they buy,
when they buy, and why they buy.
…

But learning about the whys of consumer buying

behavior is not so easy—the answers are often
locked deep within the consumer's head.
Model of Consumer Behavior

 The company that really understands how

consumers will respond to different product
features, prices, and advertising appeals has a
great advantage over its competitors.

 The stimulus-response model of buyer behavior

shows that marketing and other stimuli enter the
consumer's "black box" and produce certain
responses. Marketers must figure out what is in
the buyer's black box.
Consumer Buying Behavior Model
Factors Affecting Consumer Behavior

Consumer behavior is influenced by the buyer's

characteristics and the buyer's decision process.
Consumer purchases are influenced strongly by
four major factors, factors can influence the
Buying decision of the buyer:
A.Cultural
B. Social
C. Personal
D. Psychological
 A. Cultural Factors
• Culture is fundamental determinant of a person’s
wants and behavior which further includes
culture, sub-culture and social classes.
• The society in which we grew up and the accepted
believes, values, habits and attitudes are time
honored.

• Failure to adjust to these differences can result in

ineffective marketing or embarrassing mistake.
 …
Sub-culture: specific identification & socialization
of the members.
Sub-cultures include nationalities, religions, racial
groups, and geographic regions. When sub-cultures
grow large and affluent enough, companies often
design specialized marketing programs to serve
them.
Social classes: relatively homogeneous and
enduring divisions in a society, hierarchically
ordered and with members who share similar
values, interests, and behaviour.
e.g. USA social classes (1) lower lowers, (2) upper
lowers, (3) working class, (4) middle class, (5) upper
 B. Social Factors
A consumer’s behavior also influenced by social
factors, such as reference group, family, and social
roles and status.

Reference groups _ A person’s reference groups

are all the groups that have a direct (face-to-face) or
indirect influence on their attitudes or behaviour.
•Membership Group
Primary Group (family, friends, neighbours, & co-
workers).
Secondary Group (religious, professional, and trade-
union groups).

•Aspirational Group (are those a person hopes to

…
Reference groups are important to marketing
because they influence our buying habits in a
number of ways including:
1)They expose an individual to new behavior and
lifestyles,
2)They influence attitudes and self-concept, and
3)They create pressures for conformity that may
affect product and brand choices.
Besides, marketers should figure out how to reach
the opinion leaders in the relevant reference
groups.
Opinion leaders are people within the reference
group because of their special skills, knowledge,
personality or other characteristics exert much
…
Family: it is a group of two or more people related
by blood, marriage or adoption living together.

Family is the most important consumer buying

organization in society and it has been researched
extensively.

Marketers are interested in the roles and influences

of the husband, wife, and children on the purchase
of different products. It is important to establish
exactly who is making the final decision of what to
buy.
 …

Role and status: The person’s position in each

group can be defined in terms of both role and
status.

A role consists of the activities people are expected

to perform according to the persons around them.
Each role carries a status- the general esteem given
to it by the society.

People often buy products that show their status in

society.
C.Personal Factors

Personal characteristics _ the buyers age and life-

cycle stage, occupation, economic situation, life
style, and personality and self concept are also
influenced buyers’ decisions.
Age and life cycle stage: people change the goods
and services they buy over their life time.
Family life cycle - the stages through which
families might pass as they mature over time.
Occupation _ e.g. Blue collar workers tend to buy
more rugged work clothes whereas executives buy
more business suits.
Economic situation: marketers of income sensitive
goods watch trends in personal income.
…
Lifestyle: it is a summary of how we live. It
embraces our activities, interests, opinions, and
aspirations. (work, hobbies, shopping, sports, social
events), interests (food, fashion, family, recreation),
and opinions (about themselves, social issues,
business, products).
Personality and self-concept_personality
combines a set of physical and mental
characteristics that reflect how a person looks,
thinks, acts, and feels. It described in terms of
traits like self-confidence, dominance, sociability,
agreeableness etc.
…
Brands also have personalities, and consumers are
likely to choose brands whose personalities match
their own

We define brand personality as the specific mix of

human traits that we can attribute to a particular
brand.
Stanford’s Jennifer Aaker researched brand
personalities and identified the following traits:
1.Sincerity (down-to-earth, honest, wholesome, and
cheerful)
2. Excitement (daring, spirited, imaginative, and up-
to-date)
…
Self-concept refers to the way you see yourself.
Also it is the picture you think others have of you.
self-esteem and self-efficacy.

Self-esteem is a belief about one’s own worth

based on an overall self-evaluation.
Self-efficacy : An individual's beliefs and
expectancies about his or her ability to accomplish
a specific task effectively.
Studies of purchases show that people generally
prefer products and brands that are compatible
with their self-concept and personality.
D. Psychological Factors
A person's buying choices are further influenced by
four major psychological factors: motivation,
perception, learning, and beliefs and attitudes.
Motivation
A person has many needs at any given time.
A need becomes a motive when it is aroused to a
sufficient level of intensity. A motive (or drive) is a
need that is sufficiently pressing to direct the
person to seek satisfaction.
…
Perception: is the process by which we select,
organize, and interpret information inputs to create
a meaningful picture of the world.
It depends not only on physical stimuli, but also on
the stimuli’s relationship to the surrounding
environment and on conditions within each of us.

People emerge with different perceptions of the

same object because of three perceptual processes:
selective attention, selective distortion, and
selective retention.
…
Selective Attention_ It’s estimated that the average person
may be exposed to over 1,500 ads or brand communications a
day. It is impossible to attend to all these, we screen most
stimuli out—a process called selective attention.

Selective distortion is the tendency to interpret information

in a way that fits
our preconceptions. Consumers will often distort information
to be consistent with prior brand and product beliefs and
expectations.
Selective Retention Most of us don’t remember much of the
information to which we’re exposed, but we do retain
information that supports our attitudes and beliefs. Because
of selective retention, we’re likely to remember good points
about a product we like and forget good points about
competing products. Selective retention again works to the
advantage of strong brands. It also explains why marketers
…
Learning: a relatively permanent change in an
individual’s behavior arising from experience.

A belief is a descriptive thought that a person has

about something.

Attitude: attitude describes a person’s relatively

consistent evaluations, feelings, and tendencies
toward an object or idea. It put people into a frame
of mind of liking or disliking things or moving
toward or away from them.
Types of Buying Behavior

There are 4 types of consumer buying behavior

based on the consumer involvement in the
decision making process and degree of differences
among brands.

