LECTURE 1

1. THE NATURE AND IMPORTANCE OF MARKETING

Marketing
➢ Marketing is asking someone out on a date. Branding is the reason they
say yes. (Ren Jones)
➢ Marketing is like food, not medicine. (Lachlan Nicolson).
➢ Decisions made in marketing affect customers, members of the
company, and external collaborators. Together we must define the
market that the company is heading. Together they have to discover
what opportunities appear on the market (Kotler proposes to think it at
least 5 opportunities each year)
➢ (Ph. Kotler)

What is Marketing?
➢ Marketing is everyone’s business. Every person working for an
organization should understand the importance of marketing.
➢ „Marketing is the management process responsible for identifying,
anticipating and satisfying consumer requirements profitably”
➢ CIM (The Chartered Institute of Marketing)
➢ „Marketing is the process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to create
exchange and satisfy individual and organizational needs.” AMA
(American Marketing Association)

The Goal of Marketing is:

To attract new customers by promising superior value, and to keep current
customers by delivering satisfaction.
➢ Marketing, more than any other business function, deals with
customers.
➢ Creating customer value and satisfaction are at the very heart of
modern marketing thinking and practice.
➢ Some people believe that only large business organizations operating
in highly developed economies use marketing, but sound marketing is
critical to the success of every organization – whether large or small,
for profit or non – profit, domestic or global.
MARKETING CHALLENGES INTO THE NEW CENTURY
➢ THE INFORMANTION TECHNOLOGY BOOM
➢ RAPID GLOBALIZATION
➢ THE CHANGING WORLD ECONOMY
➢ THE CALL FOR MORE ETHICS AND SOCIAL
➢ RESPONSIBILITY
➢ DEMANDING CUSTOMERS
➢ PRODUCT LIFE CYCLE SHORTENING
➢ WORLDWIDE COMPETITIVE ENVIRONMENT
Marketing Defined
Many people think of marketing only as selling and advertising.
Selling and advertising are only the tip of the marketing iceberg.
Marketers act as the customers’ voice within the firm and marketers are
responsible for many more decisions than just advertising or sales:
-Analyze industries to identify emerging trends.
-Determine which national and international markets to enter or exit.
-Conduct research to understand consumer behavior.
-Design integrated marketing mixes – products, prices, channels of distribution,
and promotion programs.
To explain marketing definition, we examine the following important terms:
Needs, wants, and demands
Products and services
Value, satisfaction and quality
Exchange, transactions, and relationships

Needs, Wants, and Demands

Needs:
The most basic concept underlying marketing is that of human needs.
Human needs are states of felt deprivation.
Humans have many complex needs:
-Physical needs for food, clothing, warmth, and safety
-Social needs or belonging and affection
-Individual needs for knowledge and self–expression
Wants
Wants are the form taken by human needs as they are shaped by culture and
individual personality.
People have almost unlimited wants but limited resources.
They want to choose products that provide the most value and satisfaction for
their money.
For example, students need to relax after the first week of classes of the new
semester. Some students will go to sports activities, some will choose a party, and
some will go home for the weekend.

Demands
When backed by buying power, wants become demands.
Consumers view products as bundles of benefits and choose products that give
them the best bundle for their money.

Products and Services

Product:
-Anything that can be offered to a market to satisfy a need or want.
-The concept of the product is not limited to physical objects – anything capable
of satisfying a need can be called a product.
Services:
-In addition to tangible goods, products also include services, which are
activities or benefits offered for sale that are essentially intangible and do not
result in the ownership of anything.

Marketing implications: provision of tangible evidence and brand building.

Use of appropriate communication, symbols, messages, uniforms etc.

The Classification of Goods

Three major types of attributes clarify the difference between products and
services.
-Search attributes: aspects which can be assessed prior to purchase or
consumption – tangible.
-Experience attributes: aspects that can only be assessed after consumption –
hybrid.
-Credence attributes: consumers lack the information necessary to make
evaluations even after consumption - intangible.

The marketing triangle

„Marketing is about promises made and promises kept to customers. A strategic
framework visually reinforces the importance of people in the ability of firms to
keep their promises and succeed in building customer relationships”.
 Values, Satisfaction, and Quality
Values:
-Customer value is the difference between the values the customer gains from
owning and using a product and the costs of obtaining the products.
-Customers often do not judge product value and costs accurately or
objectively. They act on perceived value.
Satisfaction:
-Customer satisfaction depends on a product’s perceived performance in
delivering value relative to a buyer’s expectation.
-If the product’s performance falls short of the customer’s expectations, the
buyer is dissatisfied.
Quality:
-Customer satisfaction is closely linked to quality.
-Quality has a direct impact on product performance.
-Quality can be defined as “freedom from defects”.
-TQM programs designed to constantly improve the quality of products,
services, and marketing processes.

Exchange, Transactions, and Relationships

Exchange :
-The act of obtaining a desired object from someone by offering something in
return
Transaction :
-A trade between two parties that involves at least two things of value, agreed–
upon conditions a time of the agreement, and a place of agreement.
Relationship marketing :
-The process of creating, maintaining, and enhancing strong, value-laden
relationships with customers and other stakeholders.
Why it’s Important
Effective marketing puts the products in the hands of its targeted customers
 LECTURE 2
What is the scope of marketing?
Market – parameters
▪ size of market
▪ volume of market
▪ capacity of market

Size of market
Definition: The size of the market refers to the total potential demand for a
product or service within a specific geographic area, industry, or customer
segment.
Usage: It is often used to understand the overall market opportunity for a
business. It represents the total number of potential customers or the total
potential revenue that can be generated in a given market.
Example: If you are considering entering the smartphone market in a particular country,
the size of the market would represent the total number of people in that country who
could potentially buy a smartphone.

Market size units:

▪ people
▪ household
▪ manufacturers of products or using certain technologies
▪ used machines or other devices generating demand for the product.

Volume of market
Definition: The volume of the market refers to the actual quantity of goods or
services that are bought and sold within a specific market during a specific
period.
Usage: It is used to measure the actual consumption or sales activity in a
market. It reflects the total units or value of products or services exchanged
within the market.
Example: If you are a manufacturer of smartphones and you sell 100,000 smartphones
in a particular country in a year, the volume of the market for your smartphones in that
country is 100,000 units.

Capacity of market
Definition: Capacity typically refers to the maximum amount of production or
output that a business or facility can achieve in a given period under normal
operating conditions.
Usage: It is often used in manufacturing or production contexts to determine the
maximum potential output. Capacity can be measured in terms of units
produced, services delivered, or any relevant metric.
Example: A car manufacturing plant may have a production capacity of 1,000 cars per
day, meaning it can produce up to 1,000 cars daily if all resources and processes are
operating at full efficiency.

In summary,
the "size of the market" is a measure of the total potential demand, the "volume
of the market" represents the actual quantity of goods or services exchanged,
and "capacity" pertains to the maximum production or output capability.
These concepts are used in different contexts and are important for businesses
to understand when assessing market opportunities and managing their
operations.

With the emergence of marketing, we also witness the emergence of

new economy characterized by the following:
-A substantial increase in purchasing power.
-A greater variety of available goods and services.
-A great amount of information about everything.
-A great ease in interacting and placing orders.
-An ability to compare notes on products and services.

