Principles of Marketing

GAZA F PRINCIPLES OF MARKETING MODULE
PRINCIPLES
OF
MARKETING
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Author’s Note
This Principles of Marketing textbook is my first effort at writing a textbook. I have
tried to gather and record the areas of marketing that meet two goals. First, I
have included the information that is most likely to be used by a typical marketing
student. Second, I have written about principles of marketing that are true
principles, that is, that are less likely to change fundamentally in the foreseeable
future. In choosing material to cover, I have tried to consider the fact that most
people who learn this material do not have their primary professional
responsibility in marketing. Therefore, I have attempted to focus on material that
will be most helpful to those who will not work primarily in the marketing area. If
you learn this material and are not a marketing person at least it will help you
work more effectively with those who are in marketing and improve your ability to
be a better consumer.
I hope you enjoy your experience with this textbook. As with any project, I will be
trying to continuously change this book to meet the needs of its users, so please
let me know of any suggestions, recommendations you may have particularly as
they apply to your ability to learn and apply the material presented.
MS F. Mawadze Gazah
funmaw@gmail.com
0772431239
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Contents
DEFINITION OF MARKETING ................................................................................................................... 8
Type of organizations that use marketing. ..................................................................................... 8
Basic/core concepts of marketing ...................................................................................................... 8
Need, Wants and Demand .............................................................................................................. 8
Products (Goods, Services and Ideas): ............................................................................................ 8
Value, Cost and Satisfaction: .......................................................................................................... 8
Exchange and Transaction: ............................................................................................................. 8
Marketing Environment: ................................................................................................................. 9
Competition: ................................................................................................................................... 9
Supply Chain: .................................................................................................................................. 9
Reasons for Studying Marketing: ........................................................................................................ 9
1. Importance of marketing to consumers ...................................... Error! Bookmark not defined.
2. Importance of marketing to the firms/Business ......................................................................... 9
3. Importance of marketing to the society ..................................................................................... 9
GOALS OF MARKETING SYSTEM ....................................................................................................... 10
Types of utility:.................................................................................................................................. 10
Place utility.................................................................................................................................... 10
Time utility .................................................................................................................................... 10
Possession utility ........................................................................................................................... 10
MARKETING FUNCTIONS................................................................................................................... 11
(1)Research function ..................................................................................................................... 11
(2)Buying function......................................................................................................................... 11
(3)Product development and management ................................................................................. 11
(4)Production function.................................................................................................................. 11
(5)Promotion function .................................................................................................................. 11
(6)Standardization and grading .................................................................................................... 11
(7)Pricing function......................................................................................................................... 11
(8)Distribution function: ............................................................................................................... 11
(9)Risk bearing function: ............................................................................................................... 12
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(10)Financing function: ................................................................................................................. 12

(11) After sales-service ................................................................................................................. 12
EVOLUTION OF MARKETING CONCEPT ............................................................................................. 12
1. The Production Concept. .......................................................................................................... 12
2. The Product Concept ................................................................................................................ 12
3. The Selling Concept ................................................................................................................... 12
4. The Marketing Concept............................................................................................................. 13
Distinctions between the Sales Concept and the Marketing Concept: ........................................ 13
5. The Societal Marketing Concept ............................................................................................... 13
STEPS IN MARKETING PROCESS ........................................................................................................ 15
1. Analysis..................................................................................................................................... 15
2. Marketing Planning ................................................................................................................... 16
3. Implementation ........................................................................................................................ 16
4. Control...................................................................................................................................... 16
MICRO ENVIRONMENT ................................................................................................................... 17
The Company ................................................................................................................................ 18
Suppliers- ...................................................................................................................................... 18
Marketing intermediaries ............................................................................................................. 18
Customer....................................................................................................................................... 18
Competitors .................................................................................................................................. 18
Publics ........................................................................................................................................... 19
MACRO ENVIROMENT...................................................................................................................... 19
Demography.................................................................................................................................. 19
Economic environment ................................................................................................................. 19
Natural environment ..................................................................................................................... 20
Technological environment .......................................................................................................... 20
Political environment .................................................................................................................... 20
Society and culture ....................................................................................................................... 20
MARKETING INFORMATION SYSTEMS .................................................................................................. 22
(a) Internal Company Records .......................................................................................................... 23
(b) Marketing Intelligence................................................................................................................. 23
(c) Marketing Research ..................................................................................................................... 23
(d) Marketing Decision Support Systems .......................................................................................... 25
CONSUMER BUYING BEHAVIOUR ......................................................................................................... 27
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Black box ........................................................................................................................................... 27

Consumer buying roles ................................................................................................................. 28
Stages of the Consumer Buying Process ........................................................................................... 28
Stages of the Consumer Buying Process ........................................................................................... 29
1. Problem Recognition................................................................................................................. 29
2. Information search.................................................................................................................... 29
3. Evaluation of Alternatives ......................................................................................................... 29
4. Purchase decision ..................................................................................................................... 29
5. Post-Purchase Evaluation.......................................................................................................... 29
Types of consumer buying behaviour are determined by: ........................................................... 30
Factors that Affect the Consumer Buying Decision Process ............................................................. 30
I. Cultural factors........................................................................................................................... 30
Psychological factors..................................................................................................................... 33
Maslow Hierarchy of Needs. ......................................................................................................... 34
Perception-- .................................................................................................................................. 34
Learning- ....................................................................................................................................... 35
Attitudes- ...................................................................................................................................... 35
FACTORS AFFECTING THE PURCHASE OF INDUSTRIAL GOODS .................................................. 37
BUSINESS BUYER BEHAVIOUR ..................................................................................................... 38
Problem Recognition .................................................................................................................... 38
General Need Description ............................................................................................................. 39
Product Specification .................................................................................................................... 39
Supplier Search ............................................................................................................................. 39
Proposal Solicitation ..................................................................................................................... 39
Supplier Selection ......................................................................................................................... 39
Order-Routine Specification ......................................................................................................... 40
Performance Review ..................................................................................................................... 40
SEGMENTATION, TARGETING, AND POSITIONING ............................................................................. 41
Reasons for segmenting markets...................................................................................................... 42
Criteria needed for segmentation .................................................................................................... 43
Variables that can be used to segment markets. ............................................................................. 43
Evaluating Market Segments ............................................................................................................ 44
2. Concentrated Targeting ............................................................................................................... 45
Bases for Business Market Segmentation ..................................................................................... 47
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STRATEGIC PLANNING .......................................................................................................................... 48

1. Defining the Corporate Mission ................................................................................................ 48
2. Setting company objectives ...................................................................................................... 49
3. Analysing the current business portfolio .................................................................................. 49
The Boston Consulting Group Approach ...................................................................................... 49
4. Planning marketing and functional strategies .......................................................................... 50
General Electric (GE) ..................................................................................................................... 51
Ansoff Matrix ................................................................................................................................ 52
Contents of a Marketing Plan ....................................................................................................... 53
PRODUCT .............................................................................................................................................. 55
Differences between Goods and Services ........................................................................................ 55
Major distinguishing characteristics of Services: .......................................................................... 55
Three levels of a product/total product concept.......................................................................... 55
Classifying Products ...................................................................................................................... 56
Consumer products:...................................................................................................................... 56
Classifications for Business to Business products: ........................................................................ 57
New Product Development Process ............................................................................................ 58
Product Life Cycle (PLC) ................................................................................................................ 60
Limitations of Product Life Cycle (PLC) .................................................................................. 63
Protecting a Brand ........................................................................................................................ 66
PRICING .................................................................................................................................... 70
Factors Affecting Pricing Decisions ................................................................................................... 70
Internal factors affecting pricing................................................................................................... 70
External factors affecting pricing. ................................................................................................. 71
DISTRIBUTION .................................................................................................................... 78
Types of utility distribution offers: ................................................................................................... 78
Functions of Intermediaries .......................................................................................................... 78
Types of Channels of Distribution ................................................................................................. 78
Selection of Distribution Channels................................................................................................ 79
PROMOTION ......................................................................................................................................... 82
Marketing Communications Process ................................................................................................ 82
Basic Model of Communication .................................................................................................... 82
Promotional Mix ........................................................................................................................... 83
SERVICES MARKETING .......................................................................................................................... 96
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Designing and managing services ..................................................................................................... 96

Characteristics of Services and Their Marketing Implications .......................................................... 96
Marketing strategies for service firms .......................................................................................... 97
INTERNATIONALMARKETING............................................................................................................... 99
Reasons for going international ........................................................................................................ 99
Concepts of international marketing .......................................................................................... 100
Ways of entering the international market ................................................................................ 100
Tariffs .......................................................................................................................................... 101
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Definition of Marketing
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution (4 Ps)
of ideas, goods and services to create exchanges (with customers) that satisfy individual and organizational
objectives.
Marketing is defined by the AMA as "an organizational function and a set of processes for creating,
communicating, and delivering value to customers and for managing customer relationships in ways that benefit
the organization and its stakeholders."It generates the strategy that underlies sales techniques, business
communication, and business developments. It is an integrated process through which companies build strong
customer relationships and create value for their customers and for themselves.
Marketing is used to identify the customer, satisfy the customer, and keep the customer. With the customer as
the focus of its activities, marketing management is one of the major components of business management. The
term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of
target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational
objectives, an organization should anticipate the needs and wants of consumers and satisfy these more
effectively than competitors.
The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying,
anticipating and satisfying customer requirements profitably." A different concept is the value-based marketing
which states the role of marketing to contribute to increasing shareholder value. In this context, marketing is
defined as "the management process that seeks to maximize returns to shareholders by developing relationships
with valued customers and creating a competitive advantage."
Type of organizations that use marketing.

 Corporations:
 Government: promoting the health plan, politicians during elections
 Hospitals: Schools: University of Delaware MBA program
 Churches: Many churches are redesigning their service offering to better meet the needs of their target
audience so as to keep members and financial support.
Basic/core concepts of marketing
Need, Wants and Demand: Marketing begins with human needs and wants. Needs are feelings of
deprivation of some satisfaction. People need food, air, water, shelter to survive. Wants are desire for satisfies of
needs. Wants which are backed by the purchasing power become demand
Products (Goods, Services and Ideas): A product is anything that can be offered to satisfy a
need or want. A product may consist of three components- physical goods, services and ideas.
Value, Cost and Satisfaction: Value means the customer's estimate of the product's overall capacity
to satisfy his/her needs. Cost is the price which a customer pays the products. Satisfaction is inner felling.
Exchange and Transaction: Exchange is the process of obtaining a desired product from someone
by offering something in return. Exchange leads to transactions.
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Marketing Environment: Marketing environments are divided into two parts. Internal environment
includes customer, suppliers, managements, employees, productions, etc. On the other hand external
environment includes socio-cultural environment, political, technological, economic environment, etc.
Competition: Competition is the rivalry among sellers trying to achieve such goals as increasing profits,
market share, and sales volume by varying the elements of the marketing mix: price, product, distribution, and
promotion.
Supply Chain: Supply chain is a longer channel includes backward and forward logistic. It stretches from
raw materials to delivery of finished goods to the ultimate consumer. Capturing higher value of supply chain
gives firm competitive advantage
Reasons for Studying Marketing:

Marketing is part of all of our lives and touches us in some way every day, so for an organisation to be
successful each company that deals with customers on a daily basis must be customer-driven or customer-
obsessed. The best way to achieve this objective is to develop a sound marketing department within the
organization.
1.Marketing provides different information about the product and services to the consumers.
 It helps them to know and understand the different benefits and techniques of products through
advertising, publicity and public relation.
2. Marketing can easily distribute the products by applying proper and effective channels of distribution.
It suggests managing the transportation and ware-housing systems which help the firm to deliver the product
from origin of production to the site of consumption.
It provides valuable information which helps them to make effective plan for future and right decision.
3. Marketing creates employment opportunities in the society.

Many people may involve in different activities of marketing such as production,
distribution, promotion and selling.
Marketing helps in efficient allocation of resources by improving the living standard of the customers in the
society.
It provides goods and services according to the demand and preferences of the customers which then provides
satisfaction to the customers.
Marketing helps to utilize the different resources such as natural, financial, physical and human resources in the
society which helps the economic development of the country.
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GOALS OF MARKETING SYSTEM
Increase Consumer Satisfaction

The goal of the marketing system is to increase client support, not simply the quality of utilization. Buying a
new car or having more outfits number only if this plays a role in the client's fulfilment.
Unfortunately, client support is complicated to assess.
Increase Choice
Some promoters believe that the objective of a system should be to increase products large variety and client
choice. I his system would allow clients to find products that please their choices exactly. Customers would be
able to realize their way of life fully and, therefore, could increase their overall fulfilment.
Improve Life Quality

Many people believe that the purpose of a marketing system should be to boost the way of life. T his contains
not only the fantastic, quantity, availableness, and cost of items, but also the fantastic of the real and public
circumstances.
Types of utility:
Utility is the satisfaction, value, or usefulness a user receives from a good or a service. They are four types of
utilities
Form utility involves the idea that the product is made available to the consumer in some form that is more
useful than any commodities that are used to create it. A customer buys a chair, for example, rather than the
wood and other components used to create the chair. Thus, the customer benefits from the specialization that
allows the manufacturer to more efficiently create a chair than the customer could do him or herself.
Place utility refers to the idea that a product made available to the customer at a preferred location is worth
more than one at the place of manufacture. It is much more convenient for the customer to be able to buy food
items in a supermarket in his or her neighbourhood than it is to pick up these from the farmer.
Time utility involves the idea of having the product made available when needed by the customer. The
customer may buy a chicken a few days before Christmas without having to plan to have it available.
Intermediaries take care of the logistics to have the chickens when customers demand them.
Possession utility involves the idea that the consumer can go to one store and obtain a large assortment
of goods from different manufacturers during one shopping occasion. Supermarkets combine food and other
household items from a number of different suppliers in one place
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MARKETING FUNCTIONS
To achieve success in your marketing effort you need to know the activities you need to perform in achieving
your set marketing objectives, these activities is referred to as the function of marketing. It refers to those
specialized activities that a marketer must perform in order to achieve your set marketing objectives.
(1)Research function: the research function of marketing is that function of marketing that enables you
to generate adequate information regarding your particular market of target. You must carry out adequate
research to identify the size, behaviour, culture, believe, genders etc. of your target market segment, their needs
and want, and then develop effective product that can meet and satisfy these market needs and want.
(2)Buying function: the function of buying is performed in order to acquire quality materials for
production. When you design a good product concept, you should also ensure you're buying the essential
materials for the product. This function is carried out by the purchase and supply department, but your
specifications of materials goes a long way in assisting the purchasing department to acquire the necessary
materials needed for production.
(3)Product development and management: product development is an essential function of

marketing since it was the duties of the marketing department to identify what the market need or want and then
design effective product based on the identified need and want of the market. Product development passes
through some basic stages carried out by the marketers to develop a targeted market specified product. And you
can also manage your product by evaluating it performance and changing them to fit the current market trend.
(4)Production function: production is the function performs by the production department. Though,
this is interrelated to the department of marketing, because your product must possess the essential
characteristics that can meet the target market needs and want as identified during your market research, such
characteristics as in your product Test, Form, Packaging etc.
(5)Promotion function: promotion is one of the core functions of marketing since your finish product
must not remain in the place of production, hence, you as a marketer must design effective communication
strategies to informing the availability of your product to your target market. You must be able to design
effective strategies to communicate your product availability and features to your target market, such strategies
as in; advertisement, personal selling, public relation etc.
(6)Standardization and grading: the function of standardization is to establish specified

characteristics that your product must conform to, such standard as in having a specify test, ingredient etc. That
makes your product brand so unique. Grading comes in when you sort and classify your product into deferent
sizes or quantities for different market segment while maintaining your product standard.
(7)Pricing function: you perform the function of pricing on your product offerings by designing
effective pricing systems base on your product stage and performance in the product life cycle. Price is the
actual value consumers perceive on your product, so you as a marketer should ensure that your value of your
product is not too high or too low to that of your costumers.
(8)Distribution function: the function of distribution is to ensure that your product is easily and
effectively moved from the point of production to the target market, the kind of transportation system to employ
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e.g. Road, rail, water or air, and ensures that the product can be easily accessed by customers. You as
a marketer should also design the kind of middlemen to engage in the channel of distribution, their incentives
and motivations etc.
(9)Risk bearing function: the process of moving a finished product from the point of production to
the point of consumptions is characterized with lots of risks, such risks as in product damaging, pilferage and
defaults etc. So you must provide effective packaging system to protect your product, good warehouse for the
storage of your product until they are needed, effective transportation system to speedily deliver your product on
time.
(10)Financing function: financing deals with the part of marketing to providing incomes for your
business. It refers to how you can raise capital to start operation and remain in business. It refers to your modes
of payment for the goods and services transferred to your costumers.
(11) After sales-service: in a more complex and technical product, you as a marketer should make
provision in order to assist your customers after they have purchased your product. In terms of machines or
heavy equipment product that requires installation or maintenance, most marketing organization renders such
services like installing the machine or maintaining it for stipulated periods on time for free or by a little service
charge. After sales services is an effective marketing strategy to building a long lasting customer relationship,
staying ahead of your competitors while making profit for your organization.
Adequate understanding of these functions enables you as a marketer to know what is required to be done to
having an effective transfer of ownership between you and your costumers, creating a big picture of your
business, while also making profit for your organization.
Evolution of Marketing Concept

Five orientations (philosophical concepts to the marketplace have guided and continue to guide organizational
activities:
1. The Production Concept

2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept
1. The Production Concept. This concept is the oldest of the concepts in business. It holds that
consumers will prefer products that are widely available and inexpensive. Managers focusing on this concept
concentrate on achieving high production efficiency, low costs, and mass distribution. They assume that
consumers are primarily interested in product availability and low prices. This orientation makes sense when
consumers are more interested in obtaining the product than in its features and when demand of a product is
greater than supply. It is also useful concept when increasing production raises economies of scale etc.
2. The Product Concept. This orientation holds that consumers will favour those products that offer
the most quality, performance, or innovative features. Managers focusing on this concept concentrate on
making superior products and improving them over time. They assume that buyers admire well-made products
and can appraise quality and performance. However, these managers are sometimes caught up in a love affair
with their product and do not realize what the market needs. Management might commit the “better-mousetrap”
fallacy, believing that a better mousetrap will lead people to beat a path to its door.
3. The Selling Concept. This is another common business orientation. It holds that consumers and
businesses, if left alone, will ordinarily not buy enough of the selling company’s products. The organization
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must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers
typically shows buying inertia or resistance and must be coaxed into buying. It also assumes that the company
has a whole battery of effective selling and promotional tools to stimulate more buying. Most firms practice the
selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the
market wants. Selling concept is useful for selling unsought goods, i.e., encyclopaedias, funeral plots.
4. The Marketing Concept. Marketing concept is a business philosophy that challenges the above
three business orientations. Its central tenets crystallized in the 1950s. It holds that the key to achieving its
organizational goals (goals of the selling company) consists of the company being more effective than
competitors in creating, delivering, and communicating customer value to its selected target customers. The
marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability.
Supply for a product is greater than demand, creating intense competition among suppliers. Company first
determines what the consumer wants, then produces what the consumer wants, and then sells the consumer what
it wants.
Distinctions between the Sales Concept and the Marketing Concept:
5. The Societal Marketing Concept. This concept holds that the organization’s task is to
determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more
effectively and efficiently than competitors (this is the original Marketing Concept). Additionally, it holds that
this all must be done in a way that preserves or enhances the consumer’s and the society’s well-being. This
orientation arose as some questioned whether the Marketing Concept is an appropriate philosophy in an age of
environmental deterioration, resource shortages, explosive population growth, world hunger and poverty, and
neglected social services.
Societal Marketing Concept focuses on other stakeholders, as well as the business and its customers.
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Company profits
Customer wants
Society's interests
The difference between short term consumers wants and long term consumer welfare.
An example of a company adopting the societal concept
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MARKETING PROCESS
The Marketing Process of a company typically involves identifying the viable and potential marketing
opportunities in the environment, developing strategies to effective utilise the opportunities, evolving
suitable marketing strategies, and supervising the implementation of these marketing efforts.
Marketing process involves ways that value can be created for the customers to satisfy their needs. Marketing
process is a continual series of actions and reactions between the customers and the organisations which are
making attempt to create value for and satisfy needs of customers. In marketing process the situation is analysed
to identify opportunities, the strategy is formulated for a value proposition, tactical decisions are taken, plan is
implemented, and results are monitored.
Steps in Marketing Process