1.Complex buying behavior

2.Dissonance-reducing buying behavior
3.Variety seeking buying behavior
4.Habitual buying behavior
…
…
Complex Buying Behavior

Consumers go through complex buying behavior

when they perceive significant brand differences
and if products are expensive, highly self-
expressive, risky and purchased infrequently.

Because of these factors, there is high involvement

of consumers in the decision process.

Marketers need to help buyers learn about product

class attributes and their relative importance.
 …
Dissonance Reducing Buying Behavior
The situations observed in the complex buying
behavior also appear in this type of buying behavior
with the exception of insignificant difference among
different brands. Hence, buyers may shop around to
learn what is available but buy relatively quickly.
They may respond primarily to a good price or
convenience.
After purchase, buyers might experience
dissonance/discomfort when they notice certain
disadvantages of the purchased product or hear
favorable things about brands not purchased.
To relieve consumers from this dissonance,
marketers’ after sales communication should provide
…
Habitual Buying Behavior- low involvement of
consumers

In habitual buying behavior, consumes’ low

involvement and little brand differences exist.
Consumers simply go to the store and reach for a
brand especially for low cost and frequently
purchased products.
Consumers passively read magazines and watch TV
to receive information. buyers are not highly
committed to any brand.
In advertisement marketers need to use imagery
advertisements and visual symbols because they
…
Variety Seeking Buying Behavior
Consumers choose the brand without much
evaluation, or the evaluation of the product is
during consumption.
The next time buyers seek another brand not
because of dissatisfaction but simply to try
something different.
…
The Consumers Buying Process
The buying process starts long before actual
purchase and continues long after purchase.
Marketers need to focus on the entire buying
process. For most purchases buyers pass through
five stages.
…
Need Recognition/Problem Identification
It is the first stage in which the buyer recognizes a
problem. The need can be triggered or activated by
internal stimuli (hungry and thirsty) or external
stimuli (advertising).
…
Information Search
In this stage, consumer is triggered to search for
information. If the buyer’s need is strong they
undertake an information search.
The information may be obtained from: Personal
sources e.g. family, friends, acquaintances;
Commercial sources e.g. advertising, sales people,
dealers, packages; Public sources e.g. mass media,
consumer rating organization (e-commerce);
Experimental sources e.g. handling, examining or
using the product.
 …
Evaluation of Alternatives _ buyers use the
information they fetched from various sources to
evaluate alternative brands in the choice set and
they rank brands according to some specifications.
For example, may consider attributes like warranty,
operating cost, style and price.
Purchase Decision _ It is actually buying the
product. Generally the consumers’ purchase
decision will be to buy the most preferred brand.
Post-purchase Decision _ buyers take further
actions after purchase based on previous
satisfaction level. The marketers’ job does not end
when the product is bought. Buyers base their
expectation on the information they receive. To this
The adoption process for new
products
New Products
Good, service or idea that is perceived by
customers as new.
Stages in the Adoption Process
Marketers should help consumers move
through these stages.
…Stages in the Adoption Process

Awareness
Awareness:: Consumer
Consumer is
is aware
aware of
of
product,
product, but
but lacks
lacks information.
information.
Interest
Interest:: Consumer
Consumer seeks
seeks
Information
Information about
about new
new product.
product.

Evaluation
Evaluation:: Consumer
Consumer considers
considers
trying
trying new
new product.
product.
Trial: Consumer tries new
product on a small scale.

Adoption: Consumer
decides to make regular
use of product.
 Individual differences in
innovativeness
Not all people are ready to try new products.

Consumers can be classified into five adopter

categories, each of which behaves differently
toward new products
Adopter Categories
Percentage of Adopters

Early Majority Late Majority

Innovators

Early
34% 34% Laggards
Adopters

13.5% 16%
2.5%
Early Time of Adoption Late
 …
Innovators: are venturesome-the first to buy and
willing to take risks related to a new product
(relatively younger, better educated, high income
earners, more receptive to unfamiliar things, more
rely on own judgment, less brand loyal, more likely
to take advantage of special offers like discounts,
coupons, and samples).
Early adopters: are guided by respect—they are
opinion leaders in their communities and adopt new
ideas early but carefully.
Early majority : even if these members are not just
leaders, they adopt new ideas before the average
society. They are influenced by advertising and sales
…
Late majority they are skeptical/disbelieving in
that they adopt an innovation only after the
majority of people have tried it. They are more
resistant to change and risk taking than previous
groups. They tend to be middle aged or older.

Laggards are tradition bound and highly

suspicious for changes. They adopt an innovation
only when it has become some thing of a tradition
itself. They are the last to buy. They tend to be
price conscious, low-income consumers.
Influence of product characteristics on rate
of adoption
Some characteristics of a product which influence
the rate of adoption (overnight verses longer time to
gain acceptance) include:
1.Relative advantage: the degree to which the
innovation appears superior.
2.Compatibility: the degree to which the
innovation fits the lifestyles of potential customers.
3. Complexity: the degree to which the innovation
is difficult to use and understand.
4.Divisibility: the degree to which the innovation
may be tried on a limited basis.
5.Communicability: the degree to which the
results of using the innovation can be observed and
described to others.
Business Markets and buying behavior

• The business market includes firms that buy

goods and services in order to produce products
and services or sell to others.

• It also includes retailing and wholesaling firms

that buy goods in order to resell them at a profit.
Because aspects of business-to-business
marketing apply to institutional markets and
government markets, we group these together.
 Characteristics of (business) markets
Business markets differ in many ways from consumer
markets.

•Business markets typically deal with fewer but

larger buyers.

•They are more geographically concentrated.

•Many business markets have derived, fluctuating,

and inelastic demand
…
• Compared with consumer purchases, a business
purchase usually involves more decision
participants & professional purchasing
effort.

• Often, business buying is done by trained

purchasing agents who spend their working
lives learning how to make better buying
decisions.

• Buying committees made up of technical experts

and top management are common in the buying
of major goods.
 …
Business buyers usually face more complex buying
decisions than do consumer buyers. Purchases
involve (large sums of money, complex technical and
economic considerations, and interactions among
many people at many levels of the buyer's
organization).
The business buying process tends to be more
formalized than the consumer buying process.
Large business purchases call for (detailed product
specifications, written purchase orders, careful
supplier searches, and formal approval).
Finally, in the business buying process, buyer and
seller are often much more dependent on each
 Business Buyer Behavior

Marketer try to answer four questions about business

buyer behavior:

What buying decisions do business buyers make?