Today’s companies also have new capabilities as given below:

-Ability to operate powerful information and sales channels.
-Ability to collect fuller and richer information about markets, customers,
prospects, and competitors.
-Faster internal communication amongst employees.
-Two-way communication with customers and prospects.
-Send ads, coupons, samples, and information to customers.
-Customize offerings and services to individual customers.
-Improved, purchasing, recruiting, and training.
-Improved external communication.
-Improved logistics and service quality.
 Branding:
Branding of products is adopted by many reputed enterprises to make their
products popular among their customer and for many other benefits.
Marketing manager must take decision regarding the branding policy,
procedures and implementation programs.
Branding benefits:

50% of people follow 1 to 4 brands on social media, 26% follow 5 to 9 brands,

22% follow 10 or more brands, and 3% follow no brands.
For brand they are loyal to, consumer are willing to: 60% recommended, 52,3%
join loyalty program and 39,4% spend more.
-Build brand loyalty on shared values with your consumers. It is not the number
of interactions a buyer has with your brand, but the quality and relatability of the
interaction.
-90% of consumers expect their experience to be consistent across all channels
and devices used to interact with brands.
 Brand process Building the foundation

What is a brand?
A brand is a personality that identifies a product, service or company, including
a name, term, sign, symbol or design. A brand also represents the relationships
between customers, staff, partners, investors, and so forth.
A brand does not exist within a company or organization.
A brand exists in the minds of your customers. A brand is the sum of
impressions a customer has, based on every interaction they have had with
you, your company, and your products.

Good logo
Great logos are the perfect tools for attracting audiences to brands and creating
memorable impressions. They use design to differentiate products and services
from their competition and communicate ownership of a brand’s stake in the
marketplace.
Make it simple.
Design for an audience.
Make it memorable.
Make it timeless.
Make it versatile and scalable.
Use a quality typeface.
Be strategic with color.
It should look great in black and white.
PARTS OF LOGO

Logo design process

 LECTURE 3
Characteristics of services and their marketing
implications
What is a service ?
1/6
„A SERVICE IS AN ACT OR PERFORMANCE THAT ONE PARTY
CAN OFFER TO ANOTHER THAT IS ESSENTIALLY INTANGIBLE
AND DOES NOT RESULT IN ANY OWNERSHIP OF ANYTHING.
ITS PRODUCTION MAY OR MAY NOT BE TIED TO A PHYSICAL
PRODUCT”.
2/6
It is the part of the product or the full product for which the customer
is willing to see value and pay for it.
3/6
„Activities, benefits and satisfactions which are offered for sale or
are provided in connections with the sale of goods.”
The American Marketing Association
4/6
„There are no such thing as service industries. There are only
industries whose service components are greater or less than those
of other industries. Everybody is in service.”
Theodore Levitt
5/6
• It is intangible.
• It does not result in ownership.
• It may or may not be attached with a physical product
6/6
A service is a product in the sense that it represents a bundle of
benefits that can satisfy customer wants and needs, yet it does so
without physical form.
 SERVICE DIFFERENTATION
DISTINGUISH PHYSICAL PRODUCT BY ADDING SPECIAL SERVICE

✓ Easy Order ✓ Delivery ✓ Instalation ✓ Training ✓ Consulting ✓ Service And

Repair
EASY ORDER:
-Website (online) -Apps -Take away -Special terminal -Individual account

DELIVERY:
-ASAP (time)
-Monitoring/ Shipment tracking
-Contact with the supplier
-compensation for a delay
INSTALATION
TRAINING/ CONSULTING.
Every McDonald's franchisee must successfully complete a training programme
-This takes around nine months fulltime to complete.
-Franchise candidates are not charged for the training but must fund
themselves during this period.
-Each franchisee has the constant support of a McDonald's Field Consultant
who is always available for help and advice
TRAINING/CONSULTING
►Workshops
►Instuction
►Q&A session
►Building a relations
►Delivering the promise
SERVICE AND REPAIR
-E-support
-Control/uncontroll
ed returns
-Technical support
-Customer satisfaction

Importance of Services
✓Three-fourths of the European labour force is employed in service industries.

✓From 1986 to 2022, mostly all new jobs will be in the service industries.

The 5 I’s
✓ (In) Tangibility

✓ Inseparability
✓ Inconsistency

✓ Inventory

✓ Inability to own

(In) Tangibility
► Service is an experience, not a thing,
► Enhanced perceived risk when a customer buys a service.
►Difficult to sample and to evalute, „U can’t touch this”.
► Services cannot be experienced before purchase
Lack of trial means higher consumer risk
Services cannot be stored
Services cannot be protected through patents
Hard to explain and display services if client can’t see them
Prices are diffoicult to set - depends on customers expectations
Inability to physically possess
Difficult to evaluate … providing guarantees
Difficult to advertise … using personal selling
Difficult to price
Difficult to distribute… promoting availability
Difficult to store ... offering a trial basis
Inseparability
►Production and consumption occurs simultaneously
►Consumer participation required in production of service
► (in some cases) service production can begin in presence of customer,
►Role performance in service delivery

✓ Services cannot be separated from their providers

▪ Many people involved in delivering a service
▪ Service provider must be physically present to deliver service
▪ Customer is involved in the production process e.g. taking medicines
▪ Involvement of other customers in the production process eg. smokers
violating space of nonsmokers in restaurants
▪ Mass production of services is hard to do
▪ Performing the service & consumption of the service
- happens at the same time (eating in restaurant,
staying at hotel)
▪ Difficult to distribute
▪ Selection, hiring & training is important

Inconsistency
► Variability/heterogeneity,
►Quality of services depends on who provides them & when, where & how
► Match service to customer requirements,
► Standardisation of service is a challenge:
►Balance employee control and customer’s perceived needs,
►Time spent on service delivery will vary,
►Adaptation of service blue print,
► Need for applying quality control systems, e.g. using
a standardised franchising package
► Employee actions determine the quality of service,
► Service quality depends on many uncontrollable factors.
Inventory
► Degree of perishability,
► Increased the intangibility, lower opportunity to store service, increased
perishability,
►Services cannot be stored for later sale or use
►Services cannot be stored & used at a future time
► … A lost sale is lost revenue
► … Unused capacity is lost forever
►Services cannot be returned or resold (just like products)
►Demand fluctuates and changes, difficult to match demand and supply
► eg. Place in the restaurant at noon can not be stored to beused in the
evening
► Manage fluctuation in demand,
► Increase efficiency (reduce costs/ increase sales).

Strategies to manage:
Self service during busy periods,
Differential pricing,
Complementary services,
Reservation systems,
Part-time employees,
Peak-time efficiency,
Increased consumer participation,
Shared services,
Facilities for future expansion.
PROGRAMMES TO COMPENSATE FOR UNEVEN DEMAND
Nights rates, group and tour fares, family discounts, purchase super-saver,
last/first minute
Call-back reminders, family discount, packages
Weekend classes, adult education,
Inability to own.
► Does not result in transfer of title
►A service marketing lecture?
►A package tour?
►Renting a car?
►A life insurance policy (possession of a policy is not the core service, but the
security provided in case of illness or a fire at home).
 LECTURE 4
Overview of the services sector and classification of
services
Reasons for the growth in services industries

5 Economic Sectors - Primary, Secondary, Tertiary, Quaternary & Quinary

Primary: Extract, process, produce and package raw materials and basic foods
from the earth.
Secondary: Manufacture, process and construct fished goods by transforming
raw materials.
Tertiary: Services for the general population and businesses to acquire and use
finished goods.
Quaternary: Knowledge and skills for complex processing and handling of
information and environmental technology
Quinary: High-level economic and social decision making trough responsible
institutions.
Traditional Service Industries
✓ Business services

