Chapter Five

ENTREPRENEURSHIP

2016 E.C
 CHAPTER 5: MARKETING

5.1 INTRODUCTION
 Business firms and non-profit organizations
engage in marketing.
 The foundation of marketing is exchange in which
one party provides to another party something of
value in return for something else of value.

 The AMA defines a market as “The aggregate

demand of the potential buyers for a product or
services”.

 Thus, a market is a group of buyers and sellers

interested in negotiating the terms of
purchase/sale for goods or services.
 5.2 Meaning and Definitions of Marketing

The definitions that serve our purpose best are

as follows:
Marketing:
 is a social and managerial process by which an
individual or group obtain what they need and want
through creating, offering and exchanging of
product of values with others (Philip Kotler,2012).

 is the total business activity designed to plan,

price, promote and distribute want satisfying
products to target market to achieve organizational
goal (William J.Stanton, 1984).

 is the creation and delivery of standard of living to

society (Paul. Mazor, 2005).
 5.3 Core Concepts of Marketing

5.3.1 Needs, Wants and Demand

Marketing starts with human needs and wants.
Let see terms related with this as follow:
 Need: -
 Human Need is a state of deprivation of some basic
satisfaction.
 People require food, clothing, shelter, safety and
belonging and esteem.

 Wants: -
 Wants are desires for specific satisfiers of needs.
 Human wants are continually shaped and reshaped
by social forces and institutions including churches,
schools, families and business cooperation.
 Eg. A person needs food but wants spaghetti
 Cont….

 Demands:-
 Demands are wants for specific products that are backed
by ability and willingness to buy them.
 Wants become demand when supported by purchasing
power.
 Product:-
 is anything that can be offered to satisfy a need or want.
 Products broadly classify as tangibility and intangibility
features.
 Value:-
 is the consumer’s estimate of the products overall
capacity to satisfy his or her needs.
 It is “the satisfaction of customer requirement at the
lowest cost of
 acquisition,
 ownership and
 use”.
 Conti…

 Cost:-
 is the amount of money that are going to be
expended or already incurred to acquire a
product.
 Exchange:-
 is the act of obtaining a desired product
from someone by offering something in
return.
 Transaction:-
 is the trade of values between two parties.
 Market:-
 consists of all the potential customers
sharing a particular need or want who might
be willing and able to engage in exchange
 5.4 Importance of Marketing
 A customer purchases a product because it provides satisfaction.
 Something that makes a product capable of satisfying want is its
utility.
1. Form Utility:
 is associated primarily with production - the physical or
chemical changes that make a product more valuable.
 Decision making regarding product design, color, quantities
produced, or some other aspect of a product.
 All of these things contribute to the product’s form utility.
2. Place Utility:
 Exists when a product is readily accessible to potential
customers.
3. Time Utility:
 Having a product available when you want it.
4. Information Utility:
 is created by informing prospective buyers that a product
exists.
 Cont…

 Unless you know a product exists and where you

can get it, the product has no value.
 Advertising
 creates information utility by answering a
customer questions
 Image utility
 is a special type of information utility. It is the
emotional or psychological values that a person
attaches to a product or brand because of its
reputation or social standing.
5. Possession Utility:
 is created when a customer buys the product-
that is, ownership is transferred to the buyer.
 Thus, for a person to consume and enjoy the
product, a transaction must take place.
 5.5 Marketing Philosophies

1 The Production Concept

 is one of the oldest concepts in business.
 It holds that consumers will favor products
that are widely available and low in cost.
 Managers of production-oriented
organization concentrate on achieving high
production efficiency and wide distribution.
 This orientation makes sense in two types of
situations.
 The first is where the demand for a product
exceeds supply, as in many developing
countries.
 The second situation is where the product’s
cost is high and has to decrease to expand
 Cont…

2. The Product Concept

 It holds that consumers will favor those
products that offer the most quality,
performance or innovative features.
 Managers focus their energy on making
superior products and improving them over
time.
 Mangers assume that buyers admire well-
made products and can appraise product
quality and performance.
 In such situation, customers are ready to pay
high prices for product extra features.
 Product-oriented companies often design
their products with little or no customer
 Cont…

3. The Selling Concept/Sales Concept

 It holds that consumers and businesses will not buy
enough of the firm’s products unless it undertakes an
aggressive selling and promotion effort.
 It is practiced most aggressively with unsought
goods—goods that buyers normally do not think of
buying, such as insurance, blood donations and
funeral plots.
 Most firms practice the selling concept when whom
they have overcapacity.
 Their aim is to sell what they make rather than make
what the market wants.
 Moreover, prospects are bombarded with TV
commercials, newspaper advertisements, direct mail
 Cont…