Following are the steps involved in the Marketing Process:-
 Analysis
 Marketing Planning
 Marketing Implementation
 Marketing Control
1. Analysis
Analysis of situation in which the organization finds itself serves as the basis for identifying opportunities to
satisfy unfulfilled customer needs. Situational and environmental analysis is done to identify the marketing
opportunities, to understand firms own capabilities, and to understand the environment in which the firm is
operating.
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2. Marketing Planning
After identifying the marketing opportunities a strategic plan is developed to pursue the identified opportunities.
At this step detailed tactical decisions are made for the controllable parameters of the marketing mix. It includes
- product development decisions, product pricing decisions, product distribution decisions, and product
promotional decisions.
3. Implementation
The marketing plan is implemented. The heart of the implementation of a marketing plan is the execution, the
actual "doing" of the planned marketing activities. Initiatives don't get completed by stating them on paper--they
require action, management and follow up.
Successful marketing implementation requires:
 Effective and efficient coordination of activities--who's doing what and by when
 Attention to detail.
 Staying on top of "who's doing what. Never assume someone else is doing something
 Elimination of procrastination and no waiting should be allowed.
4. Control
To maximize the return on a marketing plan, there need to be controls in place to monitor the plan's progress. As
a marketing plan moves along, the controls are constantly analyzed to determine how the plan's actual
performance compares to the projections. Any changes that need to be made are done based on the analysis of
marketing controls. Understanding what the controls in a marketing plan are will help you develop effective
performance measurement indicators.
The results of marketing efforts are monitored to adjust the marketing mix according to the market changes.
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MARKETING ENVIROMENT
The market environment is a marketing term and refers to factors and forces that affect a firm’s ability to build
and maintain successful relationships with customers.
Micro environment / internal environment
The micro environment refers to the business itself and to all the challenges that come from inside the business.
Businesses can therefore take control over all the challenges and influences in the micro environment. The
micro environment refers to the forces that are close to the company and affect its ability to serve its customers.
It includes the company itself, its suppliers, marketing intermediaries, customer markets and public.
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The Company - refers to the internal environment of the company which includes all departments, such as
management, finance, research and development, purchasing, operations and accounting.. All departments
within an organization have the potential to positively or negatively impact customer satisfaction. As a result, a
marketing department works closely with the finance, purchasing, research and development, and manufacturing
departments, among others, to identify ways that each department can contribute to the provision of exceptional
customer value, which leads to superior customer satisfaction. For example, research and development have
input as to the features a product can perform and accounting approves the financial side of marketing plans and
budget in customer dissatisfaction.
Suppliers-Suppliers are the firms and individuals that provide the resources needed by the company and its
competitors to produce goods and services. Suppliers provide businesses with the materials they need to carry
out their business activities. A supplier's behaviour will directly impact the business it supplies. For example if a
supplier provides a poor service this could increase timescales or product quality. An increase in raw material
prices will affect an organisation's Marketing Mix strategy and may even force price increases. Close supplier
relationships are an effective way to remain competitive and secure quality products. Marketing managers must
watch supply availability and other trends dealing with suppliers to ensure that product will be delivered to
customers in the time frame required in order to maintain a strong customer relationship.
Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies,
and financial intermediaries. These are the people that help the company promote, sell, and distribute its
products to final buyers. Resellers are those that hold and sell the company’s product. Physical distribution firms
are places such as warehouses that store and transport the company’s product from its origin to its destination.
Marketing services agencies are companies that offer services such as conducting marketing research,
advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies
and insurance companies. The marketing strategy is defined in part on the degree to which each intermediary
can potentially increase or decrease customer satisfaction.
Customer- As all businesses need customers, they should be Centred (Orientated) around customers. The
firm's marketing plan should aim to attract and retain customers through products that meets their "wants and
needs" and excellent customer service.The Company’s customers can include the following:
 consumer markets: individuals purchasing for private final consumption

 business markets: organisations purchasing for use or assistant in further processing
 reseller market: purchase to resell at a profit
 government markets: agencies that purchase too produce public services
 International markets: overseas buyers, including all of the above.
Competitors - include companies with similar offerings for goods and services. To remain competitive a
company must consider who their biggest competitors by considering its own size and position in the industry
and then company should develop a strategic advantage over their competitors.
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Publics -is any group that has an interest in or impact on the organization’s ability to meet its goals. For
example, financial publics can hinder a company’s ability to obtain funds affecting the level of credit a company
has.
 Media publics include newspapers and magazines that can publish articles of interest regarding the
company and editorials that may influence customers’ opinions.
 Government publics can affect the company by passing legislation and laws that put restrictions on the
company’s actions.
 Citizen-action publics include environmental groups and minority groups and can question the actions
of a company and put them in the public spotlight.
 Local publics are neighbourhood and community organizations and will also question a company’s
impact on the local area and the level of responsibility of their actions.
 The general public can affect the company as any change in their attitude, whether positive or negative,
can cause sales to go up or down because the general public is often the company’s customer base.
MACRO ENVIROMENT
The macro-environment refers to all forces that are part of the larger society and affect the micro-environment.
It includes concepts such as demography, economy, natural forces, technology, politics, and culture.
Factors affecting organization in Macro environment are known as PESTEL, that is: Political, Economical,
Social, Technological, Environmental and Legal.
Demography refers to studying human populations in terms of size, density, location, age, gender, race,
and occupation. Demography is a very important factor to study for marketers and helps to divide the population
into market segments and target markets. Each classification has different characteristics and causes they find
important. This can be beneficial to a marketer as they can decide who their product would benefit most and
tailor their marketing plan to attract that segment. Demography covers many aspects that are important to
marketers including family dynamics, geographic shifts, work force changes, and levels of diversity in any
given area.
Economic environment. This refers to the purchasing power of potential customers and the ways in
which people spend their money. People alone do not make a market. They must have money and willingness
to spend it for an exchange to occur.
Factors that can affect the availability and willingness to spend money include:
 changes in disposable income

 Interest rates
 Consumer confidence
 Employment
 Inflation
Changes in Disposable Income- The average consumer's purchasing power is directly related to
disposable income. Economic factors that increase or decrease disposable income result in either a positive or a
negative effect on many purchasing decisions. For example, an increase in the tax rate reduces disposable
income, thus reducing purchasing power and limiting nonessential purchases for many consumers. This factor
will directly affect the marketing strategy of businesses that specialize in discretionary products or services.
Interest rates- An interest rate is the amount that a lender charges an individual or business to borrow
money. Some small businesses rely on loans from banks or other financial institutions as a source of financing.
Higher interest rates result in higher total business expenses for companies with debt. High interest rates can
also reduce consumer spending, because high rates make it more expensive for consumers to take out loans to
buy things like cars and homes.
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Consumer Confidence-Consumer confidence is an economic indicator that measures overall consumer

optimism about the state of the economy. Confident consumers tend to be more willing to spend money than
consumers with low confidence, which means businesses are more likely to prosper when consumer confidence
is high. Periods of high consumer confidence can present opportunities for new businesses to enter the market,
while period of low confidence may force companies to cut costs to maintain profits.
Employment-The economy tends to follow a business cycle of economic booms followed by periods of
stagnation or decline. During boom periods, jobs tend to be plentiful, since companies need workers to keep up
with demand. When unemployment is low, consumer spending tends to be high because most people have
income to spend, which is good for businesses and helps drive growth. When unemployment is high, consumer
spending tends to be low because unemployed people don't have excess income to spend.
Inflation-Inflation is the rate at which prices in the economy are increasing. Inflation causes increases in
business expenses such as rent, utilities, and cost of materials used in production. Rising costs are likely to force
businesses to raise prices on their own products and services to keep pace with inflation and maintain profits.
Inflation can reduce the purchasing power of consumers unless employers increase wages based on the level of
inflation
Natural environment includes the natural resources that a company uses as inputs that affect their
marketing activities. The concern in this area is the increased pollution, shortages of raw materials and increased
governmental intervention. As raw materials become increasingly scarcer, the ability to create a company’s
product gets much harder. Pollution can negatively affect a company’s reputation if they are known for
damaging the environment..
Technological environment -is one of the fastest changing factors in the macro-environment.
Technological advances have a significant impact on the types and quality of products available as well as the
way they are produced. As markets develop it can create new markets and new uses for products. It also requires
a company to stay ahead of others and update their own technology as it becomes outdated. They must stay
informed of trends so they can be part of the next big thing, rather than becoming outdated and suffering the
consequences financially.e.g Nokia
Major technological breakthroughs carry a threefold marketing impact which are as follows:
 they start entirely new industries

 they radically alter or destruct existing industries
 they stimuli other markets and industries not directly related to the new technology
Political environment includes all laws, government agencies, and groups that influence or limit other
organizations and individuals within a society. It is important for marketers to be aware of these restrictions as
they can be complex. Some products are regulated by both state laws. There are even restrictions for some
products as to who the target market may be, for example, cigarettes should not be marketed to younger
children. As laws and regulations change often, this is a very important aspect for a marketer to monitor.
Government influence is generally in the form of the following:
 fiscal policy (taxation)

 social policy (anti-pollution laws)
 specific marketing legislation (Trade Practices Act)
Society and culture

Cultural environment, which consists of institutions and basic values and beliefs of a group of people.
The values can also be further categorized into core beliefs, which passed on from generation to
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generation and very difficult to change, and secondary beliefs, which tend to be easier to influence. As
a marketer, it is important to know the difference between the two and to focus your marketing
campaign to reflect the values of a target audience. When dealing with the marketing environment it is
important for a company to become proactive. By doing so, they can create the kind of environment
that they will prosper in and can become more efficient by marketing in areas with the greatest
customer potential.
The focus of the current social and cultural environments is on:
 the changing role of women

 the desire for convenience
 growth in cultural diversity.
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Marketing Information Systems
A business needs an organized system that allows continuous flow of information about their goods/services.
This system can enable a business to develop certain strategies and make decisions for assuring continuity in
demand and expansion of their business in the long-run. This system is referred to as the Marketing Information
System (MIS), which consists of people, equipment and procedures to gather, sort, analyze, evaluate and
distribute needed, timely, accurate information to marketing decision makers.
Any business is exposed to data that may be relevant or irrelevant. This data is related to the business
environment in which a business operates and comprises different set of conditions and circumstances that can
be economic factors, social factors, political factors, legal factors, technological factors, demographic factors,
natural factors, competition, market channels, etc. A business needs to select only relevant information from the
above mentioned factors that could directly and indirectly affect the business in the long-run. This information
can be further utilized for certain business decisions. An MIS assists a business to determine specific
information from the business environment that enables business decisions, which could be strategic decisions,
control decisions and operational decisions. Strategic decisions of a business are related to the overall
environment in which a business operates and control decisions are related to necessary decisions pertaining to
specific managerial aspects of a business whereas operational decisions are related to planning production and
sales of a business.
Assessing information needs

MIS first assess information needs by interviewing marketing managers and surveying their decision
environment, to determine what information is desired, needed and feasible to offer.MIS next develops
information and helps managers to use it more effectively
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MIS can be developed from four basic components –
(a) Internal Company Records;
(b) Marketing Intelligence Activities
(c) Marketing Research
(d) Decision support systems
(a) Internal Company Records :

Internal company records are internal reports derived mainly from the accounting system of a business. These
broadly include information related to a business’ current and potential clients, sales proceeds and relevant
databases maintained by a business as summarized below:
Order-to-payment Cycle
Orders for a business’ products/services are placed to a business through either sales representatives, dealers or
other customers (other customers lead new customers to a business’ product/service through word of mouth).
The process involved from placing orders to actual translation into a payment transaction should be reported in
the internal records in a computerized system. These records are mostly studied to understand factors that
influence customers’ willingness to make formal purchases of goods/services from the business.
Sales Information Systems

Marketing managers need timely and accurate reports on current sales of a business’ goods and services from
internal records. This information enables managers to evaluate the trends in sales across different markets and
customers. Based on this information, marketing managers can also forecast future sales growth across different
markets and customers.
Databases
Businesses should organize their information into databases such as customers’ databases, products databases,
salesperson databases, etc. and then combine the data with different databases. For example, customer databases
will contain customer names, address, past transactions, demographics, etc. The database will assist in
understanding the characteristics of customers and factors that influence past, current and future sales.
(b) Marketing Intelligence

Marketing intelligence is a set of procedures and sources marketing managers can use to obtain everyday
information about the developments in the marketing environment. Marketing managers collect marketing
intelligence by
 Reading books, newspapers and trade publications

 Talking to customers, suppliers and distributors
 Meeting with other company managers
 Obtaining socio-economic and financial data from government databases Central Statistical Organization
(CSO), etc.
 Purchasing information on consumers of various products/services from independent research firms
 Obtaining customer feedback
The intelligence gathered by the managers can be utilized for the following:
1. To train and motivate and sales representatives to gather additional information that they may have missed
while selling a business’ goods/services.
2. To motivate distributors and retailers and other intermediaries to pass along intelligence.
3. To set up a customer advisory panel.
(c) Marketing Research Need to probe beneath the superficial symptoms.

Research objective specifies what information is needed to solve the problem.
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Steps for Marketing Research

Marketing research is a systematic design, collection, analysis and reporting of data and findings relevant to a
specific marketing situation that a business faces. Accordingly, the process involved in conducting marketing
research is as follows:
1. Define a problem – Marketing managers should define the problem or issues faced by the business for
which the research needs to be conducted.
2. Develop the research plan – Marketing managers prepares a research plan based on the marketing
intelligence reports which are also known a secondary data. Secondary data is data that already exists
however it is incomplete because it does not provide specific information e.g internal data= budgets, sales
figures, profit and loss statement, all research report
External data = government, must consider dates, census of population/manufacturing/retail trade, regular
publications, Business Week, Commercial research houses
Advantages: Inexpensive, quick to obtain, multiple sources available, obtain info. That cannot be obtained
through primary research, independent therefore credible.
Disadvantages: Maybe incomplete, dated, obsolete, methodology maybe unknown, all findings may not be
public, reliability may be unproven.
Marketing managers can also consider primary data, which is freshly gathered information directly from the
consumers from a research project. Approaches to collect primary data can include – focus groups, surveys,
observational and experimental data. The market research team monitors and questions an individual or groups
of individuals in different locations and regions through the above mentioned approaches. The team prepares
questionnaires or set of questions to ask the individuals considered for collecting primary data. These
questionnaires can have questions for which answers can be descriptive or can have multiple choices from
which the select individuals choose answers. The number of individuals considered for the research project is
identified by statistical method called sampling that selects the number and groups of individuals to be
considered for collecting primary data. Once the marketing team has selected the approach, questionnaires and
sampling plan, they proceed to the following step.
Advantages :Fits the precise purpose of the organization, information is current, methodology is controlled and
known, available to firm and secret from competitors, no conflicting data from different sources, reliability can
be determined, only way to fill a gap.
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Disadvantages Time consuming, costly, some information cannot be collected.
Your choice of research instrument will be based on the nature of the data you are trying to collect. There are
three classifications to consider:
Exploratory Research –Exploratory research will help you gain broad insights, narrow your focus, and learn the
basics necessary to go deeper. Common exploratory market research techniques include secondary research,
focus groups, survey and interviews. Exploratory research is a qualitative form of research.e.g surveys
Descriptive Research – If your research objective calls for more detailed data on a specific topic, you’ll be
conducting quantitative descriptive research. The goal of this form of market research is to measure specific
topics of interest, usually in a quantitative way. Observation is the most common research instrument for
descriptive research.
Causal Research – The most specific type of research is causal research, which usually comes in the form of a
field test or experiment. In this case, you are trying to determine a causal relationship between variables. For
example, does the music I play in my restaurant increase dessert sales (i.e. is there a causal relationship between
music and sales?).
In this step of the market research process, it’s time to design your research tool. If a survey is the most
appropriate tool, you’ll begin by writing your questions and designing your questionnaire. If a focus group is
your instrument of choice, you’ll start preparing questions and materials for the moderator. You get the idea.
This is the part of the process where you start executing your plan.
Sampling
Sampling is the selecting of representative units from a total population

A population refers to all elements, units or individuals that are of interest to researchers for a specific study e.g
all registered voters for an election.
Sampling procedures are used in studying the likelihood of events based on assumptions about the future.
1. Random sampling, equal chance for each member of the population

2. Stratified sampling, population divided into groups re: a common characteristic, random
sample each group
3. Quota sampling, judgmental, sampling error cannot be measured statistically, mainly used in
exploratory studies to develop hypotheses, non-probabilistic.
Questionnaire Construction
Questionnaire is designed to elicit information that meets the studies requirements. Questions should be clear,
easy to understand & directed towards meeting an objective.
Need to define objectives before designing the questionnaire. Must maintain impartiality and be very careful
with personal data. Four basic types of questions are: Open ended, Dichotomous, Multiple choice and Scaled
3. Collect the information – Information is collected by a business directly by employing their human
resources in market research (this is a specialized qualification) to go on field and collect primary data or
employ a market research agency.
4. Analyses of information – Following collection of data, marketing managers utilize statistical and
analytical methods to analyze and determine the significance of data.
5. Presenting the findings – The information analyzed using statistical analysis is presented to the marketing
team and business management to make relevant marketing decisions
(d) Marketing Decision Support Systems (MDSS) rely on simple systems

such as Microsoft Excel and on-line analytical tools like linear programming, regression analysis & spreadsheet
that help collect data. Data compiled for analysis is stored and processed from a data warehouse, which is
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simply a data repository system that helps store and further process data collected internally and externally. This
component consists of system managers who manage and maintain the system assets including software and
hardware network, monitor its activities and ensure compliance with organizational policies.
Distributing needed information

Marketing information has no value until managers use it to make better marketing decisions.Decision making
would require collective information and analyses of internal records, marketing intelligence reports and market
research & system support.
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Consumer Buying Behaviour
Buying Behaviour is the decision processes and acts of people involved in buying and using products.
Markers need to understand:
 Why consumers make the purchases that they make?

 What factors influence consumer purchases?
 The changing factors in our society.
Consumer Buying Behaviour refers to the buying behaviour of the ultimate consumer. A firm needs to analyze
buying behaviour for:
 Buyer’s reactions to a firms marketing strategy has a great impact on the firm’s success.
 The marketing concept stresses that a firm should create a Marketing Mix that satisfies (gives utility
to) customers, therefore need to analyze the what, where, when and how consumers buy.
 Marketers can better predict how consumers will respond to marketing strategies.
Black box
The black box model shows the interaction of stimuli, consumer characteristics, and decision process and
consumer responses. It can be distinguished between interpersonal stimuli (between people) or intrapersonal
stimuli (within people).The black box model is related to the black box theory of behaviourism, where the focus
is not set on the processes inside a consumer, but the relation between the stimuli and the response of the
consumer. The marketing stimuli are planned and processed by the companies, whereas the environmental
stimulus is given by social factors, based on the economical, political and cultural circumstances of a society.
The buyers’ black box contains the buyer characteristics and the decision process, which determines the buyers’
response.
Environmental factors Buyer's black box
Buyer's
response
Marketing Environmental Buyer
Decision Process
Stimuli Stimuli Characteristics
Economic Attitudes Problem recognition

Product choice
Product Technological Motivation Information search
Brand choice
Price Political Perceptions Alternative evaluation
Dealer choice
Place Cultural Personality Purchase decision
Purchase timing
Promotion Demographic Lifestyle Post-purchase
Purchase amount
Natural Knowledge behaviour
The black box model considers the buyers response as a result of a conscious, rational decision process, in
which it is assumed that the buyer has recognized the problem. However, in reality many decisions are not made
in awareness of a determined problem by the consumer.
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Consumer buying roles

 The initiator: the person who suggests buying a product or service
 The influencer: the person whose point of view or advice will influence the buying decision. It may be
a person outside the group (singer, athlete, actor, etc..) but on which group members rely on.
 The decider: the person who will choose which product to buy. In general, it’s the consumer but in
some cases it may be another person. For example, the “leader” of a soccer supporters’ group
(membership group) that will define, for the whole group, which supporter’s scarf buy and bear during
the next game.
 The buyer: the person who will buy the product. Generally, this will be the final consumer.
 The User: A person who consumes or uses the product or service. A company needs to identify these
roles because they.
Stages of the Consumer Buying Process
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The 5 stages are:
Stages of the Consumer Buying Process

1. Problem Recognition (awareness of need)-difference between the desired state and the actual
condition. A need can be triggered by internal stimuli like hunger. Hunger stimulates your need to eat or can be
stimulated by external stimuli through product information i.e see a commercial for a new pair of shoes,
stimulates your recognition that you need a new pair of shoes.
2. Information search- Once the need is identified, it’s time for the consumer to seek information about
possible solutions to the problem. He will search more or less information depending on the complexity of the
choices to be made but also his level of involvement. (Buying pasta requires little information and involves
fewer consumers than buying a car.)
Then the consumer will seek to make his opinion to guide his choice and his decision-making process with:
 Internal information: this information is already present in the consumer’s memory. It comes from
previous experiences he had with a product or brand and the opinion he may have of the brand.
 External information
An individual can acquire information through any of the following sources:
 Social Sources - He might discuss his need with his friends, family members, co workers and other
acquaintances.
 Commercial sources - Advertisements, sales people Packaging of a particular product in many cases
prompt individuals to buy the same, Displays etc)
 Public sources - Newspaper, Radio, Magazine
 Experiential sources - Individual’s own experience, prior handling of a particular product (Tim would
definitely purchase a Dell laptop again if he had already used one)
3. Evaluation of Alternatives-The next step is to evaluate the various alternatives available in the
market. An individual after gathering relevant information tries to choose the best option available as per his
need, taste and pocket.
4. Purchase decision-At this fourth step, this is where the purchase finally happens. Choose buying
alternative, includes product, package, store, method of purchase etc.
5. Post-Purchase Evaluation-The purchase of the product is followed by post purchase evaluation.