✓ Healthcare

✓ Hospitality industry

✓ Lodging industry

✓ Travel & Tourism industry

✓ Meeting and convention planning

Newer Service Industries

• Continuing Care Retirement
Communities
• Diet and Weight Reducing Centers
• Environmental Consulting
• Golf Courses, Country Clubs
• Hazardous Waste Collection
• Medical Centers
• Industrial Design Services
• Investment Banking and Securities
Dealing
• Management Consulting Services
• Satellite Telecommunications
• Telemarketing Bureaus
• Temporary Help Services
Information and Communication Technology (ICT)
►The 20-year perspective over 40 countries offered by the report EU shows
how the ICT sector has tripled in value added in the last 20 years.
►As the computer industry expanded, the IT industry evolved. The ICT industry
is a result of that evolution; a convergence between the IT industry and the
telecommunications industry.
►The information industry has three major facets: content, computers, and
telecommunications. The ICT industry, which is made up of businesses that
focus on digital equipment, software, and communications technologies
ICT is one of the world’s largest economic sectors; revenues exceed those of
the oil and gas industry and the world’s airlines.
ICT Goods and Services
►ICT goods and services can be distributed locally, nationally, or
internationally, and are purchased by individuals and corporations.
►The terms outsourcing and offshoring are often used interchangeably, but
they are slightly different:
-Outsourcing is the use of components or labor from outside suppliers,
-Offshoring relocates business processes, manufacturing and customer
support, to lower-cost locations in other countries.

Classification of services:
By nature of service (1/2)
People Things
People processing Possession processing
a) Service directed at people’s bodies: b) Service directed at goods:

Mental stimulus processing Information processing

c) Service directed at people’s minds: d) Service directed at intangible assets:

Schmenner’s Service Process Matrix

Schmenner’s Service Process Matrix (Schmenner, 1986) classifies services by
the amount of in-person support required from employees to enable the service
to function, and by the amount of customer contact and/or customization the
service requires
 Classification of services
Service Industry companies are involved in retail, transport, distribution, food
services, as well as other service-dominated businesses. Also called service
sector, tertiary sector of industry

I.Business Services
They are mainly focused on earning a profit, where there is more
involvement of the common public in large number. Service involves a lot of
economic transaction.
Banking services

✓ The bank is a very important service provider in the economy. It acts as a

main regulatory authority.

✓ The banking services mainly involve in accepting the deposits and

granting a loan to both common people and industrialist at a stipulated rate
of interest.
✓ The bank plays a very important role in the circulation of money in
the economy.
Insurance Services

✓Insurance means covering the uncertain risk.

✓The insurance services target the customer for providing life and general
insurance with a minimal and reasonable rate of risk.

✓Insurance services play a very important role and control.

Various insurance products are suitable for different age risk covering,
general insurance include fire, theft loss, etc.
Consultancy Services

✓ In consultancy services, the expert provides certain suggestions or advice

to a client.

✓Nowadays consultancy services are growing at a faster rate.

Consultancy service is highly customized.
II. Trade Services
Trade services are related to tangible products and commodities. These
services associate the intangible factors of service with a tangible factor of
production.
These services are supportive in nature and enhance tangibility of the
product.
Retail services

✓ In retail services, retail outlet acts as a mandatory to sell all tangible

product. It adds a shopping area, proper billing, display, home delivery, and
telephonic order execution so that buyer gets motivated to buy the product.
Repair services

✓Repair service provides a customer with an aftersale service for e.g.

washing machines refrigerators, and TVs these services are well known for
after-sale service.
Maintenance services

✓ These are provided to the customer to avoid malfunctioning or problems in

production so to take care of these products like computer labs. The annual
contract is created between both parties such a service makes the tangible
product more unique and competitive.
III. Infrastructure Services

✓These services very important in the development of nation it also

stimulates economic and social services.
Communication services
In the last 10 years, communication services have been in demand these
services are provided through phone mobile, with innovative services.
✓ As communication plays a very important role in the day-to-day life of business it
has become essential for the common man also.

Transport services
✓ We use various services in our daily life. These are carried by rail, road,
water or air and made available to the public at their locality.

✓ Transport service helps to carry finished products or raw material from

one place to another. Similarly, you must have seen people traveling from
one place to another by airplanes, trains, buses, cars, scooters, rickshaws,
cycles, etc.

✓ This movement of goods and persons is very important in business. This

helps the industries to avail raw material to the place of manufacturing.
ROAD TRANSPORT

✓Roads are the means that connect one place to another on the surface of
the land.
ADVANTAGES

✓It is a relatively cheaper mode of transport as compared to other modes.

✓Perishable goods can be transported at a faster speed by road over a

short distance.

✓Flexible mode of transport as loading and unloading is possible at any

destination. It provides door-to-door service.

✓Helps people to travel and carry goods from one place to another
particularly in places which are not connected by other means of transport,
e.g. hilly areas.
LIMITATIONS

✓It is not economical for long distance transportation of goods due to their
limited carrying capacity.

✓Transportation of heavy goods or goods in bulk by road involves high cost.

✓It is affected by bad weather conditions like floods, rain, landslide etc.
 RAILWAY TRANSPORT
The most dependable mode of transport to carry goods and passengers
over a long distance. Besides long distance, local transport of passengers is
also provided by local trains or metro-trains in some metropolitan cities.
ADVANTAGES

✓It is a convenient mode of transport for traveling long distances.

✓ It is relatively faster than road transport.

✓ It is suitable for carrying heavy goods in large quantities over long

distances.

✓ Its operation is less affected by adverse weather conditions like rain,

floods, fog, etc.
LIMITATIONS

✓Availability is limited.

✓ It provides service according to the fixed time schedule and is not flexible
for loading or unloading of goods at any place.

✓ It involves heavy losses of life as well as goods in case of an accident.

WATER TRANSPORT
It refers to the movement of goods and passengers on waterways by using
various means like boats, steamers, launches, ships, etc. Which helps to
carry goods and passengers to different places, both within as well as
outside the country
ADVANTAGES

✓ It is a relatively economical mode of transport for bulky and heavy goods

✓ It is a safe mode of transport with respect to the occurrence of accidents.
✓ The cost of maintaining and constructing routes is very low as most of
them are naturally made.
LIMITATIONS

✓The depth and navigability of rivers and canals vary and thus affect
operations of transport vessels of different sizes.

✓It is a slow-moving mode of transport and therefore not suitable for

transport of perishable goods.

✓It is adversely affected by weather conditions.

✓sea transport requires a large investment in ships and their maintenance.

AIR TRANSPORT
This is the fastest mode of transport. It carries goods and passengers
through airways by using different air crafts like passenger aircraft, cargo
aircraft, helicopters, etc. Besides passengers, it generally carries goods that
are less bulky or are of high value. In hilly and mountainous areas where
another mode of transport is not feasible, air transport is an important as
well as convenient mode.
ADVANTAGES

✓It is the fastest mode of transport.

✓ It is very useful for transporting goods and passengers to the area which
are not accessible by any other means of transport.

✓ It is the most convenient mode of transport during natural calamities.

✓It provides vital support to the national security and defense

LIMITATIONS

✓It is a relatively more expensive mode of transport.

✓Not suitable for transporting heavy and bulky goods.

✓Affected by adverse weather conditions.

✓Is not suitable for short distance travel.

✓ In case of accidents, it results in heavy losses of goods, property, and life.