4. The marketing concept

 It holds that achieving organizational goals depends
on knowing the needs & wants of target markets &
delivering the desired satisfactions better than
competitors do.
 Customer focus & value are the paths to sales and
profits.
 Instead of a product-centered “make and sell”
philosophy, the marketing concept is a customer-
centered “sense & respond” philosophy.
 It views marketing not as “hunting,” but as
“gardening,”
 The job is not to find the right customers for your
product, but to find the right products for your
 Cont…

 The selling concept takes an inside-out

perspective.
 It starts with the factory, focuses on the company’s
existing products, & calls for heavy selling &
promotion to obtain profitable sales.
 It focuses primarily on customer conquest – getting
short-term sales with little concern about who buys
or why.
 In contrast, the marketing concept takes an
outside-in perspective.
 The marketing concept starts with a well-defined
market, focuses on customer needs, & integrates all
the marketing activities that affect customers.
 In turn, it yields profits by creating lasting
 Conti…

Table 5.1 Selling and Marketing Concept

Contrasted
Point of
Difference Selling Marketing
Starting point Factory Market place
Existing
Focus product Customer need

Selling and Integrated

Means promotion marketing

Profit through Profit through

End Volume satisfaction
 Conti…

5. The Societal Marketing Concept

 It holds that the organization’s task is to determine
the needs, want, and interests of target markets
 It should deliver the desired satisfactions more
effectively and efficiently than competitors in a way
that preserves or enhances the consumers and the
SOCIETY’S WELLBEING.
 It asks if the firm that senses, serves and satisfies
individual wants is always doing what’s best for
consumers & society in the long run.
 According to the societal marketing concept, the
pure marketing concept overlooks possible conflicts
between short-run consumer wants and long run
consumer welfare.
 Table 5.2: Summary of the Evolution of
Marketing

 Consumers favor products that are

Product available and highly affordable
ion  Improve production and distribution
 Availability and affordability is what
the customer wants’
 Consumers favor products that offer
Product the most quality, performance and
innovative features
 A good product will sell itself
Sales  Consumers will buy products only if
the company promotes/sells these
products
 Creative advertising and selling will
 Cont…

Marketin  Focuses on needs/wants of target

g markets and delivering satisfaction
better than competitors
 The consumer is king! Find a need
and fill it
Relation  Focuses on needs/wants of target
ship markets and delivering superior
Marketin value
g  Long-term relationships with
customers and other partners lead
to success
 Cont…

6. Relationship Marketing
 It is the practice of building long term
satisfying relations with key parties-
 customers,
 suppliers,
 distributors- in order to retain their long
term preferences and business.
 The ultimate outcome of relationship marketing
is the building of a unique company asset called
a marketing network.
 In this case, customer experience rather than
customer satisfaction is the most critical
component in relationship marketing.
 5.6 Marketing Information Systems

 A MIS consists of people, equipment and

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

 The role of Information Systems is to:

 assess the manager’s information needs,
 develop the needed information, and
 distribute the information to the marketing
managers.

 The needed information is developed through

internal company records, marketing
intelligence activities, marketing research, and
 5.6.1 Marketing Research

 Marketing research:
 is the systematic & objective identification,
 is the collection, analysis, & dissemination of
information for the purpose of assisting
management in decision making,
 related to the identification & solution of
problems & opportunities in marketing.
 required systematic planning at all the
stages of the marketing research process.
 The procedures followed at each stage are
methodologically sound, well documented,
and planned in advance.
 It uses the scientific method in that data are
collected and analyzed to test prior thinking
5.6.1.1 The Role of Marketing Research in
Decision Making

 There are three Functional Roles of Marketing

Research.
 Descriptive Function –
 the gathering and presentation of
statements of fact.

 Diagnostic (analytical) Function –

 The explanation of data.