Who participates in the buying process?
What are the major influences on buyers?
How do business buyers make their buying
decisions?
 …

A Model of Business Buyer Behavior

In this model, marketing and other stimuli affect
the buying organization and produce certain buyer
responses.
As with consumer buying, the marketing stimuli for
business buying consist of the four Ps: product, price,
place, and promotion.
Other stimuli include major forces in the
environment: economic, technological, political,
cultural, and competitive.
These stimuli enter the organization and are turned
into buyer responses: product or service choice;
supplier choice; order quantities; and delivery,
service, and payment terms.
…
Within the organization, buying activity consists of
two major parts:
a) The buying center, made up of all the people
involved in the buying decision, and
b)The buying decision process.

The model shows that the buying center and the

buying decision process are influenced by
i. internal organization
ii. interpersonal
iii. individual and
iv. external environmental factors.
…
Response
choice
The buying center
Marketing Product &
stimuli Other stimuli Supplier choice
Product Economical
Price Political Order of unities
Promotion Socio-cultural
Place Technological
Buying decision Delivery terms
process and time

Service terms
& Payment
 Types of Buying Situations

There are three major types of buying situations

Straight re-buy
Modified re-buy
New task

Straight Re-buy _ is used to purchase inexpensive,

low risk products.
In this buying situation, the buyer reorders
something without any modifications; it is usually
handled on a routine basis by the purchasing firm
based on past buying satisfaction.
Previous purchases are simply reordered to replace
depleted inventory. Alternative products or suppliers
…
Modified Re-buy
Modified Re-buy processes are used when the
purchase situation is less complex than new-task
buying and more involved than a straight re-buy.
The buyer wants to modify product specifications,
price or supplier. Some information is required to
reach decisions and a limited number of
alternatives may be evaluated.
In-suppliers may become nervous and feel
pressured to put their best to protect an account.
Out-suppliers may see this as an opportunity to
make a better offer and gain new business.
…
New Task Buying
The buyer purchases a product or service for the
first time and most complex .
The task requires greater effort in gathering
information and evaluating alternatives. More
people are involved in the decision-making
process
New-task buying processes are most frequently
employed in the purchase of high-cost products
that the firm has not had previous experience
with.
In the new-task situation, the buyer must decide
on product specifications, suppliers, price limits,
payment terms, order quantities, delivery times,
…
Participants in the industrial buying process
The decision making unit of the buying organization
is called its buying center- all the individuals and
groups that participate in the business buying
decision making process.

This group includes the actual users of the product

or service,
 those who make the buying decision,
 those who influence the buying decision,

 those who do the actual buying, and

 those who control buying information.

 …
The buying center includes all members of the
organization who play any of five roles in the
purchase decision process.
Users _ members of the organization who will use the
product. In many cases users initiate the buying
proposal and help define product specifications.
Influencers _ often help define specifications and
also provide information for evaluating alternatives.
Technical personnel are particularly important
influencers.
Buyers _ have formal authority to select the supplier
and arrange terms of purchase.
 …

Deciders _ those who have formal or informal power

to select or approve the final suppliers. In routine
buying, the buyers are often the deciders.
Gate keepers _ People who have the power to
prevent sellers or information from reaching
members of the buying center.

e.g., purchasing agents, receptionists, and telephone

operators may prevent salespersons from contacting
users or deciders.
 Industrial buying process

Stage 1. Anticipation or recognition of a

need/problem
Someone in the company recognizes a problem or
need that can be met by acquiring a good or a
service.
Problem recognition can result from internal or
external stimuli. Internally, the company may decide
to launch a new product that requires new production
equipment and materials. Or a machine may break
down and need new parts. Perhaps a purchasing
manager is unhappy with a current supplier’s product
quality, service, or prices.
Externally, the buyer may get some new ideas at a
 …
Stage 2. General Need Description
The company describes the general characteristics
and quantity of a needed item.
For standard items, this process presents few
problems. For complex items, however, the buyer
may need to work with others—engineers, users,
consultants— to define the item.
The team may want to rank the importance of
reliability, durability, price, and other attributes
desired in the item. In this phase, the alert business
marketer can help the buyers define their needs and
provide information about the value of different
product characteristics.
…
Stage 3. Product specification
The buying organization next develops the item’s
technical product specifications, often with the
help of a value analysis engineering team.
Product value analysis is an approach to cost
reduction in which components are studied
carefully to determine if they can be redesigned,
standardized, or made by less costly methods of
production. The team decides on the best product
characteristics and specifies them accordingly.
 …

Stage 4. Supplier search

Supplier search is the stage of the business buying
process in which the buyer tries to find the best
vendors.

The buyer can compile a small list of qualified

suppliers by reviewing trade directories, doing
computer searches, or phoning other companies for
recommendations. Today, more and more
companies are turning to the Internet to find
suppliers.
…
Stage 5. Proposal Solicitation

The stage of the business buying process in which

the buyer invites qualified suppliers to submit
proposals. In response, some suppliers will send
only a catalog or a salesperson.

However, when the item is complex or expensive,

the buyer will require a detailed written proposal
from each qualified supplier.

After evaluating the proposals, the buyer will

invite a few suppliers to make formal
presentations. Business marketers must thus be
 …
Stage 6. Supplier Selection
Supplier Selection is the stage of the business
buying process in which the buyer reviews
proposals and selects a supplier or suppliers.
During supplier selection, the buying center often
will draw up a list of the desired supplier attributes
and their relative importance.
Such attributes include product and service quality,
reputation, on-time delivery, ethical corporate
behavior, honest communication, and competitive
prices.
The members of the buying center will rate
suppliers against these attributes and identify the
…
Stage 7. Order-Routine Specification

The stage of the business buying process in

which the buyer writes the final order with the
chosen supplier(s), listing the technical
specifications, quantity needed, expected time of
delivery, return policies, and warranties.

In the case of maintenance, repair, and operating

items, buyers may use blanket contracts rather
than periodic purchase orders. A blanket contract
creates a long-term relationship in which the
supplier promises to resupply the buyer as
needed at agreed prices for a set time period.
 …
Stage 8. Performance Evaluation and
Feedback

In the final stage of the buying process, the buyer

periodically reviews the performance of the chosen
supplier(s).