IV. SOCIAL & PERSONAL SERVICES

Due to high disposable income today social and personal services are in
boom today. Everybody wants to spend a quality time either on own or with
family so many organizations are in the field of social and personal services
Hotel industry

✓ The Hotel industry thrives largely due to the growth in tourism and travel.
Due to the increase in tourism with rising foreign and domestic tourists, the
hotel sector is bound to grow.
Hotels: These include business hotels, suite hotels, resort hotels, airport
hotels, extended stay hotels, apartment hotels, resort hotels, timeshare
hotels, casino hotels, convention centers, and conference centers.
 Tourism

✓ In its broadest sense, the tourism industry is the total of all businesses
that directly provide goods or services to facilitate business, pleasure, and
leisure activities away from the home environment;

✓ Five sectors of tourism: transportation, accommodation, food and

beverage, recreation and entertainment, and travel services.

✓ Tourism offers great opportunities for emerging economies and

developing countries. It creates jobs, strengthens the local economy,
contributes to local infrastructure development and can help to conserve the
natural environment and cultural assets and traditions, and to reduce
poverty and inequality
 LECTURE 5
How and why should you use market segmentation strategies?
Market Segmentation
Market Segmentation: division of the total market into smaller, relatively
homogeneous groups.
Segments: Members are different between segments but similar within.

The Importance of Market Segmentation

► Markets have a variety of product needs and preferences.
► Marketers can better define customer needs.
► Decision makers can define objectives and allocate resources more accurately

Segmentation – what for?

• Not all buyers are the same.
• From the group of buyers of a given product, it is possible to distinguish
their subgroups with similar characteristics or similar behavior.
• Subgroups are numerically smaller and more homogeneous than the group
as a whole.
• It is easier and more effective to act for a smaller subgroup than for large,
diverse groups of consumers.

Segmentation - definition
• Division of the market, according to a specific criterion, into homogeneous
groups of customers (market segments) that define the area of the
company's operation.
• Dividing the market into distinct groups of buyers that may require different
products or marketing instruments.
 Fundamentals of Consumer Markets Segmentation
All marketing strategies begin with:
Segmentation - the process of dividing the market according to specific
criteria into possibly uniform groups of buyers, the socalled market
segments requiring the use of different marketing strategies to influence
purchases made by buyers,
Choosing the target group - a set of units with specific characteristics (the
so-called target) to which we address our offer.
Positioning - identifying the benefits of the brand, differentiating and making
the product / service similar, the product line, the organization.
Segment features (a homogeneous group of buyers of a given product or service
distinguished from all buyers of a given product based on various criteria).

The market Segment should be

• MEASURED, that is, enable obtaining necessary information about
customer characteristics
• AVAILABLE for the company, enabling effective operation
• LARGE enough to justify the application of an individual action program
• DISTINCTIVE, which would justify the desirability of separating and
handling it
• STABLE, enabling service of the market in a sufficiently long period
 The main variables of market segmentation
GENERAL OBJECTIVE
• Geographical - region, size of the city or metropolitan area, population
density (urban/ rural area), climate,
• Demographic - age in years, family size, stage of the family life cycle,
gender, income, occupation, education, religion,
• Race - generation, nationality, social class,
SUBJECTIVE
• Psychographic - lifestyle, personality,
• Behavioral - opportunities, preferred benefits, user status, frequency of
use, loyalty, readiness phase, attitude towards the product.

Geographic segmentation
• Divides the market into different geographical unit such as nations, regions,
states, countries, or cities.
• McDonalds globally, sell burgers aimed at local markets, for example:
burgers are made from lamb in India rather than beef because of religious
issues. In Mexico, more chilli sauce is added and so on. Teriyaki burger in
Japan.

Rules for the selection of the target market

• Focus in an area that will give the company the opportunity to gain a
competitive advantage
• Choose a market area that the company knows
• Choose a market area that is consistent with the long-term business plans
of the company
• Focus on segments of the right size and growth potential
• Avoid segments associated with fierce competitive battles
• Carefully assess market entry barriers
• Ensure that the action for the selected market segment ensures profit

Buyer persona
• Fictional character that is created to represent a type of customer.
 • Personas are used in conjunction with segmentation, where the personas
represent the different segments.
• Personas are represented through their demographics, history, personality,
ambitions and goals, frustrations, preferred brands and other characteristics
that are important to the company.
• When the buyer is not the user/consumer important to create buyer
persona and user persona

WHY?
-You can draw the attention of potential customers by offering them
interesting content or helping them.
-Excellent way to create targeted, interesting and meaningful content
-Customers expect personalized content
-Buyer persona is a model – a fictional persona – who describes your typical
customer
-NOTE! Buyer persona is NOT ”a 30- 50 year old man”.

HOW TO USE?
Talk to your persona in his/her own tone of voice.
When making content, always keep in mind, what is important for your
customer (and not to your company)
Better results in SEO and SEA, when you plan your keywords for your
persona (f. ex. Painpoints)
When sharing content in social media, you can target more precisely, when
you target to your persona (f. ex. according to his/her interests)
How to build?
1. Do audience research •
-Who is already buying from you? Interview some of them.
-Study your website and social analytics. For example Facebook Audience
Insights.
-See what the competition is up to
2. Identify customer pain points
-Social listening
3. Identify customer goals
4. Understand how your brand can help
5. How can you reach him/her? What news and social media channel s/he
uses?
6. Turn your research into buyer personas

Empathy map
An empathy map is a collaborative tool that we can be used to gain a deeper
insight into our customers. Much like a buyer persona, an empathy map can
represent a group of users, such as a customer segment.
A tool to gain deeper insight into the needs / experience of the target group you
work for. Use this to identify your persona’s goals and painpoints

Placing (positioning) the product

• creating product and company image in the minds of buyers against the
background of competitive products and companies,
• influencing the consumer to shape his perception of the product / brand
compared to other offers.

BENEFITS of segmentation:
 LECTURE 6

Understanding the Marketing Mix concept

Marketing Mix – 4Ps
The marketing mix elements that make up an organization’s marketing
program:
1. Product
2. Promotion
3. Price
4. Place
These are management decisions, controllable factors
 Putting it together
Putting the right product (service) in the right place, at the right price, at the right
time.

The first model was presented in Basic marketing: a managerial approach by

American marketing professor and author, Edmund Jerome McCarthy, in 1960.
The 4 P’s of Marketing:
-Think of them as colors on an artist's palette
-Finding the right mix is essential for your business
 Traditional 4 Ps Applied to Services
-Product elements
• Service products are at the heart of services marketing strategy
• Marketing mix begins with creating service concept that offers value
• Service product consists of core and supplementary elements
• Core products meet primary needs
• Supplementary elements are value-added enhancements
-Place and time
• Service distribution can take place through physical and non-physical
channels
• Some firms can use electronic channels to deliver all (or at least
some) of their service elements
• Information-based services can be delivered almost instantaneously
electronically
• Delivery Decisions: Where, When, How
• Time is of great importance as customers are physically present
• Convenience of place and time become important determinants of
effective service delivery
Price and (other user outlays)
• Marketers must recognize that customer costs involve more than price
paid to seller
• Identify and minimize non-monetary costs incurred by users:
-Additional monetary costs associated with service usage (e.g., travel to
service location, parking, phone, babysitting, etc.)
-Time expenditures, especially waiting
-Unwanted mental and physical effort
 -Negative sensory experiences
• Revenue management is an important part of pricing
Promotion and Education
Plays three vital roles:
 Provide information and advice
 Persuades the target customers of merit of service product or brand
 Encourages customer to take action at a specific time
Customers may be involved in co-production so:
 Teach customers how to move effectively through the service process
 Shape customers’ roles and manage their behavior