Post purchase evaluation refers to a customer’s analysis whether the product was useful to him or not and
whether the product fulfilled his need or not. The consumer can be delighted, satisfaction, dissatisfaction after
comparing their expectations vs performance. Cognitive Dissonance is the discomfort that comes with every
purchase, have you made the right decision. This can be reduced by warranties, after sales communication etc.
Ways of reducing cognitive dissonance
 Look up to satisfied customers

 Look for adverts that supports your choice
 Seek after sale service
 Return the product for refund
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Not all decision processes lead to a purchase. All consumer decisions do not always include all 5stages,
determined by the degree of complexity...
Types of consumer buying behaviour are determined by:

 Level of Involvement in purchase decision. Importance and intensity of interest in a product in a
particular situation.
 Buyer’s level of involvement determines why he/she is motivated to seek information about a certain
products and brands but virtually ignores others.
High-involvement products are those that represents the consumer’s personality, status and justifying lifestyle;
for example, buying a home theatre. High involvement purchases are high priced that have high risk and
requires high involvement.
Low- involvement products are those that reflect routine purchase decisions and requires low involvement; for
example, buying a candy or an ice cream.
The four type of consumer buying behaviour are:
 Routine Response/Programmed Behaviour--buying low involvement frequently purchased

low cost items; need very little search and decision effort; purchased almost automatically. Examples
include soft drinks, snack foods, milk etc.
 Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate
amount of time for information gathering. Examples include Clothes--know product class but not the
brand.
 Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or
infrequently bought products. High degree of economic/performance/psychological risk. Examples
include cars, homes, computers, education. Spend a lot of time seeking information and deciding.
Information from the companies MM; friends and relatives, store personnel etc. Go through all six
stages of the buying process.
 Impulse buying, no conscious planning.
The purchase of the same product does not always elicit the same Buying Behaviour. Product can shift from one
category to the next.
For example:
Going out for dinner for one person may be extensive decision making (for someone that does not go out often
at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary
celebration, or a meal with a couple of friends will also determine the extent of the decision making.
Factors that Affect the Consumer Buying Decision Process

A consumer, making a purchase decision will be affected by the following three factors:
1. Cultural
2. Social
3. Personal
4. Psychological
I. Cultural factors
Cultural factors are coming from the different components related to culture or cultural environment from which
the consumer belongs.
Culture
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Culture is crucial when it comes to understanding the needs and behaviours of an individual.
Throughout his existence, an individual will be influenced by his family, his friends, his cultural environment or
society that will “teach” him values, preferences as well as common behaviours to their own culture. For a
brand, it is important to understand and take into account the cultural factors inherent to each market or to each
situation in order to adapt its product and its marketing strategy. As these will play a role in the perception,
habits, behaviour or expectations of consumers.
Sub-cultures:
A society is composed of several sub-cultures in which people can identify. Subcultures are groups of people
who share the same values based on a common experience or a similar lifestyle in general. Subcultures are the
nationalities, religions, ethnic groups, age groups, gender of the individual, etc.The subcultures are often
considered by the brands for the segmentation of a market in order to adapt a product or a communication
strategy to the values or the specific needs of this segment.Consumers are usually more receptive to products
and marketing strategies that specifically target them.
Social classes:
Social classes are defined as groups more or less homogenous and ranked against each other according to a form
of social hierarchy. Even if it’s very large groups, we usually find similar values, lifestyles, interests and
behaviours in individuals belonging to the same social class.
We often assume three general categories among social classes: lower class, middle class and upper class.
People from different social classes tend to have different desires and consumption patterns. Disparities
resulting from the difference in their purchasing power. According to some researchers, behaviour and buying
habits would also be a way of identification and belonging to its social class.
Beyond a common foundation to the whole population and taking into account that many counterexample
naturally exist, they usually do not always buy the same products, do not choose the same kind of vacation, do
not always watch the same TV shows, do not always read the same magazines, do not have the same hobbies
and do not always go in the same types of retailers and stores.
For example, consumers from the middle class and upper class generally consume more balanced and healthy
food products than those from the lower class.
II. Social factors
Social factors are among the factors influencing consumer behaviour significantly. They fall into three
categories: reference groups, family and social roles and status.
Reference groups and membership groups :
The membership groups of an individual are social groups to which he belongs and which will influence him.
The membership groups are usually related to its social origin, age, place of residence, work, hobbies, leisure,
etc..The influence level may vary depending on individuals and groups. But is generally observed common
consumption trends among the members of a same group. The understanding of the specific of each group
allows brands to better target their advertising message.
More generally, reference groups are defined as those that provide to the individual some points of comparison
more or less direct about his behaviour, lifestyle, desires or consumer habits. They influence the image that the
individual has of himself as well as his behaviour. Whether it is a membership group or a non-membership
group.
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Aspirational group
The individual can also be influenced by a group to which he doesn’t belong yet but wishes to be part of. This is
called an aspirational group. This group will have a direct influence on the consumer who, wishing to belong to
this group and look like its members, will try to buy the same products.
Some brands have understood this very well and communicate, implicitly or not, on the “social benefit”
provided by their products.
Many brands look up to target opinion leaders to spread the use and purchase of their product in a social group,
through an internal person. Or through a sponsorship or a partnership with a reference leader (celebrity, actor,
musician, athlete, etc.) for larger groups.
Family:
The family is maybe the most influencing factor for an individual. It forms an environment of socialization in
which an individual will evolve, shape his personality, and acquire values. But also develop attitudes and
opinions on various subjects such as politics, society, social relations or himself and his desires. But also on his
consumer habits, his perception of brands and the products he buys.
We all kept, for many of us and for some products and brands, the same buying habits and consumption patterns
that the ones we had known in our family.
Perceptions and family habits generally have a strong influence on the consumer buying behaviour. People will
tend to keep the same as those acquired with their families. For example, if you have never drunk Coke during
your childhood and your parents have described it as a product “full of sugar and not good for health”. There is
far less chance that you are going to buy it when you will grow up that someone who drinks Coke since
childhood. That’s why it’s important for brands to be seen as a family brand in order to become a consumer
habit for parents and children when they will become adults.
Social roles and status:
The position of an individual within his family, his work, his country club, his group of friends, etc.. can be
defined as role and social status. A social role is a set of attitudes and activities that an individual is supposed to
have and do according to his profession and his position at work, his position in the family, his gender, etc.. –
and expectations of the people around him.
Social status meanwhile reflects the rank and the importance of this role in society or in social groups. Some are
more valued than others. The social role and status profoundly influences the consumer behaviour and his
purchasing decisions. For example, a consumer may buy a Ferrari or a Porsche for the quality of the car but also
for the external signs of social success that this kind of cars represents. Moreover, it is likely that a CEO driving
a small car like a Ford Fiesta or a Volkswagen Golf would be taken less seriously by its customers and business
partners than if he is driving a German luxury car.
Again, many brands have understood it by creating an image associated with their products reflecting an
important social role or status.
III. Personal factors:
Decisions and buying behaviour are obviously also influenced by the characteristics unique to a particular
person. E.g. Sex, Race, Age, Education, Occupation etc.
Age:
A consumer does not buy the same products or services at 20 or 70 years. His lifestyle, values, environment,
activities, hobbies and consumer habits evolve throughout his life. For example, during his life, a consumer
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could change his diet from unhealthy products (fast food, ready meals, etc..) to a healthier diet, during mid-life
with family before needing to follow a little later a low cholesterol diet to avoid health problems.
The factors influencing the buying decision process may also change with time. The family life cycle of the
individual will also have an influence on his values, lifestyles and buying behaviour depending whether he’s
single, in a relationship, in a relationship with kids, etc.
For a brand or a retailer, it may be interesting to identify, understand, measure and analyze what are the criteria
and personal factors that influence the shopping behaviour of their customers in order to adapt.
Purchasing power:
The purchasing power of an individual will have a decisive influence on his behaviour and purchasing decisions
based on his income and his capital. This obviously affects what he can afford, his perspective on money and the
level of importance of price in his purchasing decisions. It also plays a role in the kind of retailers where he goes
or the kind of brands he buys.
Lifestyle:
The lifestyle of an individual includes all of its activities, interests, values and opinions. The lifestyle of a
consumer will influence on his behaviour and purchasing decisions. For example, a consumer with a healthy and
balanced lifestyle will prefer to eat organic products and go to specific grocery stores, will do some jogging
regularly (and therefore will buy shoes, clothes and specific products), etc..
Personality and self-concept:
Personality is the set of traits and specific characteristics of each individual. It is the product of the interaction of
psychological and physiological characteristics of the individual and results in constant behaviours.It
materializes into some traits such as confidence, sociability, autonomy, charisma, ambition, openness to others,
shyness, curiosity, adaptability, etc..
While the self-concept is the image that the individual has – or would like to have – of him and he conveys to
his entourage. These two concepts greatly influence the individual in his choices and his way of being in
everyday life. And therefore also his shopping behaviour and purchasing habits as consumer.
In order to attract more customers, many brands are trying to develop an image and a personality that conveys
the traits and values - real or desired – of consumers they are targeting.
For example, since its launch, Apple cultivates an image of innovation, creativity, boldness and singularity
which is able to attract consumers who identify to these values and who feel valued – in their self-concept – by
buying a product from Apple.
Because consumers do not just buy products based on their needs or for their intrinsic features but they are also
looking for products that are consistent and reinforce the image they have of themselves or they would like to
have.
The more a product or brand can convey a positive and favourable self-image to the consumer, the more it will
be appreciated and regularly purchased.
Psychological factors
Psychological factors include:
Motives--
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A motive is an internal energizing force that orients a person's activities toward satisfying a need or
achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify motives then they can
better develop a marketing mix..
Maslow Hierarchy of Needs.

There is need to determine at what level of the hierarchy are the consumers are at determine what motivates
their purchases
Perception--
Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. i.e
we chose what info we pay attention to, organize it and interpret it.
Information inputs are the sensations received through sight, taste, hearing, smell and touch.
Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies
current needs, intensity of input changes (sharp price drop).
Selective Distortion-Changing/twisting current received information, inconsistent with beliefs.
Selective Retention-Remember inputs that support beliefs, forgets those that don't.
Interpreting information is based on what is already familiar, on knowledge that is stored in the memory.
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Learning-
Learning is the process through which a relatively permanent change in behaviour results from the consequences
of past behaviour .Marketers need to understand individual’s capacity to learn. Learning, changes in a person's
behaviour caused by information and experience. Therefore to change consumers' behaviour about your product,
need to give them new information of product...free sample etc. When making buying decisions, buyers must
process information. Knowledge is the familiarity with the product and expertise. Inexperience buyers often use
prices as an indicator of quality more than those who have knowledge of a product.
Attitudes-
It is the knowledge and positive and negative feelings about an object or activity-maybe tangible or intangible,
living or non- living. Drive perceptions .Individual learns attitudes through experience and interaction with other
people. Consumer attitudes toward a firm and its products greatly influence the success or failure of the firm's
marketing strategy. Attitudes and attitude change are influenced by consumers’ personality and lifestyle.
Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and
selectively retain information that reinforces our attitudes There is a difference between attitude and intention to
buy (ability to buy).
Organisational buyer behaviour
The organizational buying process is entirely different from the consumer buying process. While buying
decisions are made relatively easily and quickly by individual customers, organisational buying involves
thorough and deep analysis. Organizations purchase products ranging from highly complex machinery to small
components.
In an organization, the purchase decisions are influenced by several individuals and are not made in isolation by
an individual. Organizational buyers are more concerned about the price and quality of the product along with
the service being provided by the vendor
Organisational buying roles
1. Initiators:
Usually the need for a product/item and in turn a supplier arises from the users. But there can be occasions when
the top management, maintenance or the engineering department or any such recognise or feel the need. These
people who “initiate” or start the buying process are called initiators.
2. Users:
Under this category come users of various products. If they are technically sound like the R&D, engineering
who can also communicate well. They play a vital role in the buying process. They also act as initiators.
3. Buyers:
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They are people who have formal authority to select the supplier and arrange the purchase terms. They play a
very important role in selecting vendors and negotiating and sometimes help to shape the product specifications.
The major roles or responsibilities of buyers are obtaining proposals or quotes, evaluating them and selecting the
supplier, negotiating the terms and conditions, issuing of purchase orders, follow up and keeping track of
deliveries. Many of these processes are automated now with the use of computers to save time and money.
4. Influencers:
Technical personnel, experts and consultants and qualified engineers play the role of influencers by drawing
specifications of products. They are, simply put, people in the organisation who influence the buying decision. It
can also be the top management when the cost involved is high and benefits long term. Influencers provide
information for strategically evaluating alternatives.
5. Deciders:
Among the members, the marketing person must be aware of the deciders in the organisation and try to reach
them and maintain contacts with them. The organisational formal structure might be deceptive and the decision
might not even be taken in the purchasing department.
Generally, for routine purchases, the purchase executive may be the decider. But for high value and technically
complex products, senior executives are the deciders. People who decide on product requirements/specifications
and the suppliers are deciders.
6. Approvers:
People who authourise the proposed actions of deciders or buyers are approvers. They could also be personnel
from top management or finance department or the users.
7. Gate Keepers:
A gatekeeper is like a filter of information. He is the one the marketer has to pass through before he reaches the
decision makers. Understanding the role of the gatekeeper is critical in the development of industrial marketing
strategies and the salesperson’s approach. They allow only that information favourable to their opinion to flow
to the decision makers.
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Characteristics of Industrial Market
Industrial market is characterized by the following:
(i) The industrial marketers deal with very few numbers of buyers who buy in large quantities when
compared with consumer market.
(ii) Business or industrial markets are more geographic concentrated than consumer markets. Availability of
natural resources, raw materials, labours, managerial and technical expertise and capital may warrant
geographical concentration
(iii) Many industrial products have inelastic demand. This implies that demand for many industrial products
is not affected by changes in price mostly in the short run. Demand for some industrial products is price
insensitive.
(v) Business or industrial product faces derived demand. The demand for industrial products is by demand for
another industrial or consumer product. For instance, the rate of demand for steel by an automobile company is
necessitated by demand for cars.
(vi) Industrial purchase requires well-trained experts or professional and knowledgeable buyers. Requires after
sales services.
(vii) Business market involves formalized buying process. Business normally asks for detailed product
specification, purchase order, bidding or bargain, supplier sourcing and formal approval. This is unlike
consumer buying which does not undergo this process.
(viii) Direct Distribution: Most industrial products are distributed directly to the buyer/user especially where the
order size is large and special delivery arrangement is made.
(ix) Complex Decision: Purchase of industrial products involves huge amount of money, complex and
technical considerations, economic consideration, participants etc, thus, making buying decision complex.
(x) It involves more technically complex products.
Factors Affecting the Purchase of Industrial Goods
Industrial buyers are influenced by both economic and personal factors in their process of making buying
decisions. The following have been identified as factors influencing the purchase of industrial goods:
Environmental factors: The thrust of environmental factors influencing the purchase of industrial goods
centres on economic factors. Purchase of industrial goods is affected by level of primary demand, economic
trends, cost of money, government policies (monetary, physical and fiscal), and degree of economic
uncertainties, etc. Industrial buyers are also influenced by cultural (tradition, customs, norms, value, religion,
etc), politico-economic prevalence (centrally planned, free market economy, etc), technological and competitive
development in the economy.
Organizational factor: The policies, objective, producers, systems and structure of an organization influence
industrial buying. All industrial purchases made by an organization must align with its policies, objectives, and
procedure. Such policies and structure determine the number of people that should involve in the buying
decision, their evaluating criteria, and who they are.
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Individual Factor: Industrial purchase is influenced by differences in buying decision participants. For
instance, one participant may demand for 1000 units of a given product while another may demand for less.
Again, one may like quality goods hence expensive while another may like inferior and cheap goods.
Interpersonal Factor: This influences industrial buying based on relationship existing between buying decision
participants. Good interaction and coherence existing between these participants will increase chances of quality
buying decision. However, the reverse is the case for poor or loose interaction and coherence.
Business Buyer Behaviour
Types of Buying Situations
The major types of buying situation have been identified, namely; straight rebuy, modified rebuy, and new task.
Straight Rebuy: Straight rebuy occurs where buyers have already established order specification and all
their subsequent order placements must follow the same specification without modifications. Where a buyer is
satisfied with previous buying, he selects the supplier that made the order. This is called in-supplier(s). The in-
supplier tends to maintain product quality, stable price and save reordering time. The “out” supplier may offer
something new, which may not guarantee satisfaction to the buyer.
Modified Rebuy: Here, the buyer intends to modify the product (in terms of quality, price and features) and
supplier. The buyer can decide to involve all available and willing suppliers in order to make the appropriate
choice. In this case, in-supplier will become pressurized or anxious to submit proposal that can cut an edge for
him while out-suppliers can see it as an opportunity to strike.
New Task: This occurs where a company is buying a product for the first time. In this case large buying
decision participants, greater risk, higher cost are involved and greater efforts to source and collect information
are required.
Decision-making Process of the Industrial Buyer or Steps in Industrial Buying
Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can be met by
acquiring a specific product or 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 trade
show, see an ad, or receive a call from a salesperson who offers a better product or a lower price. In fact, in their
advertising, business marketers often alert customers to potential problems and then show how their products
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provide solutions.
General Need Description
Having recognized a need, the buyer next prepares a general need description that describes the characteristics
and quantity of the needed item. For standard items, this process presents few problems. For complex items,
however, the buyer may have 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.
Product Specification
The buying organization next develops the item's technical product specifications, often with the help of a value
analysis engineering team. 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. Sellers, too, can use value
analysis as a tool to help secure a new account. By showing buyers a better way to make an object, outside
sellers can turn straight rebuy situations into new-task situations that give them a chance to obtain new business.
Supplier Search
The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of
qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for
recommendations. Today, more and more companies are turning to the Internet to find suppliers. For marketers,
this has levelled the playing field—the Internet gives smaller suppliers many of the same advantages as larger
competitors.
These days, many companies are viewing supplier search more as supplier development. These companies want
to develop a system of supplier-partners that can help it bring more value to its customers. For example, Wal-
Mart has set up a Supplier Development Department which seeks out qualified suppliers and helps them through
the complex Wal-Mart buying process. It offers a Supplier Proposal Guide and maintains a Web site offering
advice to suppliers wishing to do business with Wal-Mart.
The newer the buying task, and the more complex and costly the item, the greater the amount of time the buyer
will spend searching for suppliers. The supplier's task is to get listed in major directories and build a good
reputation in the marketplace. Salespeople should watch for companies in the process of searching for suppliers
and make certain that their firm is considered.
Proposal Solicitation
In the proposal solicitation stage of the business buying process, 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 usually require detailed written proposals or formal presentations from
each potential supplier.
Business marketers must be skilled in researching, writing, and presenting proposals in response to buyer
proposal solicitations. Proposals should be marketing documents, not just technical documents. Presentations
should inspire confidence and should make the marketer's company stand out from the competition.
Supplier Selection
The members of the buying center now review the proposals and select 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. In one survey, purchasing executives listed the following attributes as most important in influencing
the relationship between supplier and customer: quality products and services, on-time delivery, ethical
corporate behavior, honest communication, and competitive prices. Other important factors include repair and
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servicing capabilities, technical aid and advice, geographic location, performance history, and reputation. The
members of the buying center will rate suppliers against these attributes and identify the best suppliers.
Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making the final
selections. In the end, they may select a single supplier or a few suppliers. Many buyers prefer multiple sources
of supplies to avoid being totally dependent on one supplier and to allow comparisons of prices and performance
of several suppliers over time.
Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or
suppliers and lists items such as 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. A blanket order
eliminates the expensive process of renegotiating a purchase each time that stock is required. It also allows
buyers to write more, but smaller, purchase orders, resulting in lower inventory levels and carrying costs.
Blanket contracting leads to more single-source buying and to buying more items from that source. This practice
locks the supplier in tighter with the buyer and makes it difficult for other suppliers to break in unless the buyer
becomes dissatisfied with prices or service.
Performance Review
In this stage, the buyer reviews supplier performance. 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.
We have described the stages that typically would occur in a new-task buying situation. The eight-stage model
provides a simple view of the business buying-decision process. The actual process is usually much more
complex. In the modified rebuy or straight rebuy situation, some of these stages would be compressed or
bypassed. Each organization buys in its own way, and each buying situation has unique requirements. Different
buying center participants may be involved at different stages of the process. Although certain buying-process
steps usually do occur, buyers do not always follow them in the same order, and they may add other steps.
Often, buyers will repeat certain stages of the process. Finally, a customer relationship might involve many
different types of purchases ongoing at a given time, all in different stages of the buying process. The seller
must manage the total customer relationship, not just individual purchases.
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Segmentation, Targeting, and Positioning
A market is an aggregate of people who, as individuals or organizations, have needs for products in a product
class and who have the ability, willingness and authority to purchase such products.
Segmentation, targeting, and positioning together comprise a three stage process.
We first:
(1) Determine which kinds of customers exist, then
(2) Select which ones we are best off trying to serve and, finally,
(3) Implement our segmentation by optimizing our products/services for that segment and communicating that
we have made the choice to distinguish ourselves that way.
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Segmentation involves finding out what kinds of consumers with different needs exist. In general, it holds true
that “You can’t be all things to all people,” and experience has demonstrated that firms that specialize in
meeting the needs of one group of consumers over another tend to be more profitable.
REASONS FOR SEGMENTING MARKETS
There are several important reasons why businesses should attempt to segment their markets carefully.
These are summarised below
 Better matching of customer needs
Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a
better solution
 Enhanced profits for business
Except for few organizations that are not profit oriented, Most businesses are setup to make profits.
However customers have different disposable income. They are, therefore, different in how sensitive
they are to price. By segmenting markets, businesses can raise average prices and subsequently
enhance profits
 Better opportunities for growth
Market segmentation can build sales. For example, customers can be encouraged to "trade-up" after being
introduced to a particular product with an introductory, lower- priced product
 Retain more customers
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Customer circumstances change, for example they grow older, form families, change jobs or get promoted,
change their buying patterns. By marketing products that appeal to customers at different stages of their life
("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands
 Target marketing communications
Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too
broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to
customers becomes too high / unprofitable. By segmenting markets, the target customer can be reached more
often and at lower cost.
 Gain share of the market segment
Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability.
Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and
limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve
competitive production and marketing costs and become the preferred choice of customers and distributors. In
other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.
Criteria needed for segmentation
Measurable: A segment should be measurable. It means you should be able to tell how many potential
customers and how many businesses are out there in the segment.
Accessible: A segment should be accessible through channels of communication and distribution like: sales
force, transportation, distributors, telecom, or internet.
Durable: Segment should not have frequent changes attribute in it.
Substantial : Make sure that size of your segment is large enough to warrant as a segment and large enough to
be profitable
Unique Needs: Segments should be different in their response to different marketing efforts (Marketing
Mix).Consumer and business markets cannot be segmented on the bases of same variables because of their
inherent differences.
Actionable or Feasible: It has to be possible to approach each segment with a particular marketing programme
and to draw advantages from that. The segments that a company wishes to pursue must be actionable in the
sense that there should be sufficient finance, personnel and capability to take them all. Hence, depending upon
the reach of the company, the segments must be selected.
Variables that can be used to segment markets.
Some different ways you can segment your market include the following;
Demographics- which focuses on the characteristics of the customer. For example age, gender, income ,
education, job and cultural background, fertility rates, migration patterns, and mortality rates, ethnicity,
education, occupation, family life cycle, family size, religion and social class
Geographical-location such as continent, country, state, province, city or rural that the customer group resides,
climate, terrain, natural resources, population density, sub cultural values, different population growths in
different areas
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Psychographics- which refers to the customer group's lifestyle. For example, their social class, lifestyle,
personality, opinions, and attitudes, personality characteristics and motives. Marketers must be aware of the
changing lifestyles and market products accordingly.
Behaviour which is based on customer behaviour. For example, online shoppers, shopping centre
customers, brand preference and prior purchases, regular users-potential users-non users
Heavy/moderate/light users.
Targeting
Evaluating Market Segments
Targeting evaluates the attractiveness of each segment of its buying power, size, growth of the
market, competitiveness etc. Defending a target market requires market segmentation, “the process of pulling
apart the entire market as a whole and separating it into manageable, disparate units based on demographics”.
We then choose or come up with a particular strategy or a product itself for each targeted segment.
Developing a target market strategy has three phases:
Targeting the market(s)
o undifferentiated
o concentrated
o multi-segmented
No one strategy will suit all consumer groups, so being able to develop specific strategies for your target
markets is very important.
There are three general strategies for selecting your target markets:
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1. Undifferentiated Targeting: This approach views the market as one group with no individual segments,
therefore using a single marketing strategy. This strategy may be useful for a business or product with little
competition where you may not need to tailor strategies for different preferences. Popular when large scale
production began. Not so popular now due to competition, improved marketing research capabilities, and total
production and marketing costs can be reduced by segmentation. Organization must be able to develop and
maintain a single marketing mix. Major objective is to maximize sales. The elements of the marketing mix do
not change for different consumers, all elements are developed for all consumers.
2. Concentrated Targeting: This approach focuses on selecting a particular market niche on which marketing
efforts are targeted. Your firm is focusing on a single segment so you can concentrate on understanding the
needs and wants of that particular market intimately. Small firms often benefit from this strategy as focusing on
one segment enables them to compete effectively against larger firms.
3. Multi-Segment Targeting: This approach is used if you need to focus on two or more well defined market
segments and want to develop different strategies for them. Multi segment targeting offers many benefits but
can be costly as it involves greater input from management, increased market research and increased
promotional strategies. Prior to selecting a particular targeting strategy, you should perform a cost benefit
analysis between all available strategies and determine which will suit your situation best.
Positioning
Positioning is developing a product and brand image in the minds of consumers. It can also include improving a
customer's perception about the experience they will have if they choose to purchase your product or
service. First, consider why customers should purchase your product rather than those of your competitors. Do
this by identifying your unique selling proposition, and draw a positioning to understand how each segment
perceives your product, brand or service. This will help you determine how best to position your offering. Then,
you can select the marketing mix that will be most effective for each of them.
Next, look at the wants and needs of each segment, or the problem that your product solves for these people.
Create a value proposition that clearly explains how your offering will meet this requirement better than any of
your competitors' products, and then develop a marketing campaign that presents this value proposition in a way
that your audience
The business can positively influence the perceptions of its chosen customer base through strategic promotional
activities and by carefully defining your business' marketing mix.
Effective positioning involves a good understanding of competing products and the benefits that are sought by
your target market. It also requires you to identify a differential advantage with which it will deliver the required
benefits to the market effectively against the competition. Business should aim to define themselves in the eyes
of their customers in regards to their competition.
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Main categories of positioning
By product attribute- A product attribute is a specific feature or benefit of the product. Positioning in this way
focuses on one or two of the product’s best features/benefits, relative to the competitive offerings.
By user- This positioning approach highlights the user and suggests that the product is the ideal solution for that
type of person and may even contribute to their social self-identity.
By product class- This positioning strategy tends to take a leadership position in the overall market. Statements
with the general message of “we are the best in our field” are common.
Against competition- With this approach the firm would directly compare, a comparison against certain well-
known competitors.
By use/application- With this approach, the product/brand is positioned in terms of how it is used in the market
by consumers, indicating that the product is the best solution for that particular task/use.
By quality or value- Some firms will position products based on relative high quality, or based on the claim
that they represent significant value.
By using a combination -of the above options-Some products/brands are positioned using a combination of the
above positioning options.
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Bases for Business Market Segmentation
Business market can be segmented on the bases consumer market variables but because of many inherent
differences like
 Businesses are few but purchase in bulk