The buyer may contact users and ask them to rate

their satisfaction.
The performance review may lead the buyer to
continue, modify, or drop the arrangement. The
seller’s job is to monitor the same factors used by
the buyer to make sure that the seller is giving the
expected satisfaction.
Chapter Four

Market Segmentation, Targeting, and Positioning

Companies cannot connect with all customers in

large, broad, or diverse markets.

But they can divide such markets into groups of

consumers or segments with distinct needs and
wants.
…

A company then needs to identify which market

segments it can serve effectively.
This decision requires a keen understanding of
consumer behavior and careful strategic thinking.
To develop the best marketing plans, managers
need to understand what makes each segment
unique and different. Identifying and satisfying the
right market segments is often the key to
marketing success.
Market segmentation
Market segmentation is dividing a market into
smaller groups of buyers with distinct needs, or
behaviors who might require separate marketing
mixes.
This can be done by identifying bases for
segmenting the market and develop segment
profiles.
Segmenting Consumer and Business
Markets
Segmenting Consumer markets:

consumer market includes all the individuals and

households who buy or acquire goods and services for
personal consumption. Variables/bases for
segmenting consumer markets:
1. Geographic
2. Demographic
3. Psychographic
4. Behavioral
Segmenting Business Markets

Business market can be segmented on the bases

consumer market variables but because of many
inherent differences like

Company Size
Industry
Purchasing approaches
Product usage
Situational factors
Geographic
Market Targeting
Market Targeting
Market targeting is the process of evaluating each
market segment‘s attractiveness and company's
objectives and resources ; and selecting one or more
segment to enter the market.
Once the firm has identified its market segment
opportunities, it has to evaluate the various
segments and decide how many and which ones to
target.
 Target Marketing Strategies/levels
A. Mass/Undifferentiated Marketing: ignore
market segment differences and target the
whole market with one offer. focuses on what is
common in the needs of consumers rather than
on what is different.
B. Segmented/differentiated/marketing:
Segmented marketing is a market coverage
strategy in which a firm decides to target
several groups of market segments and designs
separate offers for each.
…

C. Niche marketing: a strategy in which a firm

goes after a large share of one or few
niches/segments.
Niching lets smaller companies focus their limited
resources on serving niches that may be
unimportant to or overlooked by larger competitors.
E.g. Nigerians and Indians at Ambo
 …

D. Micro-marketing: is the practice of tailoring

products and marketing programs to suit the tastes of
specific individuals and locations. It has two types:
A. Local marketing: cities, neighborhoods, and even
specific stores(E.g. Fish T-Shirt in Ambo Ambassador
boutique).
B. Individual marketing: needs and preferences of
individual customers. Individual marketing has also
been labeled one -to-one marketing (customized
marketing and market of one marketing.)
Patterns of Target Market Selection
 Product Positioning
Is the way the product is defined by the consumers
on important attributes-the place the product
occupies in consumers minds relative to competing
products.
The act of designing the company’s offering and
image to occupy distinctive place in the target
market’s mind.
Is the battle for mind.
 Perceptual Mapping (Product
Positioning)
This is Marketing research technique in which
consumer's views about a product are traced or plotted
(mapped) on a chart.
Respondents are asked questions about their
experience with the product in terms of its performance,
packaging, price, size, etc.
Theses qualitative answers are transferred to a chart
(called a perceptual map) using a suitable scale (such as
the Likert scale), and the results are employed in
improving the product or in developing a new one.
Chapter Five

Marketing Information System and Marketing

Research
 The Importance of Information

Marketing
Environment

Why
Information Competition
Customer Is
Needs Needed

Strategic
Planning
What is Marketing Information System
(MkIS)?

• People, equipment, and procedures to gather,

sort, analyze, evaluate and distribute needed,
timely, and accurate information to marketing
decision makers.

• Function: Assess, Develop and Distribute

Information.
 The Marketing Information System
Marketing Managers
Marketing Decisions and Communications

Marketing Information System

Distributing Assessing Information

Information Needs
Developing Information

Information Internal
Analysis Data

Marketing Marketing
Research Intelligence

Marketing
MarketingEnvironment
Environment
 Functions of a MkIS: Assessing
Information Needs

Conduct Interviews and Determine

What Information is
Desired, Needed, and Feasible to Obtain.

Monitors Environment
Examine Cost/ Benefit
for Information
of Desired
Managers
Information
Should Have
 Functions of MkIS: Developing Information

btains Needed Information for Marketing Managers

From the Following Sources

Internal
InternalData
Data
Collection
Collection of
of Information
Information from
from Data
Data Sources
Sources Within
Within the
the Com
Com
: Accounting,
m: Accounting, Sales
Sales Force,
Force, Marketing,
Marketing, Manufacturing,
Manufacturing
Marketing
MarketingIntelligence
Intelligence
Collection
Collection and
and Analysis
Analysis of
of Publicly
Publicly Available
Available Information
Information about
about
Competitors
Competitors and
and the
the Marketing
Marketing Environment
Environment
From:
From: Employees,
Employees, Suppliers,
Suppliers, Customers,
Customers,
Competitors,
Competitors, Marketing
Marketing Research
Research Companies
Companies
Marketing
MarketingResearch
Research
Design,
Design, Collection, Analysis, and Reportingof
Collection, Analysis, and Reporting ofData
Dataabout
aboutaa Situati
Situati
Functions of MkIS: Distributing Information

Information Must be Distributed

to the Right Managers at the Right Time.

Distributes
Distributes Non-
Non-
Distributes
Distributes Routine
Routine routine
routine
Information
Information for
for Information
Information for
for
Decision
Decision Making
Making Special
Special
Situations
Situations
What is Market Research?

• When we do not have answers through own

Market Information and Intelligence System
• It is the systematic gathering, recording and
analyzing of data about problems related to the
marketing of goods and services.
What to find out?

• What does the customer need?