 Predictive Function –
 Specification of how to use the descriptive
and diagnostic research to predict the result
of a planned marketing decision.
 5.6.1.2 Marketing Research Components

Marketing researchers deal with many

aspects of a market:
 Market size:
 deals the no. or value of units sold to a
market in a given period.
 Market Share:
 this one is about a specific corporation’s
share of the market size out of the whole
market of a product.
 Market penetration:
 It is used to know when a company
penetrates a market to get better market
share by lowering the price of a product.
 Brand equity research –
 5.6.1.3 Customer Satisfaction Research

There are d/t types of research used to assess

abt customers.
Distribution channel audits –
 to assess distributors’ and retailers’
attitudes toward a product, brand, or
company.
Marketing effectiveness and analytics –
 Building models and measuring results to
determine the effectiveness of individual
marketing activities.
Mystery Consumer or Mystery shopping –
 here the researcher acts as a shopper.
 This is often used for quality control or for
researching competitors' products.
 Cont…

 How does the target market see the brand

relative to competitors?
 What does the brand stand for?
Price elasticity testing –
 here the objective of the research is to
determine how sensitive customers are to
price changes
Sales forecasting –
 to determine the expected level of sales
given the level of demand with respect to
other factors.
Segmentation research –
 helps to determine the demographic,
psychographic, & behavioral characteristics
5.6.1.4 Marketing Research Process

Marketing research consists of the following

related phases:
Step 1: Define the research purpose or
objectives
The following questions help to establish
objectives:
 Where potential customers buy the product?
 Why they purchase there?
 What is the size of the market?
 How much of it can your business capture?
 How does your business compare with
competitors?
 Cont…

Step 2: Research Design Formulation

 The research design is a blueprint for
conducting the marketing research.
 More formally, it involves the following:
 Study period and place determination.
 Qualitative data collection methods.
 Methods of collecting quantitative data.
 Definition of the information needed.
 Questionnaire design.
 Measurement and scaling procedures.
 Sampling process and sample size.
 Plan of data analysis.
 Cont…

Step 3: Gather at this stage secondary data

 A data which is originally collected by others
for their own purpose, but such data can be
used by the researcher when it is relevant to
the current study. Secondary data:
 Is less expensive.
 Can be acquired within or outside the
venture.
 But, may be out-dated and less valid.
Step 4.Gather Primary Data
 Primary data collection techniques can be
categorized as;
 Observational techniques-do not involve
contact with respondents.
 Cont…

 The following are examples of survey

techniques.
A) Mail questionnaires.
B) Telephone interviews.
C) Personal interviews.

Step 5: Data Processing and Analysis

 Data processing includes the editing,
coding, transcription, & verification of data.
 Cont…

Step 6: Report Preparations and

Presentation
 At the end, the research results will be written
in a report form and presented to the
concerned parties.
The report includes:
 The specific research questions identified,
 Describes the research approach,
 The research design,
 The data collection methods, and sampling
procedures,
 The data processing and analysis
procedures,
 The major findings and suggestions for
 5.6.2 Marketing Intelligence

 Market intelligence is the systematic process

of gathering, analyzing, supplying & applying
information (both qualitative & quantitative)
about the external market envn’t.
 Intelligence is evaluated information.
 Marketing intelligence is used to determine:
 Current and future market needs,
 Changes in the business envn’t that may
affect the size & nature of the market in the
future.
 Environment that may affect the size &
nature of the market in the future.
 5.6.2.1 The Importance of Marketing
Intelligence

Marketing intelligence provides the

following benefits;
 Market and customer orientation – promote
external focus.
 Identification of new opportunities.
 Smart segmentation.
 Early warning of competitor moves.
 Minimizing investment risks.
 Quicker, more efficient and cost-effective
information.
 5.6.2.2 Ways to Undertake Marketing
Intelligence
 Unfocused scanning:
 Any information that may be useful is
gathered without any specific purpose in
mind.
 Semi-focused scanning: no specific purpose.
 For instance, the manager may focus more
on economic and business publications,
broadcasts etc. and pay less attention to
political, scientific or technological media.
 Informal search:
 limited and unstructured attempt to obtain
information for a specific purpose.
 Formal search:
 this is a purposeful search for information in
 5.6.3 Competitive Analysis

 Competitive analysis refers to determining

the strengths & weaknesses of competitors and
designing ways to take opportunities or tackle
threats posed by competitors.
5.6.3.1 Uses of Competitive Analysis
 It helps Mgt understand its competitive
advantages/disadvantages relative to
competitors.
 It generates understanding of competitors’
past, present and future strategies.
 It provides an informed basis to develop
strategies to achieve competitive advantage
in the future.
 (e.g. how will competitors respond to a
 Cont…

 It is a method of gathering data abt

competitors from d/t sources.
 It should answer the following questions:
 Who are your competitors?
 What customer needs and preferences are
you competing to meet?
 What are the similarities and differences
between their products/services and yours?
 What are the strengths and weaknesses of
each of their products and services?
 How do their prices compared to yours?
 How are they doing overall?
 Cont…

 How do you plan to compete?