4 P’s to 4 C’s
In 1990, the professor of advertising Robert Lauterborn shared a different
approach to the 4Ps of marketing mix. In his work New marketing litany: four
Ps passé: Cwords take over published by the broadsheet newspaper
Advertising Age

The Four Cs model is more consumer-oriented and fits better in the

movement from mass marketing to niche marketing.
4 C’s
CONSUMER − The product part of the Four Ps model is replaced by
consumer or consumer models, shifting the focus to satisfying the
consumer.
COST − Pricing is replaced by cost, reflecting the reality of the total cost
of ownership.
 CONVENIENCE − Placement is replaced by the convenience function.
With the rise of the internet and hybrid models of purchasing, the place is no
longer as relevant as before.
Convenience takes into account the ease to buy a product, find a product,
find information about a product, and several other considerations.
COMMUNICATION − Finally, the promotions feature is replaced by
communication. Communications represent a broader focus than simply
promotions. Communications can include advertising, public relations,
personal selling, viral advertising, and any form of communication between
the firm and the consumer.
3 ADDITIONAL Ps

Booms and Bitner included three additional 'Ps' to accommodate trends

towards a service or knowledge-based economy:
Process – procedures, mechanisms and flow of activities which lead to an
exchange of value.
People – all people who directly or indirectly influence the perceived value
of the product or service, including knowledge workers, employees,
management and consumers.
Physical evidence – the direct sensory experience of a product or service
that allows a customer to measure whether he or she has received value.
Examples might include the way a customer is treated by a staff member, or
the length of time a customer has to wait, or a cover letter from an insurance
company, or the environment in which a product or service is delivered.
Process
-How firm does things may be as important as what it does
-Customers often actively involved in processes, especially when acting as
co-producers of service
-Operational inputs and outputs vary more widely
-Quality and content varies among employees, between employees
-Variations can be with different customers
-Variations from time of the day
-Variability can be reduced by:
-Standardized procedures
-Implementing rigorous management of service quality
-Training employees more carefully
-Automating tasks
 -Train employees in service recovery procedures
-Manage process design and “flow of customers
Physical environment
-Design servicescape and provide tangible evidence of service
performances
-Create and maintain physical appearances
Buildings/landscaping
Interior design/furnishings
Vehicles/equipment
Staff grooming/clothing
Sounds and smells
Other tangibles
-Manage physical cues carefully— can have profound impact on customer
impressions
People
-Interactions between customers and contact personnel strongly influence
customer perceptions of service quality
-Well-managed firms devote special care to selecting, training and
motivating service employees
-Other customers can also affect one’s satisfaction with a service

The “8Ps” of Integrated Service Management vs. the Traditional

“4Ps”
According to Marketing and management of Kotler and Keller, the marketing
mix needs 8Ps to represent the modern panorama. This model is based on
the concept of holistic marketing. In which the performance dimension
represents financial and non-financial approaches. It represents implications
that go beyond the classic revenue or profit concept.
1. Product elements
2. Price and other user outlays
3. Place, cyberspace, and time
4. Promotion and education
5. People
6. Physical evidence
7. Process/ Programs
8. Performance (Productivity and quality)

There is NO ONE attribution model to rule them all

Differences, Implications, and Marketing-Related Tasks

 LECTURE 7

The Service Product

Can a product be defined as anything that we can offer?

In marketing terms: ✓ Physical good ✓ Service ✓ Person ✓ Organization ✓

Idea ✓ Place ✓ Events

WHAT IS A PRODUCT?
The concept of product in a marketing concept is broadly understood: it
includes everything that can be offered to buyers for consumption or use.
‚A product, therefore, is that which a company or an individual offers for
exchange which can satisfy the needs of the consumer or the seller's own
needs.'
In addition to physical things, the product includes all kinds of services, but also:
▪ people (marketing used e.g. to create the image of politicians);
▪ organizations (marketing of for-profit organizations to "sell" themselves and
strengthen their image, including public relations; marketing of non-profit
organizations such as schools or churches to attract new members);
▪ place (marketing, e.g. cities, tourism, places e.g. Disneyland);
▪ ideas (idea marketing is the use of commercial marketing concepts and tools in
programs aimed at influencing the behavior of individuals in order to ensure their
wellbeing and the well-being of the community as a whole, e.g. health campaigns,
social campaigns – Planning a long life).

A product is anything that can be offered to a market for attention,

acquisition, use or consumption. It includes physical objects, services,
personalities, places, organizations and ideas.
Product occupies a dominant position in marketing mix.
Key element of the marketing programme.
Before making deicisons about pricing, promotions, distributions firm has to
decide about product.

Product categories by Philip Kotler and Gary Armstrong

Consumer Products
• a convenient purchase that we buy often without much thought, such as
toothpaste;
• selectable, with a higher price and a longer purchasing process, e.g.
household appliances; • special, such as expensive, luxury watches;
• unnoticed, the purchase of which we rarely or never consider, e.g. funeral
services.
 Industrial Products
• acquired for further processing or use in business activities.
• kitchenware can become industrial - it is enough that it will be used by the
buyer, e.g. in the restaurant he runs.

What is a service?
A service is a product in the sense that it represents a bundle of benefits that
can satisfy customer wants and needs, yet it does so without physical form.
PRODUCT STRUCTURE
Philip Kotler defines a product as anything that can meet a need or a want,
and his Five Product Levels Model provides a way to show the different
levels of need customers have for a product, such as:

Product strategy
Product strategy - the process of adapting the product to the current and
future needs and requirements of the recipients.
The elements of this strategy are the product and its equipment.
Developing a product strategy includes primarily:
 shaping product function
 selecting and undertaking product-related activities
 launching a new product on the market
 product recall
 shaping the product range structure

PRODUCT LIFE CYCLE

DISTINGUISHING PHYSICAL PRODUCT BY ADDING SPECIAL

SERVICE
✓ Easy Order

✓ Delivery

✓ Installation

✓ Training

✓ Consulting

✓ Service And Repair

When its hard to distinguish physical products. The key to success could lie in
improving their quality by adding some special service. Rolls Royce protects
their high demand for jet engines by constant monitoring processes (monitor
parameters of the engine by satellites in total care programme). It wasnt free of
charge, airlines pay for every hour of flight, but RR take the risk and cost of
demurrage.

Customers do not buy goods or services

They buy offerings which render services which create value.
The traditional division between goods and services is long outdated.
 LECTURE 8

Promotion and marketing communications

The promotion mix
It is essential for organizations to promote their brands well among the end-
users not only to outshine competitors but also survive in the long run.
Brand promotion increases awareness of products and services and eventually
increases their sales, yielding high profits and revenue for the organization.
Objectives of Promotion
1/5
Build Awareness
New products and new companies are often unknown to a market, which
means initial promotional efforts must focus on establishing an identity.
In this situation the marketer must focus promotion to:
1) effectively reach customers, and
2) tell the market who they are and what they have to offer.
2/5
Create Interest
Moving a customer from awareness of a product to making a purchase can
present a significant challenge.
Customers must first recognize they have a need before they actively start to
consider a purchase. The focus on creating messages that convince customers
that a need exists has been the hallmark of marketing for a long time with
promotional appeals targeted at basic human characteristics such as emotions,
fears and humor.
3/5
Provide Information/Educate
Some promotion is designed to assist customers in the search stage of the
purchasing process.
In some cases, such as when a product is so novel it creates a new category of
product and has few competitors, the information is simply intended to explain
what the product is and may not mention any competitors.
In other situations, where the product competes in an existing market,
informational promotion may be used to help with a product positioning strategy.
4/5
Stimulate Demand
The right promotion can drive customers to make a purchase. In the case of
products that a customer has not previously purchased or has not purchased in
a long time, the promotional efforts may be directed at getting the customer to
try the product. For products with an established customer-base, promotion can
encourage customers to increase their purchasing by providing a reason to
purchase products sooner or purchase in greater quantities than they normally
do.
For example, a pre-holiday newspaper advertisement may remind customers to
stock up for the holiday by purchasing more than they typically purchase during
nonholiday periods.
5/5
Reinforce the Brand
Once a purchase is made, a marketer can use promotion to help build a strong
relationship that can lead to the purchaser becoming a loyal customer.
For instance, many retail stores now ask for a customer’s email address so that
follow-up emails containing additional product information or even an incentive
to purchase other products from the retailer can be sent in order to strengthen
the customer-marketer relationship.