• Who is the target audience?
• What is the competition?
• Are there any gaps in the market?
• Would the product be acceptable in the market?
The Marketing Research

• Marketing research
• Is a process
• Use data available from different
sources
• Is conducted to aid decision making
• Findings should be communicated to
the appropriate decision maker
 The Marketing Research Process

Defining
Defining the
the Problem
Problem and
and the
the Research
Research Objectives
Objectives

Developing
Developing the
the Research
Research Plan
Plan

Implementing
Implementing the
the Research
Research Plan
Plan

Interpreting
Interpreting and
and Reporting
Reporting the
the Findings
Findings
Marketing Research Process
Step 1. Defining the Problem & Research
Objectives •Gathers preliminary information
that will help define the problem
and suggest hypotheses.
Exploratory • it is conducted into an issue
Research
or problem where there are few
or no earlier studies to refer to
•Describes things as consumers’
attitudes and demographics
or market potential for a product.
Descriptive •Descriptive research describes
Research Phenomena as they exist.
Data is often quantitative and statistics
applied

•Test hypotheses about cause-

Causal and-effect relationships.
Research /relationship between advertiz
and profit /
Marketing Research Process
Step 2. Develop the Research Plan

Determine
Determine the
the Specific
Specific Information
Information Needed
Needed

Secondary Primary

Information Information
Informationcollected
Informationthat
thathas
has for
collected
been
beenpreviously
previously forthe
thespecific
specificpurpose
purpose
collected. at
athand.
hand.
collected.

Both
Both Must
Must Be:
Be:
Relevant
Relevant
Accurate
Accurate
Current
Current
Impartial
Impartial
Primary Data Collection Process Step 1.
Research Approaches
Observational
ObservationalResearch
Research

Gathering
Gatheringdata
databy
byobserving
observingpeople,
people,
actions and situations
actions and situations
(Exploratory)
(Exploratory)

Survey
SurveyResearch
Research
Asking
Asking individuals
individuals about
about
attitudes,
attitudes, preferences
preferences or
or
buying behaviors
buying behaviors
(Descriptive)
(Descriptive)

Experimental
ExperimentalResearch
Research
Using
Using groups
groups ofof people
people to
to
determine
determine cause-and-effect
cause-and-effect
relationships
relationships
(Causal)
(Causal)
Primary Data Collection Process Step 2.
Contact MethodsContact Methods

Mail Telephone Personal Online

Flexibility Poor Good Excellent Good
Quantity of Good Fair Excellent Good
Data Collected
Control of Excellent Fair Poor Fair
Interviewer
Control of Fair Excellent Fair Poor
Sample
Speed of Data Poor Excellent Good Excellent
Collection
Response Rate Fair Good Good Good
Cost Good Fair Poor Excellent
Primary Data Collection Process
Step 3. Developing a Sampling Plan

Probability Who
Whois isto
tobe
Probabilityor
or be
Non-probability surveyed?
surveyed?
Non-probability
sampling?
sampling?
Sample -
representative
segment of the
population

How
Howshould
shouldthe
the How
sample be Howmany
many
sample be should
shouldbe
be
chosen?
chosen? surveyed?
surveyed?
Primary Data Collection Process
Step 4. Research Instruments

Research
Research Instruments
Instruments

Questionnaire
Questionnaire Mechanical
Mechanical Devices
Devices
•• What
What to
to ask?
ask? •• People
•• Form People Meters
Meters
Form of
of each
each question?
question? •• Grocery
Grocery Scanners
Scanners
•• Wording?
Wording?
•• Ordering? •• Measuring
Measuring devices
devices
Ordering? ••Balances,
Balances,
Marketing Research Process
Step 3. Implementing the Research Plan

Collection
Collection
of
of
Data
Data

Processing
Processing
of Research
Research
of
Data Plan
Plan
Data

Analyzing
Analyzing
the
the
Data
Data
Data sources

• Reference Library
• Directories of Products/Companies
• The commodity exchange
• Industry/Trade Journals
• Trade fairs and Exhibitions
• Company Annual Reports
• Internet
Marketing Research Process
Step 4. Interpreting and Reporting Findings

Interpret
Interpret the
the Findings
Findings

Draw
Draw Conclusions
Conclusions

Report
Report to
to Management
Management
Chapter Six _ Managing Products

Marketing planning begins with formulating

an offering to meet target customers’ needs or
wants.
The customer will judge the offering by three basic
elements: product features and quality, services mix
and quality, and price.
Product Characteristics and
Classifications
Product is anything that can be offered to a market
for attention, acquisition, use, or consumption that
might satisfy a want or need. Products may be
tangible (goods) or intangible (services).
Product Levels: The Customer-Value
Hierarchy
…Product Levels: The Customer-Value
Hierarchy
• The fundamental level is the core benefit: the
service or benefit the customer is really buying.
A hotel guest is buying rest and sleep. The
purchaser of a drill is buying holes. Marketers
must see themselves as benefit providers.
• At the second level, the marketer must turn the
core benefit into a basic product. Thus a hotel
room includes a bed, bathroom, towels, desk,
dresser, and closet.
• At the third level, the marketer prepares an
expected product, a set of attributes and
conditions buyers normally expect when they
purchase this product. Hotel guests minimally
expect a clean bed, fresh towels, working lamps,
…Product Levels: The Customer-Value
Hierarchy
• At the fourth level, the marketer prepares an
augmented product that exceeds customer
expectations. In developed countries, brand
positioning and competition take place at this
level. In developing and emerging markets such
as India and Brazil, however, competition takes
place mostly at the expected product level.
• At the fifth level stands the potential product,
which encompasses all the possible
augmentations and transformations the product
or offering might undergo in the future. Here is
where companies search for new ways to satisfy
customers and distinguish their offering.
Product classification

There are three types of products based durability and

tangibility.
1.Nondurable goods-are tangible goods normally
consumed in one or a few uses, such as beer and
shampoo.
2.Durable goods-are tangible goods that normally
survive many uses: refrigerators, machine tools, and
clothing.
3.Service-are intangible, inseparable, variable, and
perishable products that normally require more
quality control, supplier credibility, and adaptability.
Examples include haircuts, legal advice, and appliance
repairs.
 Consumer Goods Classifications

• Staples
• Impulse goods
• Emergency
goods Specialty goods

Convenience
goods

Shopping goods Unsought

goods
 Industrial product Classifications

Materials and Parts

Manufactu
red
Materials
Capital Items
Raw and parts Installatio
materials
ns

Supplies and Equipmen

business t
Services
Product and Service Differentiation
Form
Many products can be differentiated in form—the
size, shape, or physical structure of a product.
Although essentially a commodity, it can be
differentiated by dosage size, shape, color, coating,
or action time.
Features
Most products can be offered with varying features
that supplement their basic function. A company
can identify and select appropriate new features by
surveying recent buyers and then calculating
customer value versus company cost for each
potential feature.
…

Customization
Marketers can differentiate products by
customizing them. As companies have grown
proficient at gathering information about individual
customers and business partners (suppliers,
distributors, retailers), & as their factories are
being designed more flexibly, they have increased
their ability to individualize market offerings,
messages, and media.