 Offer better quality services?
 Lower prices?
 More support?
 Easier access to services?
 How are you uniquely suited to
compete with them?

5.6.3.2 Steps of Competitive Analysis

 A strategic business owner:
 not only knows who its competitor is
 but also understands the best way to
position ahead of its competitor.
 Cont…

 The following provides a step-by-step process

in creating your competitive analysis.
1) Identify your competitors:
 Determine both local and international
competitors.
 Your competitor includes anything that
could draw customers away from your
business.
2) Gather information about competitors:
At this stage you need to know:
 what markets or market segments your
competitors serve;
 what benefits your competitors offer;
 why customers buy from them and
 Cont…

3) Gathering Information on Competitors

 To gather information you can go to your
competitors’ company site using which you can
learn about:
 promotion strategies;
 prices strategies;
 your competitors’ customers;
 your competitors suppliers and employees;
 trade shows; and
 publicly available information – from:
 Newspapers,
 Magazines,
 Press releases and
 Online publications.
 Cont…

4) Analyzing the Competition

 After studying the information you have
gathered about each of your competitors, ask
yourself these primary questions:
 How are you going to compete with that
company?
 Is there a particular segment of the market
that your competitor has overlooked?
 Is there a service that customers or clients
want that your competitors do not supply?
5) Develop a pricing:
 is to develop a pricing model that
represents:
 what you are offering the market
 5.7 The Marketing Mix and Marketing
Strategies
5.7.1 The 4 P’s Of Marketing/The Marketing
Mix
 These are marketing variables that the
marketing manager can manipulate as
controllable variables.
1) Product:
 refers to goods/services produced for sale,
 the product/service should relate to the
needs and wants of the customers.
Some important questions you need to ask
yourself include:
 What products/services do I sell?
 Why did I decide to sell these products?
 Do I have the products customers want?
 Cont…

 Do I stock products that do not sell well?

 Always listen to what your customers like
and don’t like.
 When their needs change, change your
products and services to satisfy the new
needs.
 Do more market research in order to provide
those products or services and increase your
sales.
 If your product is not selling well, think of
new ideas like finding new customers.
2) Pricing:
 refers to the process of setting a price for a
product/service.
 Cont…

To set your price you need to:

 Know your costs.
 Know how much customers are willing to
pay.
 Know your competitors price.
 Know how to make your prices more
attractive
3) Place:
 It means the d/t ways of getting your
products to your customers.
 It is also referred to as distribution.
 Find ways to get your products to where it
is easy for customers to buy.
 You can distribute your products to your
 Cont…

4) Promotion:
 Refers informing your customers of your
products and attracting them to buy them.
 It includes advertising, sales promotion,
publicity (non-paid promotion) and personal
selling.
 Ensure you maintain attractive displays.
 Let customers try new products.
 Have competitions.
 Give demonstrations.
 Sell complementary products (products that
go together)
 5.7.2 What Is Marketing Strategy?

 A marketing strategy:
 is a process that can allow an organization to:
 concentrate its limited resources on the
greatest opportunities,
 increase sales and
 achieve a sustainable competitive
advantage.
 is a method of focusing an organization's
energies and resources on:
 a course of action which can lead to
increased sales and
 dominance of a targeted market.
 Combines:
 product development, promotion,
 Cont…

 determines:
 the choice of target market segments,
 positioning,
 marketing mix, and
 allocation of resources.
1) Pricing Strategy
 Price is the value placed on what is
exchanged.
 Price is often the only element the marketer
can change quickly in response to demand
shifts.
 It relates directly to total revenue
TR = Price * Quantity
Profit = TR – TC
 Cont…

 Marketers use dynamic pricing strategies.

 The f/f are some of pricing strategies mostly
applicable in the real world scenario:
i) Price Skimming:
 In this strategy, the firm charging the
highest possible price that buyers who most
desire the product will pay.
 It attracts a market segment that is more
interested in quality, status, uniqueness
etc.
 In this case, consumers’ demand must be
inelastic.
ii) Penetration Pricing:
 In this strategy, the firm charging the
 Cont…

iii) Cost-plus pricing:

 Any amount that is above unit cost may be
considered.
iv) Mark-up pricing:
 A certain percentage of the selling price is
added to unit cost.
v) Competition Oriented Pricing:
 Considers competitors prices primarily; but
the market type matters.
vi) Odd-even pricing:
 This is Psychological pricing method based
on the belief that certain prices or price
ranges are more appealing to buyers.
2. Promotion Strategies
 Cont…