AIDA Methodology
As an acronym, AIDA breaks down into the steps required for successful
marketing: Attention, Interest, Desire (or, in some variations, Decision) and
Action.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales

Promotion, Public Relations and Direct Marketing.
The elements of the promotional mix is called tools of promotion and these tools
given of five initially by few authors but in the modern era its also got changed
there may be a lot.

ADVERTISING
The non personal communication of information usually paid for and usually
persuasive in nature about products, services or ideas by identified sponsors
via various media.
 Print Media - Newspapers and Magazines
 Broadcast Media - Radio & TV
 Network Media - Telephone,
 Electronic Media - Audiotape, Videotape,
 Web Page.
 Display Media- Billboards, signs & posters.
Its function is to inform consumers about product differences, new products and
application possibilities.

The 5 Ms of Advertising
Mission – objectives
Money – budgets
Message – communication
Media – what vehicles?
Measurement – evaluation

The 4 Key Ingredients To Effective Advertising

 Focus On Attractive Design. Getting viewers' attention is your number-one
goal with advertising.
 Convey A Clear Message. Clear and convincing copy is just as important as
the design of your ad.
 Include An Explicit Call To Action.
 Keep It On Brand.

SALES PROMOTION
A variety of short-term incentives to encourage the trial or purchase of a product
or service including
-consumer promotions such as samples, coupons, and premiums),
-trade promotions (such as advertising and display allowances), and
-business and sales force promotions (contest for sales reps).

There are many methods of sales promotion, including:

 ► Loyalty cards – where customers earn points for buying certain goods or
shopping at certain retailers – that can later be exchanged for money, goods or
other offers
► Money off coupons – customers receive coupons, or cut coupons out of
newspapers or a products packaging that enables them to buy the product next
time at a reduced price
► Competitions – buying the product will allow the customer to take part in a
chance to win a prize
► Discount vouchers – a voucher (like a money off coupon)
► Free gifts – a free product when buy another product
► Point of sale materials – e.g. posters, display stands – ways of presenting
the product in its best way or show the customer that the product is there.
MERCHANDISING
Merchandising is everything you do to promote and sell your products once the
potential customer is in your store. When we talk about merchandise, we are
talking about products available for sale, typically in a retail setting.
It revolves around product positioning and visually pleasing merchandise
displays that attract a customer's attention.
When undertaking a sales promotion, there are several factors that a business
must consider:
What does the promotion cost – will the resulting sales boost justify the
investment?
Is the sales promotion consistent with the brand image? A promotion that
heavily discounts a product with a premium price might do some long-term
damage to a brand
Will the sales promotion attract customers who will continue to buy the product
once the promotion ends, or will it simply attract those customers who are
always on the look-out for a bargain?
SPONSORSHIPS
Sponsorships are the financial or in-kind support of activities. Businesses often
sponsor events, trade shows, groups, or charity causes to reach specific
business goals and increase their competitive advantage.
Though sponsorship is a form of marketing, it is different from advertising, which
attempts to persuade customers to make purchases by sharing specific
messages about a product or company.
Sponsorships, on the other hand, don't directly promote your company or
products. Instead, your company pays to support a specific event that your
customers care about. Your business is then associated with the event by
customers, attendees, and the media.
Sponsorships could help your business increase its credibility, improve its public
image, and build prestige. Like any form of marketing, it should be used
strategically as a way to reach your target customers.
A firm may sponsor sports, cultural, and social events to create a distinct image
for itself and its brands.

PUBLIC RELATIONS
Public relations are activities that promote the image and communications a
person or company has with its employees, customers, and investors, and
public PR can build rapport with customers, investors, and the general public.
Functions of Public Relations

Public relations versus Advertising

EVENTS & EXPERIENCES
Company-sponsored activities and programs designed to create daily or special
brand-related interactions with consumers, including sports, arts, entertainment,
and cause events as well as less formal activities.

PUBLICITY
Publicity is the free mention of a product or company.
Publicity differs from advertising because a company does not pay for the
exposure it gets in the media.
It usually comes in the form of news story, editorial, or announcement about an
organization and/or its products and services.
Techniques used to gain publicity include news releases, press conferences,
feature articles, photographs, films, and videotapes.
-Responding to requests from media
-Supplying the media with information on events and occurrences,
-Carry the information about the viewpoint of the organization
-Credible message
-No media cost
-Loss of control of the publication
-Loss of control of content
-Loss of control of timing
Plan your publicity strategy as you would any marketing campaign:
➢ Develop a calendar that ties story ideas to key events and spreads your
storytelling out over the year.
➢ List events that may offer good speaking opportunities.
➢ Identify publications, reporters and bloggers who cover subjects that are
relevant for your company.
➢ Create traditional and online press materials to give reporters support
materials for their stories.
➢ Know the audience for each story and carefully target your media

DIRECT MARKETING
is a system of marketing by which organizations communicate directly with
target customers to generate a response or transaction. This response may
take the form of an inquiry, a purchase, or even a vote.
 Developing a Database
Improving the selection of market segmentation - some consumers are more
likely to be potential purchasers. By analyzing the characteristics of the
database a marketer can target a greater potential audience.
Stimulate repeat purchases - once a purchase has been made, the customers
name and other information are entered into database. These people are
proven direct marketing users who offer high potential for repurchase and a
greater likelihood of responding to an offer.
Cross sell - customers who demonstrates a specific interest also constitute
strong potential for products of the same nature.
Customer relationship management (CRM) -the aim of CRM is to establish a
relationship with one’s customers through affinities, personalized
communications and products/service offerings. For CRM to work effectively a
data base is required.

Factors in Setting Promotion Mix

 Buyer State
Liking, Preferences, and Conviction
Purchase
 Product-Life-Cycle Stage
Introduction
Growth
Mature
Decline
 Integrated Marketing Communications
The Marketing Communications Environment is Changing:
Mass markets have fragmented, causing marketers to shift away from mass
marketing
Media fragmentation is increasing
Improvements in information technology are facilitating segmentation
 LECTURE 9

What do you need to know about pricing?

Pricing
Pricing is a critical ingredient in the marketing mix that differentiates the brand.
In some cases, it is the major factor that determines brand image.

Price - Definition
 The amount of money asked or given for “something”
 The sum of all the values that consumers exchange for the benefits of having
or using the product or service
 Lessor – rent
 schools – tuition
 banks – interest
 lawyers and doctors – professional fee
 fixers – consultancy fee
The price a business charges needs to take account of and be consistent with,
the objectives of the business.
For example, it may be that the objective is to position the business as the
highest quality provider – in this case, a higher price should be used to signal
high quality to the consumer. Exclusive designer fashion labels and luxury
holiday businesses apply this strategy (using "premium" or luxury prices).
At the other end of the pricing scale, a business that positions itself as a low-
cost or discount provider will look to set prices that are lower or as low as any
rival. The strategy is to gain advantage by offering the lowest prices (not just in
the shortterm). The battles in the discount supermarket and low-cost airline
markets are great examples of this strategy in action.