Mass customization is the ability of a company to

meet each customer’s requirements—to prepare on
a mass basis individually designed products,
…

Performance Quality
Most products occupy one of four performance
levels: low, average, high, or superior.
Performance quality is the level at which the
product’s primary characteristics operate. Quality
is increasingly important for differentiation as
companies adopt a value model and provide higher
quality for less money.
Firms should design a performance level
appropriate to the target market and competition,
however, not necessarily the highest level possible.
They must also manage performance quality
through time. Continuously improving the product
can produce high returns and market share; failing
…
Conformance Quality
Buyers expect a high conformance quality, the
degree to which all produced units are identical and
meet promised specifications.
e.g. Suppose a Porsche 911 is designed to accelerate
to 60 miles per hour within 10 seconds. A product
with low conformance quality will disappoint some
buyers.

Durability
A measure of the product’s expected operating life
under natural or stressful conditions, is a valued
attribute for vehicles, kitchen appliances, and other
durable goods.
…
Reliability
Buyers normally will pay a premium for more reliable
products. Reliability is a measure of the probability
that a product will not malfunction or fail within a
specified time period.
Repairability
Measures the ease of fixing a product when it
malfunctions or fails. Ideal repairability would exist if
users could fix the product themselves with little cost
in money or time.
Style
Describes the product’s look and feel to the buyer. It
creates distinctiveness that is hard to copy. Car
buyers pay a premium for Jaguars because of their
…Services Differentiation

Ordering ease refers to how easy it is for the

customer to place an order with the company.

Delivery refers to how well the product or service is

brought to the customer. It includes speed, accuracy,
and care throughout the process.
Installation refers to the work done to make a
product operational in its planned location. Ease of
installation is a true selling point for buyers of
complex products like heavy equipment and for
technology novices.
…

Customer training helps the customer’s

employees use the vendor’s equipment properly
and efficiently.

Customer consulting includes data, information

systems, and advice services the seller offers to
buyers.

Maintenance and repair programs help

customers keep purchased products in good
working order.
The Product Hierarchy
The product hierarchy stretches from basic needs to
particular items that satisfy those needs. We can
identify 6 levels of the product hierarchy, using life
insurance as an example:

1. Need family—The core need that underlies the

existence of a product family. Example: security,
safety
2. Product family—All the product classes that can
satisfy a core need with reasonable effectiveness.
Example: savings and income, hygiene and/or
cleanliness

3. Product class—A group of products within the

product family recognized as having a certain
…
Product line—A group of products within a product
class that are closely related because they perform a
similar function, are sold to the same customer
groups, are marketed through the same outlets or
channels, or fall within given price ranges. A product
line may consist of different brands, or a single
family brand, or individual brand that has been line
extended. Example: life insurance, personal hygiene
products.
Product type—A group of items within a product
line that share one of several possible forms of the
product. Example: term life insurance, soap
s

Item (also called stock-keeping unit or product

variant)—A distinct unit within a brand or product
line distinguishable by size, price, appearance, or
Product Systems and Mixes

• A product system is a group of diverse but

related items that function in a compatible
manner.

For example,
The extensive iPod product system includes _
headphones and headsets, cables and docks,
armbands, cases, power and car accessories, and
speakers.

• A product mix (product assortment) is the set

of all products and items a particular seller offers
for sale.
• A company’s product mix has a certain width,
…
…

The width of a product mix refers to how many

different product lines the company carries.

The length of a product mix refers to the total

number of items in the mix. We can also talk about
the average length of a line. We obtain this by
dividing the total length (here 20) by the number of
lines (here 5), for an average product line length of
4.
…

The depth of a product mix refers to how many

variants are offered of each product in the line. We
can calculate the average depth of P&G’s product
mix by averaging the number of variants within the
brand groups.

The consistency of the product mix describes how

closely related the various product lines are in end
use, production requirements, distribution
channels, or some other way.
Product Line Analysis

Product line managers need to know the sales and

profits of each item in their line to determine
which items to build, maintain, harvest, or divest.

They also need to understand each product line’s

market profile

Product line analysis provides information for two

key decision areas _ product line length and product
mix pricing.

A company lengthens its product line in two ways:

line stretching and line filling.
…

Line stretching _occurs when a company lengthens

its product line beyond its current range, whether
down-market, up-market, or both ways.
Down-Market Stretch _ A company positioned in
the middle market may want to introduce a lower-
priced line.

Up-Market Stretch _ companies may wish to enter

the high end of the market to achieve more growth,
realize higher margins, or simply position themselves
as full-line manufacturers.

Two-Way Stretch _ companies serving the middle

market might stretch their line in both directions.
…

Line Filling _ A firm can also lengthen its product

line by adding more items within the present range.

Motives for line filling include reaching for

incremental profits satisfying dealers who complain
about lost sales because of items missing from the
line, utilizing excess capacity, trying to become the
leading full-line company, and plugging holes to
keep out competitors.
Product Mix Pricing

• Product Line Pricing,

• Optional-feature Pricing,
• Captive-product Pricing,
• Two-part Pricing,
• By-product Pricing, and
• Product-bundling Pricing.
2. Branding

• Brand is a name, term, sign, symbol, or design,

or a combination of these, that identifies the
maker or seller of a product or service.
• Branding helps buyers in many ways.
• Brand names help consumers identify products
that might benefit them.
• Brands also say something about product quality
and consistency
 Brand Name Selection

• Selecting the right name is a crucial part of the

marketing process
• A good name can add greatly to a product's
success
• Finding the best brand name is a difficult task
…Co-Branding and Ingredient Branding

Co-branding Marketers often combine their products

with products from other companies in various ways.
In co-branding—also called dual branding or brand
bundling—two or more well-known brands are
combined into a joint product or marketed together in
some fashion.
…

Ingredient branding is a special case of co-

branding.