 Evaluate in depth
 Joint decisions are made
Business market might be segmented on the bases of following variables:
 Company Size: what company sizes should we serve?

 Industry: Which industry to serve?
 Purchasing approaches: Purchasing-function organization, Nature of existing relationships, purchase policies
and criteria.
 Product usage
 Situational factors: seasonal trend, urgency: should serve companies needing quick order deliver, Order: focus
on large orders or small.
 Geographic: Regional industrial growth rate, Customer concentration, and international macroeconomic
factors.
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STRATEGIC PLANNING
Marketing plays a critical role in corporate strategic planning within successful companies. Market-oriented
strategic planning is the managerial process of developing and maintaining a viable fit among the organization’s
objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape
the company’s businesses and products so that they yield target profits and growth and keep the company
healthy despite any unexpected threats that may arise.
Strategic planning calls for action in three key areas.
 The first area is managing a company’s businesses as an investment portfolio.

 The second area involves assessing each business’s strength by considering the market’s growth rate
and the company’s position and fit in that market.
 And the third area is the development of strategy
1. Defining the Corporate Mission

An organization exists to accomplish something: to make cars, lend money, provide a night’s lodging, and so
on. A business mission can be defined in terms of three dimensions: customer groups, customer needs, and
technology. Its specific mission or purpose is usually clear when the business starts. Over time, however, the
mission may lose its relevance because of changed market conditions or may become unclear as the corporation
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adds new products and markets. When management senses that the organization is drifting from its mission, it
must renew its search for purpose
A well-worked-out mission statement provides employees with a shared sense of purpose, direction, and
opportunity. It also guides geographically dispersed employees to work independently and yet collectively
toward realizing the organization’s goals. Good mission statements focus on a limited number of goals, stress
the company’s major policies and values, and define the company’s major competitive scopes.
2. Setting company objectives- the firm’s statement mission needs to be refined into specific and
detailed supporting objectives. The mission leads to a hierarchy of objectives, including business and marketing
objectives. The objectives should be Specific, Measurable, Attainable, Realistic and Time frame
3. Analysing the current business portfolio-Large companies normally manage quite different
businesses, each requiring its own strategy. An SBU has three characteristics: (i) It is a single business or
collection of related businesses that can be planned separately from the rest of the company ;( ii) it has its own
set of competitors; (iii) it has a manager responsible for strategic planning and profit performance who controls
most of the factors affecting profit.
The purpose of identifying the company’s strategic business units is to develop separate strategies and assign
appropriate funding to the entire business portfolio. Senior managers generally apply analytical tools to classify
all of their SBUs according to profit potential. Two of the best-known business portfolio evaluation models are
the Boston Consulting Group model and the General Electric model.
The Boston Consulting Group Approach
 The Boston Consulting Group (BCG), a leading management consulting firm, developed and
popularized the growth-share matrix shown in .The growth-share matrix is divided into four cells, each
indicating a different type of business:
➤ Question marks are businesses that operate in high-growth markets but have low relative
market shares. Most businesses start off as question marks as the company tries to enter a high-growth
market in which there is already a market leader. A question mark requires a lot of cash because the
company is spending money on plant, equipment, and personnel. The term question mark is appropriate
because the company has to think hard about whether to keep pouring money into this business. ➤
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Stars are market leaders in a high-growth market. A star was once a question mark, but it does not
necessarily produce positive cash flow; the company must still spend to keep up with the high market
growth and fight off competition.
➤ Cash cows are former stars with the largest relative market share in a slow-growth market. A
cash cow produces a lot of cash for the company (due to economies of scale and higher profit margins),
paying the company’s bills and supporting its other businesses.
➤ Dogs are businesses with weak market shares in low-growth markets; typically, these generate low
profits or even losses.
After plotting its various businesses in the growth-share matrix, a company must determine whether the
portfolio is healthy. An unbalanced portfolio would have too many Corporate and Division Strategic
Planning dogs or question marks or too few stars and cash cows.
The next task is to determine what objective, strategy, and budget to assign to each SBU. Four
strategies can be pursued:
1. Build: The objective here is to increase market share, even forgoing short-term earnings to achieve
this objective if necessary. Building is appropriate for question marks whose market shares must grow
if they are to become stars.
2. Hold: The objective in a hold strategy is to preserve market share, an appropriate strategy for
strong cash cows if they are to continue yielding a large positive cash flow.
3. Harvest: The objective here is to increase short-term cash flow regardless of long-term effect.
Harvesting involves a decision to withdraw from a business by implementing a program of continuous
cost retrenchment. The hope is to reduce costs faster than any potential drop in sales, thus boosting
cash flow. This strategy is appropriate for weak cash cows whose future is dim and from which more
cash flow is needed. Harvesting can also be used with question marks and dogs.
4. Divest: The objective is to sell or liquidate the business because the resources can be better used
elsewhere. This is appropriate for dogs and question marks that are dragging down company profits.
Successful SBUs move through a life cycle, starting as question marks and becoming stars, then cash
cows, and finally dogs.
4. Planning marketing and functional strategies

The functional departments in each unit work together to accomplish strategic objectives. Marketing department
provides a guiding philosophy –consumer orientation, provides inputs by identifying attractive markets and
designing strategies for reaching objectives. Marketing is a forerunner to most strategic planning activities as it
originates market opportunities through research and marketing intelligence which will then be used by top
management to set long term goals.
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General Electric (GE)

In this model, each business is rated in terms of two major dimensions— market attractiveness and business
strength. These two factors make excellent marketing sense for rating a business. Companies are successful to
the extent that they enter attractive markets and possess the required business strengths to succeed in those
markets. If one of these factors is missing, the business will not produce outstanding results. Neither a strong
company operating in an unattractive market nor a weak company operating in an attractive market will do well.
Using these two dimensions, the GE matrix is divided into nine cells. The three cells in the upper-left corner
indicate strong SBUs suitable for investment or growth. The diagonal cells stretching from the lower left to the
upper right indicate SBUs of medium attractiveness; these should be pursued selectively and managed for
earnings. The three cells in the lower-right corner indicate SBUs low in overall attractiveness, which the
company may want to harvest or divest. However, portfolio models must be used cautiously. They may lead a
firm to overemphasize market-share growth and entry into high-growth businesses or to neglect its current
businesses. Also, the models’ results are sensitive to ratings and weights and can be manipulated to produce a
desired location in the matrix. Finally, the models fail to delineate the synergies between two or more
businesses, which mean that making decisions for one business at a time might be risky.
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Ansoff Matrix
The Ansoff Matrix also known as the Ansoff product and market growth matrix is a marketing planning tool
which usually aids a business in determining its product and market growth. This is usually determined by
focusing on whether the products are new or existing and whether the market is new or existing.
The model was invented by H. Igor Ansoff. Ansoff was primarily a mathematician with an expert insight
into business management. It is believed that the concept of strategic management is widely attributed to the
great man.
The Ansoff Matrix has four alternatives of marketing strategies; Market Penetration, product development,
market development and diversification.
Market Penetration
Market penetration, covers existing products and also existing markets. In this strategy there will the use of
promotional methods, putting various pricing policies that may attract more clientele, or one can make the
distribution more extensive.
In Market Penetration, the risk involved in its marketing strategies is usually the least since the products are
already familiar to the consumers and so is the established market. Another way in which market penetration
can be increased is by coming up with various initiatives that will encourage increased usage of the product.
Product Development
In product development growth strategy, new products are introduced into existing markets. Product
development can differ from the introduction of a new product in an existing market or it can involve the
modification of an existing product. By modifying the product one would probably change its outlook or
presentation, increase the products performance or quality. By doing so, it can appeal more to the already
existing market.
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Market Development
In this strategy, the business sells its existing products to new markets. This can be made possible through
further market segmentation to aid in identifying a new clientele base. This strategy assumes that the
existing markets have been fully exploited thus the need to venture into new markets. There are various
approaches to this strategy, which include: New geographical markets, new distribution channels, new
product packaging, and different pricing policies.
Diversification
Diversification is a growth strategy involves an organization marketing or selling new products to new
markets at the same time. It is the most risky strategy among the others as it involves two unknowns, new
products being created and the business does not know the development problems that may occur in the
process. There is also the fact that there is a new market being targeted, which will bring the problem of
having unknown characteristics. For a business to take a step into diversification, they need to have their
facts right regarding what it expects to gain from the strategy and have a clear assessment of the risks
involved.
There are two types of diversification. There is related diversification and unrelated diversification. In
related diversification, this means that the business remains in the same industry in which it is familiar
within unrelated diversification; there are usually no previous industry relations or market experiences.
Contents of a Marketing Plan
The marketing plan created for each product line or brand is one of the most important outputs of planning for
the marketing process. A typical marketing plan has eight sections:
➤ Executive summary and table of contents: This brief summary outlines the plan’s main goals
and recommendations; it is followed by a table of contents.
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➤ Current marketing situation: This section presents relevant background data on sales, costs, profits,
the market, competitors, distribution, and the macro environment, drawn from a fact book maintained by the
product manager.
➤ Opportunity and issue analysis: This section identifies the major opportunities and threats, strengths
and weaknesses, and issues facing the product line or brand.
➤ Objectives: This section spells out the financial and marketing objectives to be achieved. ➤ Marketing
strategy: This section explains the broad marketing strategy that will be implemented to accomplish the plan’s
objectives.
➤ Action programs: This section outlines the broad marketing programs for achieving the business
objectives. Each marketing strategy element must be elaborated to answer these questions: What will be done?
When will it be done? Who will do it? How much will it cost? ➤ Projected profit-and-loss statement: Action
plans allow the product manager to build a supporting budget with forecasted sales volume (units and average
price), costs (production, physical distribution, and marketing), and projected profit. Once approved, the budget
is the basis for developing plans and schedules for material procurement, production scheduling, employee
recruitment, and marketing operations.
➤ Controls: This last section outlines the controls for monitoring the plan. Typically, the goals and budget
are spelled out for each month or quarter so senior management can review the results each period.
No two companies handle marketing planning and marketing plan content exactly the same way. Most
marketing plans cover one year and vary in length; some firms take their plans very seriously, while others use
them as only a rough guide to action.
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PRODUCT
Differences between Goods and Services
Goods are tangible. You can see them, feel them, touch them etc.
Services are intangible. Services are the result of human or mechanical efforts to people or objects.
Major distinguishing characteristics of Services:

 Intangibility-major component of a service is intangible
 Perishibality-many cannot be stored for future sales Airline/Amusement ride. If service providers do
not have any customers at a particular period , they will lose the opportunity to provide the service
 Inseparability-customer contact is often the integral part of the service...Legal services/hair dresser,
therefore often a direct channel of distribution. The service personnel personality ,facial expression
,tone of voice ,appearance of personnel
 Variability- products are standardised but service quality lack of standardization because services are
labour intensive.
THREE LEVELS OF A PRODUCT/TOTAL PRODUCT CONCEPT

Marketers must first identify the core consumer needs to develop core product, then design the actual product
and find ways to augment it in order to create the bundle of benefits that will best satisfy the customer.
 Core Product- Marketers must first define what the core BENEFITS the product will provide the
customer. Generic product is the basic product. Level one is the most basic level and simply looks at
what people set out to buy and what benefits the producer would like their product to offer buyers. For
example a camera is expected to take pictures but there may be other benefits that the producer wants
the buyer to enjoy such as a wide lens, face recognition and high definition videos. So prior to
designing any product designers should list the core benefits the product needs to provide
The core benefit of buying a drill is making holes
The core benefit of a car is transportation
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 Actual Product-Marketer must then build the actual product around the core product. Actual
product translate list of core product benefits into product that people will buy .May have the following
characteristics:
 Quality level
 Features
 Brand name
 Packaging
 Design
People are not satisfied with the core benefit of a product or service, they expect additional things
If these features exceed the buyers’ expectations they will be satisfied.
A CD or DVD player is expected to offer a certain quality of sound, a choice of battery, control lights, and look
sophisticated. All combined to carefully deliver the core benefit.
 Augmented Product-offer additional consumer benefits and services.
 Warranty
 Customer training
 After sale service
 Delivery
 Guarantee
 Repair
 Credit
 Installation
Product benefits: all the elements of an offer which consumers perceive as meeting their needs and wants
and provide satisfaction through performance and image
Product attributes: quality, features, styling, design, branding, and packaging
Classifying Products
Products can be classified depending on who the final purchaser is.
Consumer products: destined for the final consumer for personal, family and household use.
Business products: are to satisfy the goals of the organization. The same product can be purchased by both,
for example a computer, for the home or the office
Components of the marketing mix will need to be changed depending on who the final purchaser is.
The following are classifications for consumer products:
 Convenience: A consumer item that is widely-available purchased frequently and with minimal
effort. A convenience good is readily available; it does not require the consumer to go through an
intensive decision-making process. Examples of convenience goods include newspapers and candy.
Convenience products can be categorized into staple (milk), impulse (not intended prior to shopping
trip) & emergency
 Shopping: Consumers expend considerable effort planning and making purchase decisions e.g
appliances, stereos, cameras. Consumers are not particularly brand loyal. Need producer intermediary
cooperation, high margins, less outlets than convenience goods. Use of sales personnel, communication
of competitive advantage, branding, advertising, customer service etc. Attribute based (Non Price
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Competition), product with the best set of attributes is bought. If product attributes are judged to be
similar, then priced based.
 Specialty: Item that is extraordinary or unique enough to motivate people to make an unusual effort
to get it. Examples are designer clothes, exotic perfumes, limited-edition cars,
stunning designs, works of famous painters. Buyer knows what they want and will not accept a
substitute, i.e Mercedes. Do not compare alternatives. Brand, store and person loyal. Will pay a
premium if necessary. Need reminder advertising.
 Unsought: Products which consumers are unaware, products that people do not necessary think of
purchasing. Umbrellas, Funeral Plots, Encyclopaedia
Classifications for Business to Business products:
Raw Materials & Parts
 Raw Materials
 Manufacturing materials and parts
Capital items
 Installation
 Accessories equipment
Support Goods and Services
 Operating supplies
 Maintenance repair items
 Business advisory services
Elements of a Product Mix
If an organization is marketing more than one product it has a product mix.
 Product item-a single product
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 Product line-all items of the same type

 Product mix-total group of products that an organization markets
Depth measures the no of products that are offered within each product line. Satisfies several consumer
segments for the same product, maximizes shelf space, discourages competitors, covers a range of prices and
sustains dealer support. High cost in inventory etc.
Width measures the no of product lines a company offers. Enables a firm to diversify products, appeals to
different consumer needs and encourages one stop shopping.
For a new product to succeed it must have:
 desirable attributes
 be unique
 have its features communicated to the consumer (market support necessary)
Developing new products is expensive and risky.

Failure not to introduce new products is also risky.
Why New Products Fail
 Lack of differentiating advantage

 Inadequate marketing research
 Poor marketing plan
 Poor timing
 Target market too small
 Poor product quality
 No access to market
Eight Stages in New Product Development Process
1. Idea Generation:
Only a few ideas are good enough to reach commercialization. Ideas can be generated by chance, or by
systematic approach. Need a purposeful, focused effort to identify new ways to serve a market. New
opportunities appear from the changes in the environment. Continuous systematic search for new product
opportunities
Marketing oriented sources-identify opportunities based on consumer needs, lab research is directed to satisfy
that research
Laboratory oriented sources-identify opportunities based on pure research or applied research.
Intra-firm devises-brain storming, incentives and rewards for ideas.
2. Idea Screening:
As the purpose of idea generation is to create a large number of ideas, the purpose of the succeeding stages is to
reduce the number of ideas to an attractive practical few. The first idea-pruning stage is screening. During the
idea screening stage, the ideas are analyzed against a set of predetermined criteria, to determine which ideas are
pertinent and appropriate for the company. The product ideas have to match with company objectives, (product
line) strategies and resources. Therefore, a variety of tools and techniques have been provided, to assist in
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screening new product ideas, including rating scale and checklist models of product success/failure
discriminator
3. Concept Development and Testing: A preliminary stage in the product (or service) development
process where marketers attempt to obtain initial feedback about their ideas from both external and internal
stakeholders. Potential purchasers are introduced to the foremost idea or definition of the product - this is
concept testing.
4. Marketing Strategy Development:

Craft a marketing strategy plan which includes:
 Target market size, structure and behaviour, the planned product positioning & sales, share & profit goals for
the first few years.
 Products planned price, distribution strategy and marketing budget
 Long -run sales and profit goals and long term marketing mi
5. Business Analysis:
Analyze potential contribution to sales, costs and profits. Find out if it is technically feasible to produce the new
product. If you can produce the new product at a low enough cost so as to be able to make a profit. Must pass
the business test criteria for further development.
6. Product Development: Following this the potential purchaser is presented with the product itself in
final or prototype form - this is product testing.
7. Test Marketing
Limited introduction in geographical areas chosen to represent intended market.
Aim is to determine the reaction of probable buyers, lessens the risk of product failure, reduces the risk of loss
of credibility or undercutting a profitable product. Can determine the weaknesses in the MM and make
adjustments. Need to select the appropriate MM and check the validity. It is the sample launch of the Marketing
Mix. Determine to go ahead, modify product, modify marketing plan or drop the product. It uses a simulated test
market. Free samples offered in the mall, taken home and interviewed over the telephone later. Big time testing
with brand name attached and packaging developed. Test market is expensive. Firm's competitors may interfere.
Competitors may copy the product and rush it out. Test Markets are the ultimate way to test a new product.
Company puts forth a full scale advertising and marketing plan for selected cities/regions
Simulated Test Marketing is when you find 30 or 40 shoppers at a shopping centre, show them some ads, give
them some money, and then see which brand they buy.
Controlled Test Marketing relies on a panel of real stores to carry the new products for a fee. Sales are
measured through scanners. .
8. Commercialization:
Plans for full-scale marketing and manufacturing must be refined and settled.
Need to analyze the results of the test market to determine any changes in the marketing mix.
Need to make decisions regarding warranties etc (reduces consumer’s risk). Warranties can offer a competitive
advantage. Organisation spend a lot of money on advertising, personnel etc. combined with capital expenditure
makes commercialization very expensive.
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Product Life Cycle (PLC)
A new product passes through set of stages known as product life cycle. Product life cycle applies to both brand
and category of products. Its time period vary from product to product. Companies always attempt to maximize
the profit and revenues over the entire life cycle of a product. In order to achieving the desired level of profit,
the introduction of the new product at the proper time is crucial. If new product is appealing to consumer and no
stiff competition is out there, company can charge high prices and earn high profits.
Stages of Product Life Cycle