Factors to Consider in Pricing

 There are several factors a business needs to consider in
setting the price:
 Objectives – what are the marketing objectives of the firm?
 Competitors – this is really important. Competitor strength influences
whether a business can set prices independently, or whether it simply has to
follow the normal market price
 Costs – a business cannot ignore the cost of production or buying a product
when it comes to setting a selling price. In the long-term, a business will fail if it
sells for less than cost, or if its gross profit margin is too low to cover the fixed
costs of the business
 The state of the market for the product – if there is a high demand for the
product, but a shortage of supply, then the business can put prices up.
 The state of the economy – some products are more sensitive to changes in
unemployment and workers wages than others. Makers of luxury products will
need to drop prices especially when the economy is in a downturn
 The bargaining power of customers in the target market – who are the
buyers of the product? Do they have any bargaining power over the price set?
An individual consumer has little bargaining power over a supermarket (though
they can take their custom elsewhere). However, an industrial customer that
buys substantial quantities of a product from a business may be able to
negotiate lower or special prices.
 Legislation in the market – some businesses operate in markets where
prices are regulated by government legislation – e.g. the rail industry
 Other elements of the marketing mix – it is important to understand that
prices cannot be set without reference to other parts of the marketing mix. The
distribution channels used will affect price – different prices might be charged
for the same product sold direct to consumers or via intermediaries. The price of
a product in the decline stage of its product life-cycle will need to be lower than
when it was first launched

PRICING STRATEGIES
Penetration Pricing
 Prices set to ‘penetrate the market’
 ‘Low’ price to secure high volumes
 Typical in mass market products – chocolate bars, food stuffs, household
goods, etc.
 Suitable for products with long anticipated life cycles
 May be useful if launching into a new market

Market Skimming
High price, Low volumes
Skim the profit from the market
Suitable for products that have short life cycles or which will face competition at
some point in the future (e.g. after a patent runs out)
Examples include: Playstation, jewellery, digital technology, new DVDs,
innovations and First to Market products etc.
Advantages
-Firm can increase total profit, leading to more resources for research and
development
-Customers who are prepared to wait can benefit from falling prices.
-When a firm enters a new product into the market, it will not yet have the
economies of scale so may need to charge higher prices to reflect higher
average costs. As sales grow and it gains economies of scale, it can afford to
cut prices.
Disadvantages
Customers who bought early, may feel they have been ‘ripped off’ when the
same product is sold for a lower price. This may create a negative image of the
firm. Some early adopters of the Sony Playstation 3 feel that they have been
taken advantage of.
Selling at a high price means that the firm will only be selling small quantity for
the early period. This could make it vulnerable to losing market share to a
cheaper rival. For example, Android phones have increasingly been taking
market share from Apple.
It requires a degree of monopoly power.
The difference between penetration pricing and price skimming
 Contribution Pricing
Contribution = Selling Price – Variable (direct costs)
 Prices set to ensure coverage of variable costs and a ‘contribution’ to the fixed
costs/overheads
 Similar in principle to cost-plus pricing
 Every product sold gives back a contribution towards covering the running
costs of the business
 Break-even analysis might be useful in such circumstances

Cost-Plus Pricing
 The cost of the product + mark-up = selling price.
 You can do this by using a fixed percentage (150%, 200%) or a fixed markup
 The advantage of this method is that you can calculate your expected profit
level very easily.
 The disadvantage is that it may be less, or more, than customers are willing to
pay and, most importantly, some hidden costs may be forgotten and so the
actual profit is less than you think (or even a loss)
Example:
 Advantages and disadvantages.

Value Pricing
 Price set in accordance with customer perceptions about the value of the
product/service
 Examples include status products/ exclusive products /art pieces
 Companies may be able to set prices according to perceived value.
(Demand curves sometimes slope upward— Gibson learned that its high-quality
guitars didn’t sell as well at lower prices)
Pricing based on customer perception
It is very difficult to estimate the value;
It is subjective and different for different clients and situations.
 Leader Pricing/ loss leader
• The idea behind leader pricing is to generate store traffic.
Goods/services deliberately sold below cost to encourage sales
elsewhere
• The items used to get customers into the store are known as Loss
leaders.
• Typical in supermarkets
• Purchases of other items more than covers ‘loss’ on item sold
• e.g. ‘Free’ mobile phone when taking on contract package
• When customers come into the store to purchase the loss leaders, they
usually end up purchasing extra items at full retail price.
• The retailer makes their profit off of the unplanned purchases bought with
the loss leaders.

Competitor Pricing (Going Rate)

In case of a price leader, rivals have difficulty in competing on price – too
high and they lose market share, too low and the price leader would match
price and force smaller rival out of the market
In this strategy, we are compelled to follow pricing leads of rivals especially
where those rivals have a clear dominance of market share
Where competition is limited, ‘going rate’ pricing may be applicable – banks,
petrol stations, beauty salons, dentists – find very similar prices in all

Price framing
Price framing, in which you set a reference price and then discount sharply
beneath it to convey value, is one way to help consumers new to your
service judge whether you offer good value.

Price Bundling
Companies often bundle items together to achieve maximum consumer
surplus;
A competitive pricing strategy that allows buyers to purchase multiple
products or services at a lower price than they would pay if they purchased
the individual product.

Complementary Pricing
Complementary Product pricing is a method in which one of the products is
priced to maximize the sales volume and which in turn stimulates the
demand of other product.

Relationship Pricing
The primary objective is to enhance and expand the firm’s relationship with
its targeted consumers
Long-term contracts: offer prospective customers incentives for dealing with
same provider over a number of years
Price bundling: the practice of marketing two or more services in a single
package at a single price
Mixed bundling: price-bundling technique that allows consumers to either
buy Service A and Service B together or purchase one service separately

Adaptive Pricing
The idea is to vary product attributes to appeal to a variety of customers and
their ideas of value
Common adaptive-pricing strategies include:
o Altering the product size
o Utilizing new distribution channels
o Requiring purchase minimums
o Price versioning (“good,” “better,” and “best” quality)
o Promotional pricing (two-for-one deals)
 Discount-based pricing
Most companies modify their basic prices by rewarding customers for certain
behaviors, such as paying bills early, buying more goods, or buying out of
season.
Discount; Price reduction for purchases within a specified period or for
purchases of a larger quantity of product.
Types of discounts:

✓ cash discount; Price reduction for buyers who pay bills quickly. For example,
"2/10, net 30", which means that although the payment deadline expires after
30 days, the buyer can deduct 2% from the total bill if it is paid within 10 days.

✓ quantity discount; price reduction offered to customers if they purchase a

larger quantity of a given product.

✓ functional (commercial) discount; It is offered by the seller to participants of

the distribution channel who perform certain activities for the seller.

✓ discount with the exchange in the settlement; This is the lower price offered
for returning an old (used) product when buying a new one.

✓ promotional discounts; amounts paid or discounts as a form of reward for

sales representatives for participation in advertising and sales support
programs.
Example: Ginza, Tokio
It was the first store to offer a "90% discount" on sales and it was a sensation in
Tokyo.
The discount action lasted a few days, on the first day the assortment was
discounted by 10%, the discount was increased every day, until the last two
days on which the 90% discount was in force.