It creates brand equity for materials, components, or

parts that are necessarily contained within other
branded products.
 Importance of a Brand

• The brand makes it easier for the seller to

process orders and track down problems.
• Provide legal protection of unique product
features.
• Helps to increase the control and share of the
market.
• Branding helps the seller to segment markets
and expand the product mix.
• Easy for customers to identify products or
services.
 Qualities of Brand Name

• It should suggest something about the product's

benefits and qualities.
• It should be easy to pronounce, recognize and
remember.
• The brand name should be distinctive.
Examples: Shell, Kodak.
• The name should translate easily (and
meaningfully) into foreign languages.
• It should be capable of registration and legal
protection.
 Brand Sponsor

• Manufacturer’s brand (national brand)

• Private brands
• Licensed brand
• Co-Branding
3. Packaging

• Packaging involves designing and producing the

container or wrapper for a product
• packages must now perform many sales tasks
from attracting attention, to describing the
product, to making the sale.

Packaging performs a vital function for most

products
• It protects goods from being damaged before you
buy them
• helps keep, for example, foodstuffs hygienic and
fresh, and
• Is often necessary for labelling and information
reasons.
4. Labelling

• Label is part of a package that carries verbal

information about the product of the seller
• ingredients, weight measure, use, warning,
performance, etc.
• Sometimes it also includes advertising message
Labels may perform several functions

• The label identifies the product or brand

• The label might also grade the product, or
describe several things about the product - who
made it, where it was made, when it was made,
its contents, how it is to be used and how to use
it safely.
• Finally, the label might promote the product
through attractive graphics.
Product support service decision

• Customer service is another element of product

strategy, a company's offer to the marketplace
usually includes some services, which can be a
minor or a major part of the total offer.
• In fact, the offer can range from a pure good on
the one hand to a pure service on the other.
More and more companies are using product-
support services as a vital tool in gaining
competitive advantage.
 What is new product?

• New product is original product, improved

product, modified product that is offered to the
market.
• We can get new products through two ways;
• acquisition (by buying a whole company, a
patent, or a license to produce someone else’s
product) or through new product development.
Product life cycle
• Product development: It begins when the company
finds and develops a new-product idea. During product
development, sales are zero, and the company’s
investment costs mount.
• Introduction: It is a period of slow sales growth as the
product is introduced in the market. Profits are non
existent in this stage because of the heavy expenses of
product introduction.
• Growth: growth stage is a period of rapid market
acceptance and increasing profits.
• Maturity: It is a period of slowdown in sales growth
because the product has achieved acceptance by most
potential buyers. Profits level off or decline because of
increased marketing outlays to defend the product
against competition.
• Decline: decline stage is the period when sales fall off
and profits drop.
 Chapter Seven

Developing Pricing Strategies and Programs

• Price is the one element of the marketing mix that

produces revenue; the other elements produce
costs.
• Prices are perhaps the easiest element of the
marketing
program to adjust; product features, channels, and
even communications take more time.
• Price also communicates to the market the
company’s intended value positioning of its
product or brand.
• A well-designed and marketed product can
command a price premium and reap big profits.
• But new economic realities have caused many
…

• Pricing decisions are clearly complex and

difficult,
and many marketers neglect their pricing
strategies.
• Holistic marketers must take into account many
factors in making pricing decisions—the
company, the customers, the competition, and
the marketing environment.
• Pricing decisions must be consistent with the
firm’s marketing strategy and its target markets
and brand positionings.
 …How Companies Price
• Companies do their pricing in a variety of ways. In
small companies, the boss often sets prices.
• In large companies, division and product line
managers do. Even here, top management sets
general pricing objectives and policies and often
approves lower management’s proposals.
• Where pricing is a key factor (aerospace, railroads,
oil companies), companies often establish a pricing
department to set or assist others in setting
appropriate prices. This department reports to the
marketing department, finance department, or top
management.
• Others who influence pricing include sales
managers, production managers, finance
…

For any organization, effectively designing and

implementing pricing strategies requires a
thorough understanding of consumer pricing
psychology and a systematic approach to setting,
adapting, and changing prices.
Consumer Psychology and Pricing

• Many economists traditionally assumed that

consumers were “price takers” and accepted
prices at “face value” or as given.

• Marketers, however, recognize that consumers

often actively process price information,
interpreting it from the context of prior
purchasing experience, formal
communications(advertising, sales calls, and
brochures), informal communications (friends,
colleagues, or family members), point-of-
purchase or online resources, & other factors.
…
• Understanding how consumers arrive at their
perceptions of prices is an important marketing
priority.

• Here we consider three key topics—reference

prices, price–quality inferences, and price
endings.
 …
Reference Prices
•Although consumers may have fairly good
knowledge of price ranges, surprisingly few can
accurately recall specific prices.
•When examining products, however, they often
employ reference prices, comparing an observed
price to an internal reference price they remember
or an external frame of reference such as a posted
“regular retail price.”

•Implication for a seller is to situate its product

among expensive competitors to imply that it belongs
in the same class.
…
• Marketers encourage reference-price thinking by
stating a high manufacturer’s suggested price,
indicating that the price was much higher
originally, or pointing to a competitor’s high price.
• When consumers evoke one or more of these
frames of reference, their perceived price can vary
from the stated price. Research has found that
unpleasant surprises—when perceived price is
lower than the stated price—can have a greater
impact on purchase likelihood than pleasant
surprises.
• Consumer expectations can also play a key role in
price response. On Internet auction sites such as
eBay, when consumers know similar goods will be
…Possible reference prices

• “Fair Price” (what consumers feel the product

should cost)
• Typical Price
• Last Price Paid
• Upper-Bound Price (reservation price or the
maximum most consumers would pay)
• Lower-Bound Price (lower threshold price or the
minimum most consumers would pay)
• Historical Competitor Prices
• Expected Future Price
• Usual Discounted Price
…
Price-quality Inferences

•Many consumers use price as an indicator of

quality. Image pricing is especially effective with
ego-sensitive products such as perfumes, expensive
cars, and designer clothing.
•A $100 bottle of perfume might contain $10 worth
of scent, but gift givers pay $100 to communicate
their high regard for the receiver.
…
• Price and quality perceptions of cars interact.
• Higher-priced cars are perceived to possess high
quality.
• Higher-quality cars are likewise perceived to be
higher priced than they actually are.
• When information about true quality is available,
price becomes a less significant indicator of
quality.
• When this information is not available, price acts
as a signal of quality.
…
Price Endings

•Many sellers believe prices should end in an odd

number.
•Customers see an item priced at $299 as being in
the $200 rather than the $300 range; they tend to
process prices “left-to-right” rather than by
rounding.
•Price encoding in this fashion is important if
there is a mental price break at the higher,
rounded price.
 Setting the Price

• The firm must consider many factors in setting its

pricing policy.