Product life cycle comprises four stages:
1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage
Product Life Cycle (PLC)
1. Introduction stage
Product is introduced in the market with intention to build a clear identity and heavy promotion is done for
maximum awareness. Before actual offering of the product to customers, product passes through product
development, involves prototype and market tests. Companies incur more costs in this phase and also bear
additional cost for distribution. On the other hand, there are a few customers at this stage, means low sales
volume. So, during introductory stage company’s profits shows a negative figure because of huge cost but low
sales volume.
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At introduction stage, the company core focus is on establishing a market and arising demand for the product.
So, the impact on marketing mix is as follows:
Product
Branding, Quality level and intellectual property and protections are obtained to stimulate consumers for the
entire product category. Product is under more consideration, as first impression is the last impression.
Price
High(skim) pricing is used for making high profits with intention to cover initial cost in a short period and low
pricing is used to penetrate and gain the market share. company choice of pricing strategy depends on their
goals.
Place
Distribution at this stage is usually selective and scattered.
Promotion
At introductory stage, promotion is done with intention to build brand awareness. Samples/trials are provided
that is fruitful in attracting early adopters and potential customers. Promotional programs are more essential in
this phase. It is as much important as to produce the product because it positions the product.
2. Growth Stage
In this stage, company’s sales and profits starts increasing and competition also begin to increase. The product
becomes well recognized at this stage and some of the buyers repeat the purchase patterns. During this stage,
firms focus on brand preference and gaining market share. It is market acceptance stage. But due to competition,
company invest more in advertisement to convince customers so profits may decline near the end of growth
stage.
Effect on 4 P’s of marketing is as under:
Product
Along with maintaining the existing quality, new features and improvements in product quality may be done.
All this is done to compete and maintain the market share.
Price
Price is maintained or may increase as company gets high demand at low competition or it may be reduced to
grasp more customers.
Distribution
Distribution becomes more significant with the increase demand and acceptability of product. More channels are
added for intensive distribution in order to meet increasing demand. On the other hand resellers start getting
interested in the product, so trade discounts are also minimal.
Promotion
At growth stage, promotion is increased. When acceptability of product increases, more efforts are made for
brand preference and loyalty.
3. Maturity stage
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At maturity stage, brand awareness is strong so sale continues to grow but at a declining rate as compared to
past. At this stage, there are more competitors with the same products company may need to perform some type
of product modification to correct weak or omitted attributes in the product.
Need to build brand loyalty (selective demand), communications should stress the brand of the product, since
consumers are more aware of the products benefits and there is more competition, must differentiate your
offering from your competitors.
May begin to move toward intensive distribution-the product is more accepted, therefore intermediaries are
more inclined to risk accepting the product.
Price dealing/cutting or meeting competition, especially if previously adopted a price skimming strategy. So,
companies defend the market share and extending product life cycle, rather than making the profits, By offering
sales promotions to encourage retailer to give more shelf space to the product than that of competitors. At this
stage usually loyal customers make purchases.
Marketing mix decisions include:
Product
At maturity stage, companies add features and modify the product in order to compete in market and
differentiate the product from competition. At this stage, it is best way to get dominance over competitors and
increase market share.
Price
Because of intense competition, at maturity stage, price is reduced in order to compete. It attracts the price
conscious segment and retains the customers.
Distribution
New channels are added to face intense competition and incentives are offered to retailers to get shelf preference
over competitors.
Promotion
Promotion is done in order to create product differentiation and loyalty. Incentives are also offered to attract
more customers.
4. Decline stage
Decline in sales & profits caused by changes in tastes and preferences unfavourable economic conditions and
stiff competition. Can justify continuing with the product as long as it contributes to profits or enhances the
effectiveness of the product mix.
Need to decide to eliminate or reposition to extend its life
At decline stage company has three options:
o Maintain the product, Reduce cost and finding new uses of product.
o Harvest the product by reducing marketing cost and continue offering the product to loyal niche until zero
profit.
o Discontinue the product when there’s no profit or a successor is available. Selling out to competitors who want
to keep the product.
At declining stage, marketing mix decisions depends on company’s strategy. For example, if company want to
harvest, the product will remain same and price will be reduced. In case of liquidation, supply will be reduced
dramatically.
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Limitations of Product Life Cycle (PLC)
Product life cycle is criticized that it has no empirical support and it is not fruitful in special cases. Different
products have different properties so their life cycle also varies. It shows that product life cycle is not best tool
to predict the sales. Sometimes managerial decisions affect the life of products in this case Product Life
Cycle is not playing any role. Product life cycle is very fruitful for larger firms and corporations but it is not
hundred percent accurate tool to predict the life cycle and sales of products in all the situations.
Buyers' Product Adoption Process
1. Awareness
Buyers become aware of the product
2. Interest
Buyers seek information and are receptive to learning about product
3. Evaluation
A buyer considers product benefits and determines whether to try it
4. Trial
Buyers examine, test or try the product to determine usefulness relative to needs
5. Adoption/Rejection
Buyers purchase the product and can be expected to use it when the need for the general type of
product arises.
Rate of adoption depends on consumer traits as well as the product and the firm's marketing efforts.
Diffusion Process
Diffusion of Innovation Theory, developed by E.M. Rogers in 1962, is one of the oldest social science theories.
It originated in communication to explain how, over time, an idea or product gains momentum and diffuses (or
spreads) through a specific population or social system. The end result of this diffusion is that people, as part of
a social system, adopt a new idea, behaviour, or product.
Innovation means that a person does something differently than what they had previously (i.e., purchase or use
a new product, acquire and perform a new behaviour, etc.). The key to adoption is that the person must perceive
the idea, behaviour, or product as new or innovative. It is through this that diffusion (spreading) is possible.
Diffusion of a new idea, behaviour, or product does not happen simultaneously in a social system; rather it is a
process whereby some people are quicker to adopt the innovation than others. Researchers have found that
people who adopt an innovation early have different characteristics than people who adopt an innovation later.
When promoting an innovation to a target population, it is important to understand the characteristics of the
target population that will help or hinder adoption of the innovation.
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Five adopter categories
It is still necessary to understand the characteristics of the target population. When promoting an innovation,
there are different strategies used to appeal to the different adopter categories.
1. Innovators - These are people who want to be the first to try the innovation. They are venturesome and
interested in new ideas. These people are very willing to take risks, and are often the first to develop
new ideas. Very little, if anything, needs to be done to appeal to this population.
2. Early Adopters - These are people who represent opinion leaders. They enjoy leadership roles, and
embrace change opportunities. They are already aware of the need to change and so are very
comfortable adopting new ideas. Strategies to appeal to this population include how-to manuals and
information sheets on implementation. They do not need information to convince them to change.
3. Early Majority - These people are rarely leaders, but they do adopt new ideas before the average
person. That said, they typically need to see evidence that the innovation works before they are willing
to adopt it. Strategies to appeal to this population include success stories and evidence of the
innovation's effectiveness.
4. Late Majority - These people are sceptical of change, and will only adopt an innovation after it has
been tried by the majority. Strategies to appeal to this population include information on how many
other people have tried the innovation and have adopted it successfully.
5. Laggards - These people are bound by tradition and very conservative. They are very sceptical /full of
doubt of change and are the hardest group to bring on board. Strategies to appeal to this population
include statistics, fear appeals, and pressure from people in the other adopter groups.
Five main factors that influence adoption of an innovation
1. Relative Advantage - The degree to which an innovation is seen as better than the idea, program, or
product it replaces.
2. Compatibility - How consistent the innovation is with the values, experiences, and needs of the
potential adopters.
3. Complexity - How difficult the innovation is to understand and/or use.
4. Triability - The extent to which the innovation can be tested or experimented with before a
commitment to adopt is made.
5. Observability - The extent to which the innovation provides tangible results.
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Limitations of Diffusion of Innovation Theory
 Much of the evidence for this theory, including the adopter categories, did not originate in public health
and it was not developed to explicitly apply to adoption of new behaviours or health innovations.
 It does not foster a participatory approach to adoption of a public health program.
 It works better with adoption of behaviours rather than cessation or prevention of behaviours.
 It doesn't take into account an individual's resources or social support to adopt the new behaviour (or
innovation).
Branding
A name, term, design, symbol or any other feature that identifies one seller's good or service as distinct from
another. Branding is part of the actual product.
Without brands, shopper’s choice becomes arbitrary
 Brand name is that part that can be spoken, including letters, words.
Brand names simplify shopping, guarantee a certain level of quality and allow for self expression.
 Brand mark-elements of the brand that cannot not be spoken, i.e symbol
 Trade mark-legal designation that the owner has exclusive rights to the brand or part of a brand.
Trade name-The full legal name of the organization. i.e Ford, not the name for a specific product.
Benefits of Branding
Provides benefits to buyers and sellers
TO BUYER:
 Help buyers identify the product that they like/dislike.

 Identify marketer
 Helps reduce the time needed for purchase.
 Helps buyers evaluate quality of products especially if unable to judge a products characteristics.
 Helps reduce buyers perceived risk of purchase.
 Buyer may derive a psychological reward from owning the brand, IE Rolex or Mercedes.
TO SELLER:
 Differentiate product offering from competitors

 Helps segment market by creating tailored images, i.e. Contact lenses
 Brand identifies the company’s products making repeat purchases easier for customers.
 Reduce price comparisons
 Brand helps firm introduce a new product that carries the name of one or more of its existing
products...half as much as using a new brand, lower co. designs, advertising and promotional costs.
 Easier cooperation with intermediaries with well known brands
 Facilitates promotional efforts.
 Helps foster brand loyalty helping to stabilize market share.
 Firms may be able to charge a premium for the brand.
Criteria for choosing a name:
 Easy for customers to say, spell and recall (inc. foreigners)

 Indicate products major benefits
 Should be distinctive
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 Compatible with all products in product line

 Used and recognized in all types of media
 Use words of no meaning to avoid negative connotation, Kodak, Exxon
 Can be created internally by the organization, or by a consultancy
Legal restrictions, i.e. Food products must adhere to the Nutrition Labelling and Education
Types of Brands
Manufacturers Brands:
Initiated by the producer..

Requires the producer to be involved in distribution, promotion, and to some extent, pricing.
Brand loyalty is encouraged by quality, promotion and guarantees. Producer tries to stimulate demand;
encouraging middlemen to make the product available (PULL)
Private Distributor Brands:
Initiated and owned by the resellers.

Manufacturers not identified in the product.
Helps retailers develop more efficient promotion, generate higher margins and increase store image.
Wholesaler’s brands
The competition between manufacturers’ brands and private brands (15% retail grocery) is intensifying.
Generic brands
Indicates only product category name' or non-decrepit brand that is not advertised, and is sold at
a price substantially lower than the comparable branded products. Generic brand products are more popular in
recessionary times, but largely in case of fungible products such as aluminium foil, hand tools, paper products,
small appliances.
Protecting a Brand
Need to design a brand that can be protected through registration.

Generic words are not protectable (aluminium foil), surnames and geographic or functional names are difficult
to protect. To protect exclusive rights to a brand must make certain that the brand is not likely to become
considered an infringement on any existing registered brand. Guard against a brand name becoming a generic
term used to refer to general products category.
Branding Policies
First question is whether to brand or not to brand. Homogenous products are difficult to brand (Not Purdue,
Robinson Brick). Branding policies are:
 Individual Branding: Naming each product differently , facilitates market segmentation and no
overlap.
 Overall Family Branding: All products are branded with the same name, or part of a name, promotion
of one item also promotes other items.
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 Brand Extension Branding: Use one of its existing brand names as part of a brand for an improved or
new product, usually in the same product category.
A brand can convey up to six levels of meaning:
 Attributes: The Mercedes-Benz brand, for example, suggests expensive, well-built, well-engineered,
durable, high-prestige automobiles.
 Benefits: attributes must be translated into functional and emotional benefits.
 Values: Mercedes stands for high performance, safety, and prestige.
 Culture: Mercedes represents German culture, organized, efficient, high quality.
 Personality: the brand projects a certain personality.
 User: the brand suggests the kind of consumer who buys and uses the product.
Brand Equity
This phrase describes the value of having a well-known brand name, based on the idea that the owner of a well-
known brand name can generate more money from products with that brand name than from products with a
less well-known name.
Brand Awareness
This is the extent to which a brand is recognized by potential customers, and is correctly associated with a
particular product. Expressed usually as a percentage of target market, brand awareness is the primary goal of
advertising in the early months or years of a product's introduction.
Cannibalization
In marketing strategy, cannibalization refers to a reduction in sales volume, sales revenue, or market share of
one product as a result of the introduction of a new product by the same producer.
Packaging
Packaging is the technology of enclosing or protecting products for distribution, storage, sale, and use.
Packaging also refers to the process of designing, evaluating, and producing packages. Packaging can be
described as a coordinated system of preparing goods for transport, warehousing, logistics, sale, and end use.
Packaging contains, protects, preserves, transports, informs, and sells. In many countries it is fully integrated
into government, business, and institutional, industrial, and personal use.
Levels of Packaging
Primary packaging is seen at the point of sale. It needs to contain and protect the product, as well as display it
and provide information.
Secondary packaging is the middle layer of packaging - for example a cardboard box with a number of
identical products inside.
Shipping packaging is the outer container that allows easier handling during transfer between factory,
distribution centres and retailers
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Packaging Functions
 Protect product and maintain functional form, i.e milk.

 Promote product by communicating features Develop reusable package for alternative use.
 Segmentation, tailored to a specific group
 Packages and labels communicate how to use, transport, recycle, or dispose of the package or product.
 With pharmaceuticals, food, medical, and chemical products, some types of information are required
by governments. Some packages and labels also are used for track and trace purposes.
 The packaging and labels can be used by marketers to encourage potential buyers to purchase the
product.
 Packages can have features that add convenience in distribution, handling, stacking, display, sale,
opening, re-closing, use, dispensing, reuse, recycling, and ease of disposal.
 A barrier from oxygen, water vapour, dust, etc., is often required. Permeation is a critical factor in
design.
 Keeping the contents clean, fresh, sterile and safe for the intended shelf life is a primary function.
 Packages can be made with improved tamper resistance to deter tampering and also can have tamper-
evident features to help indicate tampering.
.
Criticisms of Packaging
Life in its fullness of activities goes with merits and demerits and as such packaging is out left out. A lot or
consumers complains that packaging added to the cost or the products that are being offered to through the
criticism are as follows:
 Excessive packaging depletes natural resources.

 That some materials used on product packaging tends to be hazardous.
 The packaging is deceptive in nature.
 The critics pin pointed also at the very expensive materials used for the packaging of some product like
beer and cosmetic product.
Labelling
Labels serve to capture the attention of shoppers. The use of catchy words may cause strolling customers to stop
and evaluate the product.
The label is likely to be the first thing new customers see and thus offer their first impression of the product.
Labels are Descriptive
A label is a carrier of information about the product. The attached label provides customers with information to
aid their purchase decision or help improve the experience of using the product. Labels can include:
 Care and use of the product
 Recipes or suggestion
 Ingredients or nutritional information
 Product guarantees
 Manufacturer name and address
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 Weight statements
 Sell by date and expiration date
 Warnings
 Instructions for use
 Facilitates identification of a product
 Descriptive function
 Indicate the grade of the product
 Describe source of product, its content and major features
 How to use the product etc.
 Label can be a promotional tool
 Information.
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Nature of Pricing
Price is the value placed on what is exchanged. Something of value is exchanged for satisfaction and utility,
includes tangible (functional) and intangible (prestige) factors.
Buyers must determine if the utility gained from the exchange is worth the buying power that must be sacrificed.
Price represents the value of a good/service among potential purchases and for ensuring competition among
sellers in an open market economy.
Marketers need to understand the value consumers derive from a product and use this as a basis for pricing a
product--must do this if we are customer oriented.
Factors Affecting Pricing Decisions

There is considerable uncertainty regarding the reaction to price on the part of buyers, channel members,
competitors etc.
It is also important in market planning, analysis and sales forecasting.
Internal factors External Factors
Marketing Nature of market
Objectives demand
Marketing mix Strategies Competititors
Costs Other external factors
Organisation for pricing (economy, legal)
INTERNAL FACTORS
1. Organizational and Marketing Objectives,
Need to be consistent with companies’ goals. i.e. exclusive retailer sets high prices. Also consistent with the
marketing objectives for the year.
2. Types of Pricing Objectives
Pricing objectives:
 a. Survival-It is apparent that most managers wish to pursue strategies that enable their organizations to
continue in operation for the long term. So survival is one major objective pursued by most executives.
For a commercial firm, the price paid by the buyer generates the firn1's revenue. If revenue falls below
cost for a long period of time, the firm cannot survive
 b. Profit -Survival is closely linked to profitability. Making a $500,000 profit during the next year
might be a pricing objective for a firm. Anything less will ensure failure. All business enterprises must
earn a long-term profit. For many businesses, long-term profitability also allows the business to satisfy
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their most important constituents-stockholders. Lower-than-expected or no profits will drive down
stock prices and may prove disastrous for the company
 c. Sales- Just as survival requires a long-term profit for a business enterprise, profit requires sales. As
you will recall from earlier in the text, the task of marketing management relates to managing demand.
Demand must be managed in order to regulate exchanges or sales. Thus marketing management's aim
is to alter sales patterns in some desirable way.
 d. Market share- Market Share: If the sales of Safeway Supermarkets in the Dallas-Fort Worth
metropolitan area account for 30% of all food sales in that area, we say that Safeway has a 30% market
share. Management of all firms, large and small, are concerned with maintaining an adequate share of
the market so that their sales volume will enable the firm to survive and prosper. Again, pricing
strategy is one of the tools that is significant in creating and sustaining market share. Prices must be set
to attract the appropriate market segment in significant numbers.
 e. Image- Price policies play an important role in affecting a firm's position of respect and esteem in its
community. Price is a highly visible communicator. It must convey the message to the community that
the firm offers good value, that it is fair in its dealings with the public, that it is a reliable place to
patronize, and that it stands behind its products and services
3. Costs,
In the long run, cannot survive by selling at or below cost. Need to take into account all costs, costs
associated with product, with total product line etc. Breakeven point is where the cost of producing the
product is equal to the revenue derived from selling the product.
Fixed-do not change with change in # units produced
Variable-vary directly with the change in the # units produced
4. Organisation for pricing.