An organization’s promotional strategy can

consist:
i) Advertising:
 It is any paid form of non-personal, one-way,
mass communication about an organization,
good, service, or idea by an identified
sponsor.
ii) Personal selling:
 This is the two-way flow of communication
between a buyer and seller, often in a face
to face encounter, designed to influence a
person’s or group’s purchase decision.
iii) Public relations:
 Cont…

iv) Sales promotion:

 This promotion type involves short term
incentives of value such as discounts, free
samples, and prizes to be offered to arouse
interest of customers in buying the
good/service.
3) Distribution Strategies
 Many companies often fail to establish or
maintain the most effective distribution
strategies.
Problems that researchers identified include:
 Unwillingness to establish d/t distribution
channels for d/t products,
 Fear of utilizing multiple channels, due to
 Cont…

 Lack of creativity, and

 Resistance to change.
Marketing Channels are:
 individuals/organizations involved in the
process of making the product available for
use or consumption by consumers.
Direct channels:
 Producers and end users directly interact.
Indirect channels:
 Intermediaries are inserted between seller
and buyer.
 Cont…

The f/f factors should be considered to select the

best channel under the condition of using best
distribution strategy.
Company Factors:
 Financial, human and technological
capabilities of a company to do its business
activities.
Market Characteristics:
 Geography, market density, market size,
target market
Product Attributes:
 Perishability, value and sophistication of the
product
Environmental Forces:
5.8 Selling and Customer Service

5.8.1 The Concept of Service

Service:
 refers to any activity undertaken to fulfill
customer’s needs.
 is any act or performance that one party can
offer to another that is essentially
intangible and does not result in the
ownership of anything.
Distinctive features of services include:
Intangibility:
 shows that pure services cannot be defined
in terms of the physical dimensions; or
 the customer cannot see or feel them before
purchase.
 Cont…

Variability:
 Services are highly variable, because they
depend on who provides them, and when
and where they are provided.
Perishability:
 services are produced and consumed at the
same point, and are totally perishable right
after use.
Subjective
 in the sense that an acceptable service for
one customer may not be equally or totally
acceptable by another customer.

 If the service provider sets expectations

 5.8.2 The Concept of Customer

Customer:
 is a person or organization that buys a
product or service either for use or for
resale.
 Can be:
 internal (e.g. member of the
organization) or
 external (customers coming from
outside).

5.8.3 Strategic Activities needed for

Quality Customer Service Delivery
 Organizations should identify important
 Cont…

Especially, the following specific areas

should be considered:
1. Establishing a clear customer service
strategy.
2. Ensuring that correct people are in place,
with the correct skills to deliver outstanding
personal service.
3. Establishing clear material service delivery
processes.
4. Improving in terms of process improvement,
quality monitoring and recovery continuously.
5. Participatory Management.
 5.8.4 Customer Handling and
Satisfaction
 Customer handling and satisfaction is a key for
successful organizations.
 Managers and employees should work hand-in-
hand to improve their service delivery
programs.
 Existing customers must be satisfied with the
existing service.
 Existing customers are also means of potential
customers.
 Customer retention and satisfaction comes not
from words, but from putting time, effort, and
money to satisfy customers.
The major reasons to lose customers
are:
 Cont…

5.8.4.1 Considering Customers as an

Invaluable Asset
 The value of one customer is infinite, and you
cannot possibly calculate it.
 This includes sales to:
 him in his lifetime as well as
 customers he generates for you through
word of mouth.
 This means, your most PRECIOUS ASSET is your
customer.
5.8.4.2 Reducing Customer Complaint
 Every single complaint should be treated as
an opportunity to improve the quality of
 Cont…

Consider also the following research

findings about customer satisfaction:
 91% of customers who have major complaints
decide they will never come back.
 But if the complaint is resolved quickly, 82% of
them will return.
 Quick complaint resolution drops customer
defection rate from 91% to 18%.
 It is better to have a complaining customer
than no customer at all. It pays to resolve
complaints quickly.
 There is no investment like investment in
customer satisfaction.
 Treat the cost of satisfying a customer as an
 Cont…

5.8.4.3 Place Yourself in The Customer’s

Shoes
 You have the right to choose your customers
but not the luxury to compromise on your level
of service.

 Get rid of the unwanted customer but do it

with tact.

 Part with the unwanted customer with a smile

and a handshake.

 Place yourself in the customer’s shoes.

 ‘Do unto your customer as you would have
 P TE R F I V E
E N D O F CH A
Than k y o u !!!