Step 1_ Selecting the Pricing Objective

Step 2_ Determining Demand
Step 3 _ Estimating Costs
Step 4 _ Analyzing Competitors’ Costs, Prices, and
Offers
Step 5_ Selecting a price method
Step 6_ Selecting a Final Price
…
Step 1: Selecting the Pricing Objective

•The company first decides where it wants to

position its market offering.
•The clearer a firm’s objectives, the easier it is to
set price.
•Five major objectives are: survival, maximum
current profit, maximum market share, maximum
market skimming, and product-quality leadership.
 …
SURVIVAL _ Companies pursue survival as their
major objective if they are plagued with
overcapacity, intense competition, or changing
consumer wants.
MAXIMUM CURRENT PROFIT _ Many companies
try to set a price that will maximize current profits.
They estimate the demand and costs associated with
alternative prices and choose the price that produces
maximum current profit, cash flow, or rate of return
on
investment.
MAXIMUM MARKET SHARE _ Some companies
want to maximize their market share. They believe a
higher sales volume will lead to lower unit costs and
…
MAXIMUM MARKET SKIMMING Companies
unveiling a new technology favor setting high
prices to maximize market skimming. E.g. Sony
uses market-skimming pricing, in which prices
start high and slowly drop over time.

PRODUCT-QUALITY LEADERSHIP _ A company

might aim to be the product-quality leader in the
market. Many brands strive to be “affordable
luxuries”—products or services characterized by
high levels of perceived quality, taste, and status
with a price just high enough not to be out of
consumers’ reach.
…

OTHER OBJECTIVES_ Nonprofit and public

organizations may have other pricing objectives. A
university aims for partial cost recovery, knowing
that it must rely on private gifts and public grants
to cover its remaining costs. A nonprofit hospital
may aim for full cost recovery in its pricing. A
nonprofit theater company may price its
productions to fill the maximum number of seats. A
social service agency may set a service price
geared to client income.
…
Step 2: Determining Demand
•Each price will lead to a different level of demand
and have a different impact on a company’s
marketing objectives.
•The normally there is inverse relationship
between price and demand; The higher the price,
the lower the demand.
•For prestige goods, the demand curve sometimes
slopes upward. One perfume company raised its
price and sold more rather than less! Some
consumers take the higher price to signify a better
product. However, if the price is too high, demand
may fall.
 …
ESTIMATING DEMAND CURVES Most companies
attempt to measure their demand curves using
several different methods.
Surveys can explore how many units consumers
would buy at different proposed prices.
Price experiments can vary the prices of different
products in a store or charge different prices for the
same product in similar territories to see how the
change affects sales.
Statistical analysis of past prices, quantities sold,
and other factors can reveal their relationships. The
data can be longitudinal (over time) or cross-
sectional (from different locations at the same time).
…
Step 3: Estimating Costs

Demand sets a ceiling on the price the company

can charge for its product. Costs set the floor.

The company wants to charge a price that covers

its cost of producing, distributing, and selling the
product, including a fair return for its effort and
risk. Yet when companies price products to cover
their full costs, profitability isn’t always the net
result.
…
Step 4: Analyzing Competitors’ Costs,
Prices, and Offers
Within the range of possible prices determined by
market demand and company costs, the firm must
take competitors’ costs, prices, and possible price
reactions into account.
If the firm’s offer contains features not offered by
the nearest competitor, it should evaluate their
worth to the customer and add that value to the
competitor’s price.
If the competitor’s offer contains some features not
offered by the firm, the firm should subtract their
value from its own price. Now the firm can decide
whether it can charge more, the same, or less than
…
Step 5: Selecting a Pricing Method
Given the customers’ demand schedule, the cost
function, and competitors’ prices, the company is
now ready to select a price.
The three major considerations in price setting:
•Costs set a floor to the price.
•Competitors’ prices and the price of substitutes
provide an orienting point.
•Customers’ assessment of unique features
establishes the price ceiling.
…
Companies select a pricing method that includes
one or more of these three considerations.
We will examine six price-setting methods:
 Markup pricing,
 Target-return pricing,
 Perceived-value pricing,
 Value pricing,
 Going-rate pricing, and
 Auction-type pricing.
 …
Step 6: Selecting the Final Price

• Pricing methods narrow the range from which

the company must select its final price.
• In selecting that price, the company must
consider additional factors, including the impact
of other marketing activities, company pricing
policies, gain-and-risk-sharing pricing, and the
impact of price on other parties.
…
IMPACT OF OTHER MARKETING ACTIVITIES
The final price must take into account the brand’s
quality and advertising relative to the competition.
In a classic study, Paul Farris and David Reibstein
examined the relationships among relative price,
relative quality, and relative advertising for 227
consumer businesses and found the following:
…
• Brands with average relative quality but high
relative advertising budgets could charge
premium prices. Consumers were willing to pay
higher prices for known rather than for unknown
products.
• Brands with high relative quality and high
relative advertising obtained the highest prices.
Conversely, brands with low quality and low
advertising charged the lowest prices.
• For market leaders, the positive relationship
between high prices and high advertising held
most strongly in the later stages of the product
life cycle.a and other benefits.
Chapter Eight
Designing & Managing Integrated Marketing Channels

• Most producers do not sell their goods directly to

the final users; between them stands a set of
intermediaries performing a variety of functions.
These intermediaries constitute a marketing
channel (also called a trade channel or distribution
channel).

• Formally, marketing channels are sets of

interdependent organizations participating in the
process of making a product or service available
for use or consumption. They are the set of
pathways a product or service follows after
production, culminating in purchase and
…
• Some intermediaries—such as wholesalers and
retailers—buy, take title to, and resell the
merchandise; they are called merchants.

• Others—brokers, manufacturers’
representatives, sales agents—search for
customers and may negotiate on the producer’s
behalf but do not take title to the goods; they are
called agents.

• Still others—transportation companies,

independent warehouses, banks, advertising
agencies—assist in the distribution process but
neither take title to goods nor negotiate
Channel Functions and Flows
Channel Levels
…
…The Value-Adds versus Costs of Different
Channels