Management must decide which department within the organisation is responsible for setting prices e.g. top
management, marketing, accounting or buying. These departments have different objectives towards
achieving overall goals of the organisation.
External factors.
1. Nature of market and demand

Costs sets lower limits of prices whilst market and demand sets upper limits. Both consumers and industrial
buyers must balance the price of a product of services against the benefits of owning it. Before setting prices
marketers must understand the relationship between price and demand for its products i.e. less will be bought at
a higher price & more at lower price.
2. Competition
A companies pricing decisions is affected by competitor’s prices and their possible reaction to the cooperation’s
pricing strategies. Consumers will evaluate a product’s price and value against the price value of comparable
products. A company’s high pricing strategy may attract competitors whereas a low pricing strategy may
discourage competitors. Under competition a market will operate under four kinds of market situation;
oligopoly, monopoly, monopolistic competition is perfect competition.
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3. Resellers
How will the resellers react to various prices companies must set prices that give resellers a fair profit,
encourage, support and help sell company products?
Channel member expect to receive a profit for services performed. Need to keep distributors/retailers happy,
avoid conflicts, use exclusive dealing, and avoid discounters.
May use price guarantees to assure wholesalers/retailers that the price they pay is the lowest available.
4. Buyers Perceptions,
Price sensitivity varies among market segments and across different products (i.e. necessary products vs.
luxury).Need to know buyers acceptable range of prices and sensitivity towards price changes.
5. Other External Factors

Economic conditions can have a dramatic impact on the effectiveness of different pricing strategies. Economic
factors such as inflation, recession’s interest rates will influence price decisions because they both affect the cost
of producing product + the consumer’s perception for the price and value.
Government also affects pricing decisions through price controls, setting of price floors and ceiling.
Price setting process

1. Select the pricing objective to decide where you want to position your market offering. The five major
objectives that you can pursue are survival, maximum current profit, maximum market share, maximum market
skimming or product –quality leadership. Having a clearer objective makes it easier to set a price.
2. Determine the demand. Determine how many products you can sell in a given time period .The price
you set will affect the demand level and impact your business objectives differently. In normal situations, price
and demand are inversely related, in that the higher the price the lower the demand and vice versa.
3. Estimate the costs. While doing this, you want to charge a price that covers your cost of production,
distribution and selling of the product plus a decent return for your efforts and risks.
4. Analyze competitor costs, prices, offers and possible reactions. You should consider your nearest competitor’s
price, product features and evaluate them to check their worth to the customers. You can then decide to charge
more, same as competitor or less.
5. Select a pricing method. When selecting, consider the cost of the product or service, competitor prices and the
customer’s assessment of the unique features. The pricing method you decide should include one or more of
these considerations.
6. Finally, select the price. Here, you must consider the following: 1) Impact of other marketing activities like
brand quality and advertising in relation to competition.2) Companies pricing policy, 3) Impact of the price on
other parties like the distributors and dealers.
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Basic Pricing Concepts

A major factor in determining the profitability of any product is establishing a base price. There are three
methods of setting a product’s base price:
• Cost-oriented pricing
• Demand-oriented pricing
• Competition-oriented pricing
1. Cost-Oriented Pricing
Cost plus Pricing
Marketers first calculate the costs of acquiring or making a product and their expenses of doing business, then
add their projected profit margin to arrive at a price. Two common methods are mark-up pricing and cost-plus
pricing. Used mainly by Manufacturers & service organizations Examines costs then adds standard mark-up.
Products & services are all considered individually
Mark-up pricing
There are several reasons why expressing mark-up as a percentage of selling price is preferred to expressing it
as a percentage of cost. One is that many other ratios are expressed as a percentage of sales. For instance, selling
expenses are expressed as a percentage of sales. If selling costs are 8%, this means that for each $100,000 in net
sales, the cost of selling the merchandise is $8,000.Advertising expenses, operating expenses, and other types of
expenses are quoted in the same way. Thus, there is a consistency when making comparisons in expressing all
expenses and costs, including mark-up, as a percentage of sales (selling price). Middlemen receive merchandise
daily and make sales daily.
Break-Even Analysis A somewhat more sophisticated approach to cost-based pricing is the break-even
analysis. The information required for the formula for break-even analysis is available from the accounting
records in most firms. The break-even price is the price that will produce enough revenue to cover all costs at a
given level of production. Total cost can be divided into fixed and variable (total cost = fixed cost + variable
cost). Recall that fixed cost does not change as the level of production goes up or down.
Target Rates of Return Break-even pricing is a reasonable approach when there is a limit on the quantity
which a finn can provide and particularly when a target return objective is sought. Assume, for example, that the
firm with the costs illustrated in the previous example detennines that it c8.;'l provide no more than 10,000 units
of the product in the next period of operation. Furthermore, the firm has set a target for profit of 20% above total
costs.
2. Demand-Oriented Pricing
Marketers who use demand-oriented pricing attempt to determine what consumers are willing to pay for goods
and services. The key to this method of pricing is the consumer’s perceived value of the item
3. Competition-Oriented Pricing
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Marketers may elect to take one of three actions after learning their competitors’ prices:
• Price above the competition
• Price below the competition
• Price in line with the competition (going-rate pricing)
Competition-Oriented Pricing Methods
Going rate pricing.
The numbers price is based largely on competition’s prices with less attention paid to its own costs and demand.
The number may change the same price, more or less its major competitions.
Sealed bid pricing
This method occurs when a co bids for a job e. g building contractors must bid on possible projects and on this
method a company cannot set a price below a certain level and the must also note that the higher the price it
will bid the lower are its chances of getting to contract.
Types of strategies for new products:
Price Skimming Charge highest price possible that buyer who most desire the product will pay. Generate much
needed initial cash flow, cover high R&D costs. Esp. good for limited capacity introductions. Attract market
segment more interested in quality, status, uniqueness etc.
Good if competition can be minimized by other means, IE, brand loyalty, patent, high barriers to entry
etc.Consumers demand must be inelastic.
Penetration Pricing Price reduced compared to competitors to penetrate into markets to increase sales.
Less flexible, more difficult to raise prices than it is to lower them. May use it to follow price skimming. Good
as a barrier to entry. Appropriate when the demand is elastic. Use if there is an increase in economies of scale
through increased demand.
Product Mix Strategies
Product mix pricing strategies involve adjusting prices to maximize the profitability for a group of products
rather than for just one item. These strategies include:
o Price lining
o Optional
o Captive product pricing
o Bundle pricing
o Geographical pricing
Price lining
Special pricing technique that sets a limited number of prices for specific groups or lines of merchandise. You
are already familiar with price lines. Ties may be priced at $15, $17, $20, and $22.50; blue jeans may be priced
at $30, $32.95, $37.95, and $45. Each price must be far enough so that buyers can see definite quality
differences among products. Price lines tend to be associated with consumer shopping goods such as apparel,
appliances, and carpeting rather than product lines such as groceries. Customers do very little comparison-
shopping. Price lining serves several purposes that benefit both buyers and sellers. Customers want and expect a
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wide assortment of goods, particularly shopping goods. Many small price differences for a given item can be
confusing. If ties were priced at $1 5, $15.35, $15.75, and so on, selection would be more difficult; the customer
could not judge quality differences as reflected by such small increments in price. So, having relatively few
prices reduces the confusion
Optional product pricing -involves setting prices for accessories or options sold with the main product
Captive product pricing -sets the price for one product low but compensates for that low price by setting high
prices for the supplies needed to operate that product.
Bundle pricing- a company offers several complementary products in a package that is sold at a single price
that is lower than the cost of buying each item separately i.e., breakdown prices and allow customers to decide
what they want to purchase.
Psychological Pricing Strategies
Psychological pricing strategies are pricing techniques that help create an illusion for customers. Some common
ones are:
• Odd-even and prestige pricing
• Multiple-unit pricing
• Everyday low prices (EDLP) and Prestige pricing
Odd-even pricing involves setting prices that end in either odd or even numbers to convey certain images. It is
based on a psychological principle that odd numbers convey a bargain image, while even numbers convey a
quality image. Odd-even pricing, end prices with a certain number, $99.95 sounds cheaper than $100. May tell
friends that it is $99.Customers like to receive change, since change is given, then the transaction must be
recorded. Consumers may perceive that a lot of time taken considering the price, and it is set as low as possible.
Even prices are more unusual than odd prices.
Multiple-unit pricing suggests a bargain and helps to increase sales volume.
Everyday low prices (EDLP) are low prices set on a consistent basis with no intention of raising them or
offering discounts in the future. These help to reduce promotional expenses and losses due to discounting.
Prestige pricing sets higher-than-average prices to suggest status and high quality to the customer.
Promotional Pricing
Promotional pricing is generally used in conjunction with sales promotions where prices are reduced for a short
period of time. Two common types are:
• Loss leader pricing
• Special-event pricing
Loss leader pricing is used to increase store traffic by offering very popular items for sale at below cost
prices.
Special-event pricing items are reduced in price for a short period of time, based on a specific happening or
holiday. Rebates are partial refunds provided by the manufacturer to consumers while coupons allow customers
to take reductions at the time of purchase.
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Pricing Policies
One-Price Policy
A one-price policy is one in which all customers are charged the same prices, quoted to them by means of signs
and price tags without deviations.
PRICE FLEXIBILITY
Pricing decision relates to the extent of price flexibility. A flexible pricing policy means that the price is bid or
negotiated separately for each exchange. This is a common practice when selling to organizational markets
where each transaction is typically quite large. In such cases, the buyer may initiate the process by asking for
bidding on a product or service that meets certain specifications. Alternatively, a buyer may select a supplier and
attempt to negotiate the best possible price. Marketing effectiveness in many industrial markets requires a
certain amount of price flexibility.
Types of Price Flexibility
Discounts and Allowances
In addition to decisions related to the base price of products and services, marketing managers must also set
policies related to the use of discounts and allowances. There are many different types of price reductions-each
designed to accomplish a specific purpose.
Quantity discounts are reductions in base price given as the result of a buyer purchasing some predetermined
quantity of merchandise. A noncumulative quantity discount applies to each purchase and is intended to
encourage buyers to make larger purchases. This means that the buyer holds the excess merchandise until it is
used, possibly cutting the inventory cost of the seller and preventing the buyer from switching to a competitor at
least until the stock is used.
Seasonal discounts are price reductions given or out-of-season merchandise. An example would be a discount
on snowmobiles during the summer. The intention of such discounts is to spread demand over the year. This can
allow fuller use of production facilities and improved cash flow during the year. Electric power companies use
the logic of seasonal discounts to encourage customers to shift consumption to off-peak periods. Since these
companies must have production capacity to meet peak demands, the lowering of the peak can lessen the
generating capacity required.
Cash discounts are reductions on base price given to customers for paying cash or within some short time
period. For example, a two-percent discount on bills paid within ten days is a cash discount. The purpose is
generally to accelerate the cash flow of the organization.
Trade discounts are price reductions given to middlemen (e.g., wholesalers, industrial distributors, retailers) to
encourage them to stock and give preferred treatment to an organization's products. For example, a consumer
goods company may give a retailer a 20% discount to place a larger order for soap. Such a discount might also
be used to gain shelf space or a preferred position in the store.
Personal allowances are similar devices aimed at middlemen. Their purpose is to encourage middlemen to
aggressively promote the organization's products. For example, a furniture manufacturer may offer to pay some
specified amount toward a retailer's advertising expenses if the retailer agrees to include the manufacturer's
brand name in the ads. Some manufacturers or wholesalers also give prize money called spijfs for retailers to
pass on to the retailer's sales clerks for aggressively selling certain items. This is especially common in the
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electronics and clothing industries, where it is used primarily with new products, slow movers, or high margin
items.
Trade-in allowances also reduce the base price of a product or service. These allow the seller to negotiate the
best price with a buyer. The trade-in may, of course, be of value if it can be resold. Accepting trade-ins is
necessary in marketing many types of products. A construction company with a used grader worth $70,000
would not likely buy a new model from an equipment company that did not accept trade-ins, particularly when
other companies do accept them.
1. Discount Pricing and allowances
 Trade, given by a producer to an intermediary for performing certain functions (in terms of % off list
prices)
 Quantity, due to economies of purchasing large qtys. Pass cost savings on to the buyer. There are five
areas of cost savings, reduced per selling costs, fixed costs decline or remain the same, lower costs
from the suppliers of raw materials, longer production runs means no increase in holding costs, shift
storage, financing, risk taking functions to the buyer. Can cumulative/non cumulative.
 Cash, for prompt payment, 2/10 net 30, means 2% discount allowed if payment is made within 10
days, entire balance is due within 30 days, no discount, after that interest will be charged.
 Seasonal, purchase out of season
 Allowances, trade in allowances, price reductions granted for turning in a used item when purchasing a
new one-to achieve desired goal. Popular in the aircraft industry. Also promotional allowances, price
reduction in return for dealers promotional efforts.
2. Price Discrimination-It exists when the product is sold at different prices to different buyers and it takes
several forms;
a. Customers Basis.-Different customers pay different amounts for the same products or service e.g.
shows advance & gate tickets
b. Product form Basis -Different versions of the product are priced differently but not proportionally to
their respective costs.
c. Place Basis-Different locations are priced differently even though the cost of offering the locations
is the same.
d. Time basis-Here prices are varied seasonally, by day or by hour.
Geographical pricing -refers to price adjustments required because of the location of the customer for
delivery of products. In this strategy, the manufacturer assumes responsibility for the cost and management of
product delivery. There are several forms:
a. F. O. B (free on board)-A co can ask each customer to pay shipping costs from the factory to the
customer’s specific destination. The goods are placed free on board a carrier at which point title and
responsibility passes to the customer who pays the freight from the factory to the destination.
b. Uniform Delivery Pricing-A co will charge the same price and freight to all customers regardless of
their location.
c. Zone Pricing -A co will establish two or more zones and all customers within the same zone will
pay the same price and this price is higher in more distant zones.
d. Basing Point Method-This method allows the sellers to designate some city as a basing point and
charge all customers the freight costs from that city to customer location regardless of the city from
which the goods are actually being shipped.
e. Freight Absorption-The manufacture will absorb freight charges in order to get the business. This
method is used for market penetration and also to on to increasingly competitive markets.
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Distribution
A channel of distribution or marketing channel is a group of individuals and organizations that directs the flow
of products from producers and customers. Each channel member has different responsibilities within the
overall structure of the distribution of the system; mutual profit/success is obtained through cooperation.
Marketing Intermediaries link producers to other intermediaries or to the ultimate users of the product. Operate
between the producer and the final buyer.
Types of utility distribution offers:

 TIME...when the customers want to purchase the product.
 PLACE...where the customers want to purchase the product.
 POSSESSION...facilitates customer ownership of the product.
 FORM...sometimes, if changes have been made to the product in the distribution channel
Functions of Intermediaries
1. Risk taking – Assuming the risk connected with carrying out channel work or being a part of a channel
2. Financing – Acquiring funds to finance for inventories
3. Physical distribution of goods – Storage and movement of physical goods
4. Negotiations – Reaching an agreement on pricing and other terms which may be a part of the transaction
5. Matching – Placing order with the manufacturers and matching the orders to the actual requirement.
6. Contacts – Maintaining contacts with existing customers as well establishing contacts with potential
customers and maintaining the same with the regulatory bodies
7. Promotions – Carrying out effective communications to stimulate purchasing
8. Information – Gathering information about potential customers, competition as well as tracking the
environmental factors
.
Types of Channels of Distribution
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Selection of Distribution Channels
(i) Product:
Perishable goods need speedy movement and shorter route of distribution. Durable and standardized goods,
needs longer and diversified channels. Technical product requiring specialized selling and products of high unit
value have the shortest channel. Products are sold directly by travelling sales force.
(ii) Market:
(a) For consumer market, retailer is essential whereas in business market we can eliminate retailing.
(b) For large market size, we have many channels, whereas, for small market size direct selling may be
profitable.
(c) For highly concentrated market, direct selling is preferred whereas for widely scattered and diffused markets,
we have many channels of distribution.
(d) Size and average frequency of customer’s orders also influence the channel decision. In the sale of food
products, we need both wholesaler and retailer.
Customer and dealer analysis will provide information on the number, type, location, buying habits of
consumers and dealers in this case can also influence the choice of channels. For example, desire for credit,
demand for personal service, amount and time and efforts a customer is willing to spend-are all important
factors in channels choice.
(iii) Middlemen:
(a) Middlemen who can provide wanted marketing services will be given first preference.
(b) The middlemen who can offer maximum co-operation in promotional services are also preferred.
(c) The channel generating the largest sales volume at lower unit cost is given top priority.
(iv) Company:
(a) The company’s size determines the size of the market, the size of its larger accounts and its ability to set
middlemen’s co-operation. A large company may have shorter channel.
(b) The company’s product-mix influences the pattern of channels. The broader the product- line, the shorter
will be the channel.
If the product-mix has greater specialization, the company can favor selective or exclusive dealership.
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(c) A company with substantial financial resources may not rely on middlemen and can afford to reduce the
levels of distribution. A financially weak company has to depend on middlemen.
(d) New companies rely heavily on middlemen due to lack of experience.
(e) A company desiring to exercise greater control over channel will prefer a shorter channel as it will facilitate
better co-ordination, communication and control.
(f) Heavy advertising and sale promotion can motivate middlemen in the promotional campaign. In such cases, a
longer chain of distribution is profitable.
Thus, quantity and quality of marketing services provided by the company can influence the channel choice
directly.
(v) Marketing Environment:
During recession or depression, shorter and cheaper channel is preferred. During prosperity, we have a wider
choice of channel alternatives. The distribution of perishable goods even in distant markets becomes a reality
due to cold storage facilities in transport and warehousing. Hence, this leads to expanded role of intermediaries
in the distribution of perishable goods.
(vi) Competitors:
Marketers closely watch the channels used by rivals. Many a time, similar channels may be desirables to bring
about distribution of a company’s products. Sometimes, marketers deliberately avoid channels used by
competitors. For example, company may by-pass retail store channel (used by rivals) and adopt door-to-door
sales (where there is no competition).
(vii) Customer Characteristics:
This refers to geographical distribution, frequency of purchase, average quantity of purchase and numbers of
prospective customers.
(viii) Channel Compensation:
This involves cost-benefit analysis. Major elements of distribution cost apart from channel compensation are
transportation, warehousing, storage insurance, material handling distribution personnel’s compensation and
interest on inventory carried at different selling points. Distribution Cost Analysis is a fast growing and perhaps
the most rewarding area in marketing cost analysis and control.
Distribution strategies
Intensive Distribution:
All available outlets are chosen for maximum exposure (within reason. Used for convenience products,
especially when sales have a direct relationship to availability. Availability more important than the
nature of the outlet. Used mostly on convenience goods
Selective Distribution:
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Only some available outlets (usually geographic) are chosen. Typically used on shopping products.
Buyers prefer to spend time searching. Customer service important. Selective distribution motivates
retail support. Producers have more control. Retailer promotional support
Exclusive Distribution:
One outlet in a relatively large area. Products purchased infrequently, last a long time and require
service. Used as an incentive to sellers. No one to undercut them. Allows for the highest control.
Easier to get retailers to carry a complete inventory and to provide service and repair facilities.
May be used to introduce new products, and then change when market is more competitive (Move from
introduction to the growth stage of the product life cycle.
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Promotion
Promotion is communicating with individuals, groups or organizations to directly or indirectly to facilitate
exchanges by informing and persuading one or more audiences to accept an organization's products. Companies
must communicate with their customers; this communication should not be left to chance.
Promotion and Society

Marketers need to communicate, therefore need a medium to facilitate communication.
Promotion and the Communication Process
Marketing Communications Process

Basic Model of Communication
The Basic Model of Communication consists of the following elements.
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 Source – A source is also referred to as a sender. The sender has a message to

convey to others. The sender can be anyone from a brand manager (in a major
corporation such as Nike or Budweiser) to a salesperson in a smaller
organization. At times, celebrities are used to endorse products and act as a
sender for the product. It is always important to make sure that the source is
credible and trustworthy.
o A direct source can be a salesperson delivering a message

about a product
o An indirect source uses a well-known public figure to draw

attention to a product.
 Encode – The source encodes or translates ideas into a message. For example, a
brand manager decides to promote a new product.
 Message – After defining the target market, the marketer designs an effective
message that will achieve the communication objectives.
 Receiver – The receiver is the person or group with whom the sender attempts
to share ideas. Marketers want a response, the reactions of the receiver, after
being exposed to the message: for example, a consumer receiving the message
about the new product.
 Decode – The receiver decodes or interprets the message. For a message to be

decoded by a receiver the way it was intended by the sender, the sender and
receiver need to have common experiences. In other words, a receiver may not
decode a message the way it was intended to if her background and experience
differ greatly from the sender’s. A marketer has to be sensitive to the intended
audience.
 Noise – Noise interferes with or disrupts effective communication. This can

include a poor television or radio signal.
 Feedback – Feedback is monitoring and evaluating how accurately the intended

message is being received. This can be done by conducting market research.
Essentially, this involves asking consumers if they have seen the message, if they
recall the message, and what their attitude was towards the product.
Promotional Mix
Sales Promotion:
Sales Promotion is the use of short-term incentives to encourage the purchase or sale of a product. Sales
promotions are programs such as contests, coupons, displays, trade shows, samples, premiums, product
demonstrations, or other incentives that marketers design to build interest in or encourage purchase of a product
during a specified time period. Sales promotions are intended to stimulate immediate action, often in the form of
a purchase, rather than to build long-term loyalty. Sales promotion offers reasons to buy now.
Sales promotion geared to marketing intermediaries is called trade promotion. Companies actually spend about
as much on trade promotion as on advertising and consumer-oriented sales promotion combined. Trade
promotion strategies include offering free merchandise, buyback allowances, and merchandise allowances along
with sponsorship of sales contests to encourage wholesalers and retailers to sell more of certain products or
product lines.
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Sales Promotion Objectives:
Sales promotion objectives differ widely:
 Increase Short-Term Sales (consumer promotion)

 Build Long-Term Market Share (consumer promotion)
 Encourage Retailers to Carry New Items and Additional Inventory (trade promotion)
 Encourage Retailers to Advertise and Provide More Shelf Space (trade promotion)
 Encourage Retailers to Buy Ahead (trade promotion)
 Increase Sales Force Support (sales force promotion)
 Increase Number of New Accounts (sales force promotion)
Sellers may use consumer promotions to increase short-term sales or to help build long-term market share.
Objectives for trade promotions include getting retailers to carry new items and more inventory, getting them to
advertise the product and give it more shelf space, and getting them to buy ahead. Sales force
promotion objectives include getting more sales force support for current or new products or getting salespeople
to sign up new accounts.
Sales promotions are usually used together with advertising, personal selling, or other promotion mix tools.
Consumer Sales Promotion Tools
Coupons
A coupon is a certificate that gives buyers a saving when they purchase a specified product. Coupons can
stimulate sales of a mature brand or promote early trial of a new brand. Redemption rates have been declining in
recent years, however, as a result of coupon clutter. Most major consumer goods companies are issuing fewer
coupons and targeting them more carefully. They are also cultivating new outlets for distributing coupons, such
as supermarket shelf dispensers, electronic point-of-sale coupon printers, or “paperless coupon systems.”
Cash Rebate Offers
A cash rebate is an offer to refund part of the purchase price of a product to consumers who send a “proof of
purchase” to the manufacturer.
Price Packs
A price pack is a reduced price that is marked by the producer directly on the label or package. Price packs can
be single packages sold at a reduced price, or two related products banded together. Price packs are very
effective—even more so than coupons—in stimulating short-term sales.
Patronage Rewards
A patronage reward is cash or other award for the regular use of a certain company’s products.
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Special Packs
A special pack is a package that gives the shopper more products instead of lowering its price. A special pack
also can be a separate product given away along with another product.
Samples
A sample is a small amount of a product offered to consumers for trial. Sampling is the most effective—but
most expensive—way to introduce a new product.
Premiums
A premium is a good offered either free or at low cost as an incentive to buy a product. A premium is not the
product being promoted. It is used as an incentive to encourage purchase of the featured product. A premium
may come inside or outside the package, or through the mail.
Advertising Specialties
An advertising specialty is a useful article imprinted with an advertiser’s name, given as a gift to consumers.
Typical items include pens, calendars, key rings, matches, shopping bags, T-shirts, caps, nail files, and coffee
mugs. In a recent study, 63 percent of all consumers surveyed were either carrying or wearing an ad specialty
item.
Point-of-Purchase (POP) Promotions
A point-of-purchase promotion is a display or demonstration that takes place at the point of purchase or sale.
Unfortunately, many retailers do not like to handle the hundreds of displays, signs, and posters they receive
from manufacturers each year. Manufacturers have responded by offering better POP materials, tying them in
with television or print messages, and offering to set them up.
Contests, Sweepstakes, and Games
Contests, sweepstakes, and games are promotional events that give consumers the chance to win something—
such as cash, trips, or goods—by luck or through extra effort. A contest calls for consumers to submit an
entry—a jingle, guess, or suggestion—to be judged by a panel that will select the best entries. A sweepstakes
calls for consumers to submit their names for a drawing. A game presents consumers with something—bingo
numbers, missing letters—every time they buy, which may or may not help them win a prize.
Trade-Oriented Promotion:
Manufacturers direct more sales promotion dollars toward retailers and wholesalers.Trade promotion can
persuade resellers to carry a brand, give it shelf space, promote it in advertising, and push it to consumers. Shelf
space is so scarce these days that manufacturers often have to offer discounts, allowances, buy-back guarantees,
or free goods to retailers and wholesalers to get products on the shelf and, once there, to stay on it.
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Manufacturers use several trade promotion tools. Many of the tools used for consumer promotions—contests,
premiums, displays—can also be used as trade promotions.
Discounts
A discount is a straight reduction in price on purchases during a stated period of time. This is also called price-
off, off-invoice, or off-list. The discount could be based on the volume of the product ordered.
Allowances
An allowance is promotional money paid by manufacturers to retailers in return for an agreement to feature the
manufacturer’s products in some way. An advertising allowance compensates retailers for advertising the
product. A display allowance compensates them for using special displays.
Personal Selling:
Personal selling is promotional presentation by the firm’s sales force conducted on a person-to-person basis
with the buyer for the purpose of making sales and building customer relationships. Personal selling is the oldest
form of promotion. This direct form of promotion may be conducted face-to-face, over the telephone, through
videoconferencing, or through interactive computer links between the buyer and the seller. The salesperson can
get immediate feedback from the customer. Today, most salespeople are well-educated, well-trained
professionals who work to build and maintain long-term customer relationships by listening to their customers,
assessing customer needs, and organizing the company’s efforts to solve customer problems. The term
salesperson covers a wide range of positions. At one extreme, a salesperson might be largely an order taker,
such as a department store salesperson standing behind a counter. At the other extreme are order getters, whose
positions demand the creative selling of products ranging from appliances, industrial equipment, and airplanes
to insurance, advertising, and information technology services.
The Role of Personal Selling:
Generally, a personal sales effort is more important when a firm engages in a push strategy, in which the goal is
to push the product through the distribution channel so that it is available to consumers.
Personal selling also is likely to be crucial in B2B contexts when direct interaction with upper-level
management is required to secure an important sale—and often when intense price negotiations occur before the
sale is made. In addition, inexperienced buyers may need the hands-on assistance that a professional salesperson
can provide.
Firms selling products that consumers buy infrequently, such as computers, lawn mowers, and college
educations, often rely heavily on personal selling, as do firms selling complex or very expensive products that
need a salesperson to explain, justify, and sell them.
Disadvantages of Personal selling
First, when the dollar amount of individual purchases is low, it isn’t economically feasible to use personal
selling. The cost per contact with a customer is high compared to other forms of communication, such as
advertising.
Salespeople can also only make a limited number of sales calls a day. Reliance on personal selling is effective
only when the success ratio is at its highest. Because the cost of utilizing salespeople is high, telemarketing is
growing in popularity.
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Approaches to Personal Selling:
Personal selling is one of the oldest forms of promotion, but its image has been tarnished by smooth-talking
pitchmen who have sometimes said anything to make a sale. In more recent years, personal selling has begun to
redeem itself as a profession and has moved from a transactional, hard-sell technique to a relationship marketing
approach.
Transactional Marketing
The hard sell is a high-pressure process. Hard-sell tactics are a form of transactional selling, a form of personal
selling that focuses on making an immediate sale with little or no attempt to develop a relationship with the
customer.
Relationship Marketing
Today’s professional salesperson is more likely to practice relationship selling, a form of personal selling in
which the salesperson seeks to develop a mutually satisfying relationship with the consumer. Relationship
selling involves winning, keeping, and developing customers. Winning a customer means converting an
interested prospect into someone who is convinced that the product holds value for him or her
Personal Selling Process:
Prospecting
Prospecting is the step of the selling process that includes identifying and developing a list of potential or
prospective customers. Prospects or sales leads can come from existing customer lists, telephone directories, or
commercially available databases. Sometimes companies generate sales leads through their advertising or sales
promotions by letting customers request more information. One way to generate leads is through cold calling,
when the salesperson contacts prospects without prior introduction or arrangement. Salespeople also rely
on referrals. Current clients who are satisfied with their purchase often give referrals.
Qualifying
Salespeople next need to qualify their prospects, the step of the selling process that determines how likely
prospects are to become customers. Prospects can be qualified by looking at their financial ability, volume of
business, special needs, location, and possibilities for growth.
Pre-approach
The pre-approach is the step in the selling process in which the salesperson learns as much as possible about a
prospective customer before making a sales call. Salespeople try to learn as much as possible about qualified
prospects early on. They may probe prior purchase history, current needs, or information about their interests.
The salesperson can consult industry and online sources, acquaintances, etc. to learn about the prospect. Another
task is to decide on the best approach, which might be a personal visit, a phone call, or a letter. The best timing
should be considered carefully because many prospects are busiest at certain times. Finally, the salesperson
should give thought to an overall sales strategy for the account.
Approach
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The approach is the step in the selling process in which the salesperson usually meets the customer for the first
time. He or she should start building the relationship during the approach. The salesperson should know how to
meet and greet the prospect and get the relationship off to a good start. This step involves the salesperson’s
appearance, opening lines, and the follow-up remarks. The opening lines should be positive to build goodwill
from the beginning of the relationship. If the salesperson made contact with the prospect through a referral, the
salesperson should probably say so up-front. This opening might be followed by some key questions to learn
more about the customer’s needs or by showing a display or sample to attract the prospect’s attention and
curiosity. As in all stages of the selling process, listening to the customer is crucial.
Sales Presentation
The sales presentation is the step in the selling process in which the salesperson seeks to persuasively
communicate the product’s features and the benefits it will provide after the sale. Proof statements, such as data
on past sales, testimonials, guarantees, or research results, help to make the salesperson’s presentation credible.
Some sales presentations are canned, meaning a script has been written in advance, and the same message is
delivered to many prospects. This technique often provides a series of verbal prompts to which there are
expected customer responses. A similar approach called a formulated approach identifies a prospect’s needs and
then provides scripted sales pitch keyed to that kind of prospect. These standardized approaches work fine in
some cases, but the most effective sales presentations are those that are tailored to the specific customer.
Demonstration
One important advantage of personal selling over most advertising is the ability of salespeople to provide
a demonstration of the product to the potential buyer. Many firms use new technologies to make their
demonstrations more effective. Multimedia interactive demonstrations are now common. The key to a good
demonstration—one that gains the customer’s attention, keeps his or her interest, is convincing, and stays in the
customer’s memory—is planning. The salesperson should check and recheck all aspects of the demonstration
prior to its delivery.
Handling Objections
Handling objections is the step in the selling process in which the salesperson seeks out, clarifies, and
overcomes customer objections to buying. Customers almost always have objections during the presentation or
when asked to place an order. The problem can be either logical or psychological, and objections are oftentimes
unspoken. The salesperson should handle objections using a positive approach, by seeking out hidden
objections, asking the prospect to clarify any objections, and taking objections as opportunities to provide more
information—turning the objections into reasons for buying. Every salesperson needs training in the skills of
handling objections.
Closing
Closing is the step in the selling process in which the salesperson asks the customer for an order. Some
salespeople do not get around to closing or do not handle it well. They may lack confidence, feel guilty about
asking for the order, or fail to recognize the right moment to close the sale. Salespeople should know how to
recognize closing signals from the buyer, including body language, comments, and questions. Salespeople can
use several closing techniques. They can ask for the order, review points of agreement, offer to help write up the
order, ask whether they buyer wants this model or that one, or note that the buyer will lose out if the order is not
placed now. The salesperson may also offer the buyer special reasons to close, such as a lower price or an extra
quantity at no charge.
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Follow-Up
Follow-up is the last step in the selling process, in which the salesperson follows up after the sale to ensure
customer satisfaction and repeat business. Right after closing, the salesperson should complete any details on
delivery time, purchase terms, and other matters. The salesperson then should schedule a follow-up call when
the initial order is received, to make sure there is proper installation, instruction, and/or servicing. This visit
should reveal any problems, assure the buyer of the salesperson’s interest, and reduce any buyer concerns that
might have arisen since the sale. Follow-up also allows the salesperson to bridge to the next purchase. Once a
relationship develops, the selling process is only the beginning. Even as one cycle of purchasing draws to a
close, a good salesperson is already laying the foundation for the next one.
Advertising:
Paid form of non personal communication about an organization or its products that is transmitted to a target
audience through a mass/broadcast medium.
Use of Advertising
 Promoting Products or Organizations
Institutional Advertising promotes organizations, images, ideas or political issues. IE Beer Company
sponsors responsible drinking to promote the company image.
Product Advertising promotes goods and services.
 Stimulating Primary Demand
First to introduce product needs to stimulate primary demand. Advertising informs people about the
product (introduction stage of the product life cycle)..
 Making salespersons more effective
Tries to presale product to buyers by informing them of uses, features and benefits- encourage them to
contact dealers etc.
 Increasing use of product
Consumer can consume only so much of a product, this limits absolute demand. May need to convince
the market to use the product in more than one way.
 Reminding and reinforcing customers
Reminder, need to keep company/product name at the forefront of consumers' minds in the competitive
marketplace. Reinforcement prevents cognitive dissonance.
 Reducing Sales fluctuations
Increase sales during slow periods will help increase production efficiency; i.e advertising reduced
prices of lawn mowers in the winter months (reduce inventory costs
Developing an Advertising Campaign
1. Identify and Analyze the Advertising Target.
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The group of people for which the advertisement is aimed at, may direct campaign at only a portion of
the target market.
2. Defining Objectives.
What the firm hopes to accomplish from the campaign, should be clear, precise and measurable, can
help measure the success at the end of the campaign. Use a benchmark e.g.
Increase product/brand awareness

Change consumer attitudes
Increase customer knowledge of product features
3. Determine the Advertising Appropriation
Total amount of money that a marketer allocates for advertising in a specific period.
There are five different ways to establish a promotional

budget.
Methods for Setting Advertising Budget
Several methods are used for setting advertising budget. Depending upon internal situations of the company, the
suitable method is followed. Every method has its merits, demerits, and applicability.
a. Percentage of Sales Method:

It is a commonly used method to set advertising budget. In this method, the amount for advertising is decided on
the basis of sales. Advertising budget is specific per cent of sales. The sales may be current, or anticipated.
Sometimes, the past sales are also used as the base for deciding on ad budget. It is assumed that there is positive
correlation between sales and advertising expenditure. This is not the scientific method to decide on advertising
budget.
Merits:
(a) It is based on sales volume. Therefore, cost of advertising can be offset against profits earned from the sales.
It satisfies financial management.
(b) This method encourages marketing manager to think in terms of relationship between promotional costs,
selling price, and profits per unit.
(c) It maintains competitive parity. All firms in the industry spend approximately the same percentage of sales
for advertising.
(d) It keeps the company in constant touch with the sales target to be achieved.
Demerits:
(a) In absence of specific guidelines, it is not possible to decide the appropriate per cent of sales. It lacks a
scientific base.
(b) Long-term planning is not possible because a long-term sales forecasting seems difficult.
(c) It neglects other objectives of advertising. Only sales are given priority. It doesn’t consider the need of
advertising.
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(d) Stage of product life cycle is not considered.
(e) It is, to some extent, inflexible.
(f) It is assumed that only advertising affect sales. It is erroneous.
b. Objectives and Task Method:

This is the most appropriate ad budget method for any company. It is a scientific method to set advertising
budget. The method considers company’s own environment and requirement. Objectives and task method
guides the manager to develop his promotional budget by
(1) defining specific objectives,
(2) determining the task that must be performed to achieve them, and
(3) estimating the costs of performing the task.
The sum of these costs is the proposed amount for advertising budget. The method is based on the relationship
between the objectives and the task to achieve these objectives. The costs of various advertising activities to be
performed to achieve marketing objectives constitute advertising budget.
Under this method, following steps are to be followed to set advertising budget:
1. Determine main objectives of marketing department.
2. Set advertising objectives in terms of sales, profits, brand loyalty, competitive stability, etc.
3. Determine advertising task in terms of various advertising activities required to be performed to achieve the
advertising objectives.
4. Estimate cost of each advertising activity for the defined period.
5. Make sum of costs of all the activities. It is the estimated amount for advertising.
Thus, advertising budget is set on the basis of the objectives a company wants to achieve and in what way it
wants the objectives to be achieved. This method is logically consistent and practically applicable for all the
companies. The method emphasizes on actual needs of the company. It is considered as a scientific method to
set ad budget.
c. Competitive Parity Method:

Competition is one of the powerful factors affecting marketing performance. This method considers the
competitors’ advertising activities and costs for setting advertising budget. The advertising budget is fixed on
the basis of advertising strategy adopted by the competitors.
Thus, competitive factor is given more importance in deciding advertising budget. If not followed carefully, this
method may result into misleading. It is obvious that a company differs significantly from the competitors in
terms of product characteristics, objectives, sales, financial conditions, management philosophy, other
promotional means and expenses, image and reputation, price, etc.
Therefore, it is not advisable to follow the competitors blindly. Marketing/advertising manager should take
competitors’ advertising strategy as the base, but should not follow as it is. The advertising budget must be
adjusted to the company’s internal and external situation.
Limitations:
(a) In case of a new product, the method fails to guide for deciding on advertising budget.
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(b) It is difficult to know in which stage of life cycle the product of close competitor is passing through.
(c) Company differs in terms of sales, profits, challenges, financial conditions, and so on. To follow competitors
directly may be erroneous.
(d) Advertising is not the sole factors that affect the sales; interplay of many factors determines sales.
(e) In case, when there are many competitors, it is difficult to decide as to whom the company should follow.
(f) The method is followed only when there are dominant competitors. In absence of competition, the method
cannot be used.
(g) The method can make a sense only to followers and challengers. It is not applicable to a market leader.
d. Affordable or Fund Available Method:

This is, in real sense, not a method to set advertising budget. The method is based on the company’s capacity to
spend. It is based on the notion that a company should spend on advertising as per its capacity. Company with a
sound financial position spends more on advertising and vice versa.
Under this method, budgetary allocation is made only after meeting all the expenses. Advertising budget is
treated as the residual decision. If fund is available, the company spends; otherwise the company has to manage
without advertising. Thus, a company’s capacity to afford is the main criterion.
Limitations:
(a) The method completely ignores the role or need of advertising in the competitive market environment.
(b) In long run, it leads to uncertain planning as there is no guarantee that the company will spend for
advertising.
(c) Except company financial position, other factors like company’s need for advertising, consumer base,
competition, and so forth are ignored.
(d) This method only guides that a company should not spend beyond its capacity.
(e) This is not a method in real sense.
(f) There is possibility of bias in deciding advertising amount.
e. Expert Opinion Method:

Many marketing firms follow this method. Both internal and external experts are asked to estimate the amount
to be spent for advertisement for a given period. Experts, on the basis of the rich experience on the area, can
determine objectively the amount for advertising. Experts supply their estimate individually or jointly.
Along with the estimates, they also underline certain assumptions. Internal experts involve company’s
executives, such as general manager, marketing manager, advertising manager, sales manager, distribution
manager, etc.
Whereas external experts involve marketing consultants, dealers, suppliers, distributors, trade associations,
advertising agencies, and other professionals related to the field. Marketing consultants and advertising agencies
provide such services on professional basis.
Advertising budget recommended by external experts is more neutral (bias-free) and, hence, is reliable. Experts
considers overall situation and give their opinion on how much a company should spend. Mostly, the experts
consider all the relevant factors related to advertising while deciding on advertising budget.
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Merits:
Expert opinion method offers following merits:
(a) The estimates tend to be more balanced as various executives and experts are involved.
(b) The budget is more accurate and realistic because the internal executives are well aware of company’s
strengths and weaknesses.
(c) It is the only option when a company is new, having no past experience.
(d) External experts tend to be more neutral as they are external to organisation
Demerits:
However, the user must be aware of following possible demerits:
(a) It is not a scientific method. Personal value, experience, and attitudes play vital role.
(b) It is difficult to fix responsibility of the final estimates as many experts contribute to budget estimates.
(c) External experts are not fully aware of the company’s marketing situations.
(d) When more internal experts are involved, it may deteriorate relation due to possible conflicts or lack of
consensus.
(e) Possibility of prejudice or bias cannot be ignored.
(f) All opinions, right or wrong, are given equal importance
f. Other Methods:
There are some other methods used for setting advertising budget.
They have been listed below:

i. Arbitrary Allocation Method
ii. Profit Maximization Approach
iii. Incremental Method
iv. Sales Force Opinion Method, etc.
4. Creating an Advertising Message
A function of the product's features, uses and benefits. Must be aware of the characteristics of target
market, different message to different target market.
5. Developing a Media Plan
Sets forth the exact media vehicles to be used and dates and times of ads. Effectiveness of plan
determines how many people in the advertiser's target will be exposed to the message. Need to select
the media to be used and dates and times ads appear.
Various Media
o TV Channels
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o Radio
o Magazines, Lead time considerations, also pass along rate, subscription plus news agent sales.
o Newspapers, Local vs. national
o Direct Mail, Evolution of Database marketing.
o Outdoor, Billboards Transit...City Buses, Blimps...At Events
o Placed-Based, Schools, also sponsor educational programs, Supermarkets, Health Clubs
o Electronic, Need to select general media, IE Newspapers, then subclass, IE Philadelphia
Inquirer.
6. Evaluating the effectiveness of the campaign
Measure the achievement of the objectives, assessing the effectiveness of the copy etc., and the media.
Publicity
Publicity is mention in the media. Organizations usually have little control over the message in the media, at
least, not as they do in advertising. Regarding publicity, reporters and writers decide what will be said.At no
charge (most of the time) Part of public relations, a broad set of communication activities used to create and
maintain favourable relations between the organization and its publics:
o customers
o employees
o stockholders
o government officials
o society in general
Need to cultivate effective media relations, and targeting publicity to key markets are viewed as the
highest priorities.
Public relations
Public relations include ongoing activities to ensure the overall company has a strong public image. Public
relations activities include helping the public to understand the company and its products. Often, public relations
are conducted through the media that is, newspapers, television, magazines, etc.
Factors to consider in selecting Promotional Tools
Budget Available. For many companies, the budget available to market a product determines what elements of
the promotion mix are utilized. The budget affects a promotion’s reach (number of people exposed to the
message) and frequency (how often people are exposed).
Stage in the product life cycle. The stage in the product life cycle also affects the type and amount of
promotion used. Products in the introductory stages typically need a lot more promotional dollars to create
awareness in the marketplace. Consumers and businesses won’t buy a product if they do not know about it.
More communication is needed in the beginning of the product life cycle to build awareness and trial.
Type of product and type of purchase decision. Different products also require different types of promotion.
Very technical products and very expensive products (high involvement) often need professional selling so the
customer understands how the product operates and its different features. By contrast, advertising is often relied
upon to sell convenience goods and products purchased routinely (low involvement) since customers are
familiar with the products and they spend relatively little time making purchase decisions.
Target market characteristics and consumers’ readiness to purchase. In order to select the best methods to
reach different target markets, organizations need to know what types of media different targets use, how often
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they make purchases, where they make purchases, and what their readiness to purchase is as well as
characteristics such as age, gender, and lifestyle. Some people are early adopters and want to try new things as
soon as they are available, and other groups wait until products have been on the market for a while. Some
consumers might not have the money to purchase different products, although they will need the product later.
Consumers’ preferences for various media. In terms of target markets, college-aged students may prefer
online, cell phone, mobile marketing, and social media more than older consumers do. Media preferences have
been researched extensively by academics, marketing research companies, and companies to find out how
consumers want to be reached.
Regulations, competitors, and environmental factors. Regulations can affect the type of promotion used..
The hope is that by advertising late at night, young children do not see the advertisements. The strength of the
economy can have an impact as well. In a weak economy, some organizations use more sales promotions such
as coupons to get consumers into their stores. The risk is that consumers may begin to expect coupons and not
want to buy items without a special promotion.
Availability of media. Organizations must also plan their promotions based on availability of media. Magazines
tend to have a longer lead time, so companies must plan far in advance for some magazines. By contrast,
because of the number of radio stations and the nature of the medium, organizations can often place radio
commercials the same day they want them to be aired. Social media and online media may be immediate, but
users must be careful about what they post and their privacy.
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SERVICES MARKETING
Service industries are quite varied. The government sector, employment services, hospitals, loan agencies,
military services, police and fire departments, post office, regulatory agencies, and schools, is in the service
business. The private non-profit sector, with its museums, charities, churches, colleges, foundations, and
hospitals, is in the service business. A good part of the business sector, with its airlines, banks, hotels, insurance
companies, Internet service providers, law firms, management consulting firms, medical practices, motion-
picture companies, plumbing-repair companies, real estate firms, and Web-based services, is in the service
business. Many workers in the manufacturing sector, such as computer operators, accountants, and legal staff,
are really service providers.
DESIGNING AND MANAGING SERVICES

A service 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. Its production may or may not be tied to a physical product. Services such
as banking and other financial services are a mainstay of the Internet. Five categories of an offering’s service
mix can be distinguished:
1. Pure tangible good: The offering is a tangible good such as soap; no services accompany the
product.
2. Tangible good with accompanying services: The offering consists of a tangible good
accompanied by one or more services. General Motors, for example, offers repairs, maintenance, warranty
fulfilment, and other services along with its cars and trucks.
3. Hybrid: The offering consists of equal parts of goods and services. For example, people patronize
restaurants for both food and service
4. Major Service with accompanying minor goods and services: The offering
consists of a major service along with additional services or supporting goods. For example, airline passengers
are buying transportation service, but they get food and drinks, as well.
5. Pure service: The offering consists primarily of a service; examples include baby-sitting and
psychotherapy
Characteristics of Services and Their Marketing

Implications
Services have four major characteristics that greatly affect the design of marketing programs: intangibility,
inseparability, variability, and perishability.
1. Intangibility
Services are intangible. Unlike physical products, they cannot be seen, tasted, felt, heard, or smelled before they
are bought. The person who is getting a face lift cannot see the exact results before the purchase, just as the
patient in the psychiatrist’s office cannot know the exact outcome before treatment. To reduce uncertainty,
buyers will look for signs or evidence of the service quality. They will draw inferences about quality from the
place, people, equipment, communication material, symbols, and price that they see. Therefore, the service
provider’s task is to “manage the evidence,” to “tangibilize the intangible.”
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2. Inseparability
Services are typically produced and consumed simultaneously, unlike physical goods, which are manufactured,
put into inventory, distributed through resellers, and consumed later. If a person renders the service, then the
provider is part of the service. Because the client is also present as the service is produced, provider-client
interaction is a special feature of services marketing—both provider and client affect the outcome. Often, buyers
of services have strong provider preferences. Several strategies exist for getting around this limitation. One is
higher pricing in line with the provider’s limited time. Another is having the provider work with larger groups or
work faster. A third alternative is to train more service providers and build up client confidence, as H&R Block
has done with its national network of trained tax consultants.
3. Variability
Because services depend on who provides them and when and where they are provided, they are highly variable.
Knowing this, service firms can take three steps toward quality control. The first is recruiting the right service
employees and providing them with excellent training. This is crucial regardless of whether employees are
highly skilled professionals or low-skilled workers.
The second step is standardizing the service-performance process throughout the organization. Companies can
do this by preparing a flowchart that depicts every service event and process. Using this flowchart, management
can identify potential fail points and then plan improvements.
The third step— Is monitoring customer satisfaction through suggestion and complaint systems, customer
surveys.
4. Perishability
Services cannot be stored; once an airplane takes off or a movie starts, any unsold seats cannot be held for future
sale. Perishability is not a problem when demand for a service is steady, but fluctuating demand can cause
problems.
MARKETING STRATEGIES FOR SERVICE FIRMS

In addition to the traditional four Ps of marketing, service providers must pay attention to three more Ps
suggested by Booms and Bitner for services marketing: people, physical evidence, and process. Because most
services are provided by people, the selection, training, and motivation of employees can make a huge
difference in customer satisfaction. Ideally, service employees should exhibit competence, a caring attitude,
responsiveness, initiative, problem-solving ability, and goodwill. Companies should also try to demonstrate their
service quality through physical evidence and presentation.
Strategies for Improving Demand and Supply Demand Strategies
 Use differential pricing to shift demand from peak to off-peak periods; movie theatres and car rental
firms do this by lowering prices during off-peak periods.
 Cultivate nonpeak demand to build sales during off-peak periods; hotels do this with their weekend
mini-vacation packages.
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 Develop complementary services to provide alternatives for customers during peak periods; many
banks do this by providing drop-off boxes for deposits and payments.
 Install reservation systems to better manage demand levels; airlines, hotels, and physicians employ
such systems extensively.
 Hire part-time employees to meet peak demand; restaurants, stores, and Web-based businesses often
bring in temporary staffers to help out during holidays and other peak periods.
 Introduce peak-time efficiency routines to keep productivity high during periods of high demand;
paramedics often assist physicians during busy periods.
 Increase consumer participation to speed transactions; this is one reason why supermarkets are
experimenting with self-service checkouts where shoppers scan and bag their own groceries.
 Plan facilities for future expansion to increase supply; an amusement park can buy surrounding land
for later development as demand increases.
 Share services with other providers to help manage demand; hospitals can do this by sharing medical-
equipment purchases and scheduling.
Customers view a service as fairly homogeneous; they care less about the provider than the price. The
alternative to price competition in services marketing is to develop a differentiated offer, delivery, or
image.
➤ Offer. The service offering can include innovative features. The customer expects the primary service
package; to this secondary service features can be added. A hotel can offer hotel rooms (primary service
package) with connections for computers, fax machines, and e-mail (secondary service features). Although
most service innovations are easily copied, the company that regularly introduces new features will gain a
succession of temporary competitive advantages and earn a reputation for innovation
➤ Delivery. A service company can hire and train better people to deliver its service. It can develop a
more attractive physical environment in which to deliver the service. Or it can design a superior delivery
process). Delivery thus enhances the firm’s differentiation.
➤ Image. Service companies can also differentiate their image through symbols and branding.
Differentiation through branding is a specialty of the charge-card division of American Express.
Managing Service Quality
Service firm to succeed is by delivering consistently higher-quality service than that of its competitors and
by exceeding customers’ expectations. These expectations are formed by the firm’s past experiences, word
of mouth, and advertising. After receiving the service, customers compare the perceived service with the
expected service. If the perceived service falls below the expected service, customers lose interest in the
provider. If the perceived service meets or exceeds their expectations, they are apt to use the provider
again.
Companies that is effective at resolving complaints:
➤ Develop hiring criteria and training programs that take into account employees’ service-recovery role.
➤ Develop guidelines for service recovery that focus on achieving fairness and customer satisfaction.
➤ Remove barriers that make it difficult for customers to complain, while developing effective response
systems..
➤ Maintain customer and product databases that let the company analyze types and sources of complaints
and adjust its policies accordingly.
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INTERNATIONALMARKETING
International Marketing can be defined as exchange of goods and services between different national markets
involving buyers and sellers.
According to the American Marketing Association, “International Marketing is the multi-national process of
planning and executing the conception, prices, promotion and distribution of ideal goods and services to create
exchanges that satisfy the individual and organizational objectives.”
REASONS FOR GOING INTERNATIONAL
i. Domestic markets are saturated and there is pressure to raise sales and profits. Most companies
have very ambitious sales and profit targets. If such figures have to be realized, companies have to move out of
their domestic markets.
ii. Domestic markets are small. Companies which have ambitions to become big will have to look
for bigger markets outside their boundaries.
iii. Domestic markets are growing slowly. Most companies are no longer content to grow
incrementally. If such companies have to achieve high growth rates, they have to obtain some of their sales from
international markets.
iv. Competition
v.First-mover Advantage
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The first-mover advantage is basically getting into a market and gaining all the benefits of being first. For
instance, you’ll able to quickly gain traction in a new market by being first. Another benefit is you’ll get early
adopters on board easier since there’s no one else competing for their attention.
CONCEPTS OF INTERNATIONAL MARKETING

Domestic Marketing: Domestic Marketing is concerned with marketing practices within the marketer’s
home country.
Foreign Marketing: It refers to domestic marketing within the foreign country.
International Marketing: It is concerned with the micro aspects of a market and takes the company as a
unit of analysis.
International Trade: International Trade is concerned with flow of goods and services between the
countries
.
Global Marketing: Global Marketing consider the world as a whole as the theatre of operation.
WAYS OF ENTERING THE INTERNATIONAL MARKET
1. Exporting
Exporting is perhaps the first step for a company to go global. It is the first of the attempts to understand the
international environment develop markets abroad.
Exporting can be direct or indirect.
Direct exporting the company sells to a customer in another country. This is the most common approach
employed by companies taking their first international step because the risks of financial loss can be minimized.
Indirect exporting usually means that the company sells to a buyer in the home country who in turn exports
the product
2. Foreign investment
It refers to investment in foreign country. These facilities are either wholly owned or foreign partnership firms.
3. Mergers and acquisitions

In merger, two companies come together but only one survives and the other goes out of existence as it is
merged in the other company. While in acquisition, one company (acquirer) gets control over the other company
(acquired) at the willingness of each of the companies.
4. Joint ventures
Joint Ventures as a means of foreign market entry have accelerated sharply .Joint ventures refer to joining with
foreign companies to produce or market the products or services.
5. Strategic alliance:
A Strategic International Alliance (SIA) is a business relationship established by two or more companies to
cooperate out of mutual need and to share risk in achieving a common objective.
It is an agreement between companies that is of strategic importance to one or both companies’ competitive
viability. Strategy refers to the means to fulfil company’s objectives. On the basis of structure, strategic alliances
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can be classified into equity based and non- equity based.
Non-equity based alliances such as licensing agreements, marketing agreements, technology transfer agreements
etc. are found to be more dynamic, constructive and strategic. The scope of strategic alliance ranges from
Research and Development to distribution.
6. Licensing and franchising:

A means of establishing a foothold in foreign markets without large capital outlays is licensing. It is a favourite
strategy for small and medium sized companies. International licensing helps a firm from one country (licensor)
to permit another firm in a foreign country (licensee) to use its intellectual property such as patents, trademarks,
copyrights, technology, technical know-how, marketing skill etc. in return for royal payments. Royal payments
or license fee is regulated in most of the countries.
The advantages of licensing are most apparent when: capital is scarce, import restrictions forbid other means of
entry, a country is sensitive to foreign ownership, or it is necessary to protect trademarks and patents against
cancellation of non-use.
An important risk of licensing is that the licensor may give birth to his own competitor i.e. the licensee can
become a competitor after the expiry of the licensing agreement.
TARIFFS
A tariff is a tax. It adds to the cost of imported goods and is one of several trade policies that a country can
enact.
Functions of tariffs
1. Protecting Consumers
A government may levy a tariff on products that it feels could endanger its population. For example, South
Korea may place a tariff on imported beef from the United States if it thinks that the goods could be tainted with
disease.
2. Infant Industries
The use of tariffs to protect infant industries can be seen by the Import Substitution Industrialization (ISI)
strategy employed by many developing nations. The government of a developing economy will levy tariffs on
imported goods in industries in which it wants to foster growth. This increases the prices of imported goods and
creates a domestic market for domestically produced goods, while protecting those industries from being forced
out by more competitive pricing. It decreases unemployment and allows developing countries to shift from
agricultural products to finished goods.
3. National Security
Barriers are also employed by developed countries to protect certain industries that are deemed strategically
important, such as those supporting national security. Defence industries are often viewed as vital to state
interests, and often enjoy significant levels of protection.
4. Retaliation
Countries may also set tariffs as a retaliation technique if they think that a trading partner has not played by the
rules.. Retaliation can also be employed if a trading partner goes against the government's foreign policy
objectives.
5. Protecting Domestic Employment

The levying of tariffs is often highly politicized. The possibility of increased competition from imported goods
can threaten domestic industries. These domestic companies may fire workers or shift production abroad to cut
costs, which means higher unemployment and a less happy electorate. The unemployment argument often shifts
to domestic industries complaining about cheap foreign labour, and how poor working conditions and lack of
regulation allow foreign companies to produce goods more cheaply
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Types of Tariffs
1. Specific Duty: Specific duty is based on the physical characteristics of goods. When a fixed sum of money,
keeping in view the weight or measurement of a commodity, is levied as tariff, it is known as specific duty.
2. Ad valorem Duty: These duties are imposed “according to value.” When a fixed percent of value of a
commodity is added as a tariff it is known as ad valorem duty. It ignores the consideration of weight, size or
volume of commodity.
The imposition of ad valorem duty is more justified in case of those goods whose values cannot be determined
on the basis of their physical and chemical characteristics, such as costly works of art, rare manuscripts, etc. In
practice, this type of duty is mostly levied on majority of items.
3. Combined or Compound Duty: It is a combination of the specific duty and ad valorem duty on a single
product. For instance, there can be a combined duty when 10% of value (ad valorem) and Re 1/- on every meter
of cloth is charged as duty. Thus, in this case, both duties are charged together.
4. Countervailing Duty: It is imposed on certain imports where products are subsidised by exporting
governments. As a result of government subsidy, imports become more cheaper than domestic goods. To nullify
the effect of subsidy, this duty is imposed in addition to normal duties.
5. Revenue Tariff: A tariff which is designed to provide revenue to the home government is called revenue
tariff. Generally, a tariff is imposed with a view of earning revenue by imposing duty on consumer goods,
particularly, on luxury goods whose demand from the rich is inelastic.
6. Anti-dumping Duty: At times, exporters attempt to capture foreign markets by selling goods at rock-
bottom prices, such practice is called dumping. As a result of dumping, domestic industries find it difficult to
compete with imported goods. To offset anti-dumping effects, duties are levied in addition to normal duties.
7. Protective Tariff: In order to protect domestic industries from stiff competition of imported goods,
protective tariff is levied on imports. Normally, a very high duty is imposed, so as to either discourage imports
or to make the imports more expensive as that of domestic products.
NON-TARIFF BARRIERS TO TRADE
Non-Tariff Barriers (NTBs) refer to restrictions that result from prohibitions, conditions, or specific market
requirements that make importation or exportation of products difficult and/or costly. NTBs also include
unjustified and/or improper application of Non-Tariff Measures.NTBs arise from different measures taken
by governments and authorities in the form of government laws, regulations, policies, conditions,
restrictions or specific requirements, and private sector business practices, or prohibitions that protect the
domestic industries from foreign competition.
Types of non-tariff barriers
Licenses
A license is granted to a business by the government, and allows the business to import a certain type of good
into the country. For example, there could be a restriction on imported cheese, and licenses would be granted to
certain companies allowing them to act as importers. This creates a restriction on competition, and increases
prices faced by consumers.
Import Quotas
An import quota is a restriction placed on the amount of a particular good that can be imported. This sort of
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barrier is often associated with the issuance of licenses. For example, a country may place a quota on the volume
of imported citrus fruit that is allowed.
Voluntary Export Restraints (VER)

This type of trade barrier is "voluntary" in that it is created by the exporting country rather than the importing
one. A voluntary export restraint is usually levied at the behest of the importing country, and could be
accompanied by a reciprocal VER. For example, Brazil could place a VER on the exportation of sugar to
Canada, based on a request by Canada.
Local Content Requirement

Instead of placing a quota on the number of goods that can be imported, the government can require that a
certain percentage of a good be made domestically. The restriction can be a percentage of the good itself, or a
percentage of the value of the good. For example, a restriction on the import of computers might say that 25% of
the pieces used to make the computer are made domestically, or can say that 15% of the value of the good must
come from domestically produced components.
INTERNATIONAL ENVIRONMENT
1.Political Environment: The International Marketing activities take place within the political environment of
national political institutions such as the government, political executive, legislative and the judiciary.Any
company doing business overseas should Carefully study the political environment of the country it intends to
operate and analyze issues such as the attitude of the political party in power toward
(a) Sovereignty,
(b) Political Risk,
(c) Taxes,
(d) Threat of Equity dilution and
(e) Expropriation.
a. Sovereignty: The sovereign political power of a country in a command economy may determine every aspect
of economic life of the people. In contrast, in a market economy, the government may only play the role of a
facilitator and a regulator.
b. Political Risk: There is always a political risk involved in making investments both within and without the
country. The element of risk and its severity is relatively high in foreign countries. More objectively, the extent
of political risk depends upon the political stability of the host country. An unstable country is fraught with
investment risks. A country needs to be stable both internally and externally. Frequent changes in the
government and attendant changes in the economic policy of the government will increase the element of
uncertainty and adversely effect upon a company's ability to operate effectively in a foreign country.
Investments in highly destabilized countries like Afghanistan and Iraq may be very attractive economically
speaking but the political risks involved are overwhelming.
c. Taxes: A company which is geographically diversified needs to take care of the tax laws of the countries in
which it operates. Companies, generally minimizes their tax liability by shifting the location of their income.
One method of reducing tax liability is called earnings stripping. Foreign companies reduce earnings by' making
loans to their affiliates in a country rather than making direct foreign investment. The subsidiary company which
takes the loan can deduct the interest it pays on such loans and reduce its tax burden.
d. Equity Stripping and Dilution of Control: In less developed countries, there is a general tendency to exert
political pressure for governmental control of foreign companies. Host-nation governments may attempt to
control ownership of foreign-owned companies operating in their Countries.
e. Expropriation: Expropriation is the ultimate threat that a government can pose toward a foreign company.
Expropriation refers to governmental action to dispossess a company investor. Generally, compensation is
provided to foreign investors. However, quite often, the compensation is not prompt, adequate and effective. If
there is no compensation then the act of expropriation would be termed as confiscation. When severe limitations
are imposed the activities of a foreign company, it is termed as creeping expropriation. Such restriction may
include limitations on repatriation of profits, dividends, royalties, local content etc, quotas for hiring local
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nationals, price controls etc. All these restriction limitations adversely affects the profitability of foreign
investment.
2. International Social & Cultural Environment: The social and cultural environment encompassing the
religious aspects; language; customs; traditions and beliefs; tastes and preferences; social stratification; social
institutions; buying and consumption habits etc are all very important factors for business. What is liked by
people of one culture may not be liked by those of some other culture. One of the most important reasons for the
failure of a number of companies in foreign markets is their failure to understand the cultural environment of
these markets and to suitably formulate their business strategies.
Many companies modify their products and/or promotion strategies to suit the tastes and preferences or other
characteristics of the population of the different countries. Significant differences in the tastes and preferences
may exist even within the same country, particularly when the country is very vast, populous and multi-cultural
like India.
For a business to be successful, its strategy should be the one that is appropriate in the socio-cultural
environment. The marketing mix will have to be so designed as best to suit the environmental characteristics of
the market. In Thailand, Helene Curtis switched to black shampoo because Thai women felt that it made their
hair look glossier.
Even when people of different cultures use the same basic product, the mode of consumption, conditions of use,
purpose of use or the perceptions of the product attributes may vary so much so that the product attributes,
method of presentation, positioning, or method of promoting the product may have to be varied to suit the
characteristics of different markets.
The differences in language sometime pose a serious problem, even necessitating a change in the brand name.
For instance, Chevrolet’s brand name Nova in Spanish means “it doesn’t go”. In some languages, Pepsi-Cola’s
slogan “come alive” translates as “come out of the grave”.
The values and beliefs associated with colour vary significantly between different cultures. White indicates
death and mourning in China and Korea; but in some countries, it expresses happiness and is the colour of the
bridal dress.
While dealing with the social environment, we must also consider the social environment of the business which
encompasses its social responsibility and the alertness or vigilance of the consumers and of society at large.
3. Economic Environment: There are of course the usual economic indicators that one needs to be aware of
such as inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of
consumers to spend savings or to use credit, as well as many others. International marketers equally need to be
aware of economic factors when undertaking marketing decisions
Population figures provide a basic indication of the attractiveness of the market in terms of size and potential
growth by looking at life expectancy, age distribution and population growth. They allow marketers to identify
the segments and the geographical areas they should target Also, income levels need to be taken into account as
they provide an indication of the purchasing power of the market and allow companies to adapt their marketing
concepts accordingly.
A packaged goods company, for example, brought out a more economic version of its product in countries that
have lower income levels by using cheaper raw materials. Nonetheless, marketers should not greatly rely on this
indicator as there are certain types of products that because of the high value they create for the consumer are
not affected by income levels. In China, for example, due to being a good upgrade for bicycles and a cheap
alternative for cars, sales of motorcycles are high in the country despite the fact that the price of the product
represents a high proportion of salary Besides, marketers need to consider consumption pattern which allow
them to identify the proportion of income that consumers spend on necessities, including food and rent, and
consequently the proportion that is left to spend on less important areas of consumption, such as household
goods and leisure.
Given that purchases in these areas can be cancelled or postponed unexpectedly, companies can determine the
level of confidence in the market another important economical element is inflation as it strongly affects
consumers' buying habits and ability to buy. In markets with high inflation rates companies need to modify their
product making it less expensive to produce so that they can lower their prices to respond to customer needs and
sustain demand.
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In addition, marketers need to consider the availability and quality of local infrastructure. Transportation,
communication, and energy networks have an important effect on the company's functions. They also provide
an indication for the demand of industrial products and services .The fact that two billion people live without
electricity and that the access to a telephone is very limited in Asia, for example, informs industrial products and
services companies that there are important marketing opportunities for them there.
Furthermore, companies need to consider regional economic integrations as they can create both opportunities
and benefits, and threats and problems for them. The European Union, for example, provides many benefits to
companies operating within Europe, such as economies of scale thanks to the large single market.
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GAZA F PRINCIPLES OF MARKETING MODULE

(10)Financing function: ................................................................................................................. 12

Black box ........................................................................................................................................... 27

STRATEGIC PLANNING .......................................................................................................................... 48

Designing and managing services ..................................................................................................... 96

Type of organizations that use marketing.

Basic/core concepts of marketing

Reasons for Studying Marketing:

3. Marketing creates employment opportunities in the society.

GOALS OF MARKETING SYSTEM

Increase Consumer Satisfaction

Improve Life Quality

(3)Product development and management: product development is an essential function of

(6)Standardization and grading: the function of standardization is to establish specified

Evolution of Marketing Concept

1. The Production Concept

Distinctions between the Sales Concept and the Marketing Concept:

Steps in Marketing Process

Successful marketing implementation requires:

 Effective and efficient coordination of activities--who's doing what and by when

 Elimination of procrastination and no waiting should be allowed.

Micro environment / internal environment

 consumer markets: individuals purchasing for private final consumption

 changes in disposable income

Consumer Confidence-Consumer confidence is an economic indicator that measures overall consumer

 they start entirely new industries

 fiscal policy (taxation)

Society and culture

The focus of the current social and cultural environments is on:

 the changing role of women

Marketing Information Systems

Assessing information needs

(a) Internal Company Records :

Sales Information Systems

(b) Marketing Intelligence

 Reading books, newspapers and trade publications

(c) Marketing Research Need to probe beneath the superficial symptoms.

Steps for Marketing Research

Sampling is the selecting of representative units from a total population

1. Random sampling, equal chance for each member of the population

(d) Marketing Decision Support Systems (MDSS) rely on simple systems

Distributing needed information

Consumer Buying Behaviour

Markers need to understand:

 Why consumers make the purchases that they make?

Environmental factors Buyer's black box

Economic Attitudes Problem recognition

Consumer buying roles

Stages of the Consumer Buying Process

Stages of the Consumer Buying Process

An individual can acquire information through any of the following sources:

5. Post-Purchase Evaluation-The purchase of the product is followed by post purchase evaluation.

Ways of reducing cognitive dissonance

 Look up to satisfied customers

Types of consumer buying behaviour are determined by:

The four type of consumer buying behaviour are:

 Routine Response/Programmed Behaviour--buying low involvement frequently purchased

Factors that Affect the Consumer Buying Decision Process

II. Social factors

Reference groups and membership groups :