Customer Often Lack of Knowledge of Service Prices

Customers often lack reference prices for service
❖ Service variability limits knowledge
❖ Providers are unwilling to estimate prices
❖ Individual customer needs vary
❖ Collection of price information by customers is difficult
❖ Prices are not visible
Individual customer needs vary – your haircut from the same stylist may cost
you differently,
Price invisibility – particularly in financial services, most customers know about
only the rate of return and not the costs they pay in form of fund and insurance
fees.
Three Basic Marketing Price Structures and Challenges for Services
 Role of Non-monetary Costs
Demand is not just a function of monetary price but is influenced by other costs
as well.
Like:
❖ Time cost - since most services require direct participation of the
consumer and thus their real time,
❖ Search costs - the effort invested to identify and select among services
you desire since prices for services are rarely displayed in shelves each
service establishment offers only one brand of service (except brokers &
agents),
❖ Convenience costs – like customers have to travel to the service, if
service hours do not coincide with customer’s available time,
❖ Psychological costs – fear of not understanding (education), fear of
rejection (bank loan), fear of results (surgery).
BUYER’S PERCEPTION OF VALUE

The price should:

Be easy for consumers to understand
Represent value to the customer
Encourage customer retention and facilitate the customer’s relationship with
the providing firm
Reinforce customer trust
Reduce customer uncertainty
Quick note about vocabulary  Place (from the Four P’s)  Marketing channel  Channel of
distribution  Distribution  Distribution system  Channel More or less mean the same thing.

Place 1/2

✓ The means by which products and services

get from producer to consumer and where
they can be accessed by the consumer

✓ The more places to buy the

service and the easier it is
made to buy it, the better
for the business (and the
consumer?)
Place To maximise sales, it is necessary to have the right product/service in the
right place at the right time Firms look for the most cost-effective way of
distributing their products/services, keeping in mind the following factors:
Potential sales through each channel of distribution Transport cost for each
channel Profit margins that will have to be offered to each middleman in the
channel Demands of customer
A channel of distribution comprises a set of institutions which perform all of the activities
utilized to move a product and its title from production to consumption

How channel members add value? ► Right PLACE ► Right TIME Place UTILITY ✓ Location –
having the product where customers can buy it Time UTILITY ✓ Having the product available
when the customer wants/needs it

What does „the channel” do?

Connects producers with customers
Completes transactions
Handles logistics
Financing
Post-sale support
CHANNEL
MANAGEMENT
DECISIONS
Channel strategy is not formulated in a vacuum
Channel strategy andproduct strategy
 Channel strategy and price strategy
Channel strategy and promotion strategy
Channel management decisions

Decisions about a product’s physical movement and transfer of ownership from producer to
consumer.

FIRST - Setting channel objectives Determine what the company is trying to achieve Meet the
needs and wants of their target market Give their product a competitive edge

SECOND - Channel members: Selection Management Motivation Evaluation

Channel Management  The administration of existing channels to secure the

cooperation of channel members in achieving the firm’s distribution objectives. 
Motivation Management The actions taken by the manufacturers to foster
channel member cooperation in implementing the manufacturer’s distribution
objectives
How do producers motivate channel partners?
Opportunity for profit
Price, terms, conditions
Support and training
Product line: present and future directions
Attractive brand
Personal attention
Co-marketing
DISTRIBUTION IN SERVICES
The intangible nature of services complicates distribution decisions. • Location/convenience
are critical • Cannot store or send

Major distribution approaches include: • Franchising • Agents and brokers • Electronic

channels

DISTRIBUTION OPTIONS FOR SERVING CUSTOMERS

Customers visit service site Convenience of service factory locations and operational
schedules important when customer has to be physically present. e.g. barbershop

Service providers go to customers Unavoidable when object of service is immovable More

expensive and time-consuming for service provider e.g. repair of a technological line

Service transaction is conducted remotely Achieved with help of logistics and

telecommunications
Distinguishing between Distribution of Supplementary and Core Services  Most core services
require physical locations  Many supplementary services are informational; can be
distributed widely and costeffectively via other means  Telephone  Internet

Splitting Responsibilities for Service Delivery Challenges for original supplier • Act as guardian
of overall process • Ensure that each element offered by intermediaries fits overall service
concept

Using Websites for Service Delivery

Two main types of channels  Direct – when a producer and ultimate customer deal directly
with each other (Company-owned stores, sales force, internet).  Indirect – when there are
independent intermediaries between the producer and customer.

Direct channel Strengths • Dedicated to your products • High quality contact with customers •
Fast feedback loop

Weaknesses • Smaller coverage • High fixed cost • On own to generate leads

Indirect channel Strengths • Larger coverage • Reach new target segments • Create whole
solutions • Lower fixed cost Weaknesses • Less focused on your product • Smaller margins •
May limit customer information

Channel Preferences Vary Among Customers For complex and high-perceived risk services,
people tend to rely on personal channels (credit cards vs. mortgage) Individuals with greater
confidence and knowledge about a service/channel tend to use impersonal and self-service
(most cost-effective) channels Customers with social motives tend to use personal channels
Convenience (saving time, effort) is a key driver of channel choice
Length of Channel Channel length = number of levels in a distribution channel

INTENSIVE DISTRIBUTION
SELECTIVE DISTRIBUTION

EXCLUSIVE DISTRIBUTION
FRANCHISING
Franchisor provides training, equipment, and support marketing activities. Franchisees invest
time and finance and follow copy and media guidelines of franchisor.

Advantages: Expand delivery of effective service concept without a high level of monetary
investment
Franchising Disadvantages  Loss of control over delivery system and how customers
experience actual service  Effective quality control is difficult  Conflict between franchisees
may arise especially as they gain experience  Alternative: license another supplier to act on
the original supplier’s behalf to deliver core product  Trucking companies contract with
independent owner-operators  Banks selling insurance products, collect commission (not
handling claims)

Channel will be most effective, when: Channel members share a common goal Commitment to
quality of the product Satisfying the target market’s needs and wants All members cooperate
to attain overall channel goals If the channel is not effective, conflict occurs…..

Distinguish between horizontal and vertical conflict Horizontal Conflict: occurs between
channel members at the same level  Good, old-fashioned business competition  Example:
two retailers selling pet supplies compete to sell to the same target market  Example: some
Ford dealers in Chicago complained about other dealers in the city who stole sales from them
by being too aggressive in their pricing and advertising or by selling outside their assigned
territories.

Distinguish between horizontal and vertical conflict  Vertical Conflict: refers to conflicts
between different levels of the same channel.  Producers and wholesalers, wholesalers &
retailers, or producers and retailers;  Example: General Motors came into conflict with its
dealer some years ago by trying to enforce service, pricing, and advertising policies. Solution :
“For ensuring good performance of the channel, each channel member’s role must be
specified, and channel conflict must be managed

Multi-level Marketing (MLM)

Affiliate marketing  Affiliate marketing is a popular tactic to drive sales and generate
significant online revenue. Beneficial to both brands and affiliate marketers.

Influencer marketing Influencer marketing is a type of marketing that focuses on using key
leaders to drive your brand’s message to the larger market. Rather than marketing directly to a
large group of consumers, you instead inspire / hire / pay influencers to get out the word for
you

DIGITAL MARKETING
Digital marketing Digital marketing refers to all marketing efforts that occur on the Internet.
Businesses deploy digital channels such as search engines, social media, email, and other
websites to connect with current and prospective customers. This also includes
communication through text or multimedia messages. (Hubspot) Digital marketing is also
referred to as 'online marketing', 'internet marketing' or 'web marketing'. (Wikipedia) Digital
marketing, e-marketing or Internet marketing, is the heart of the digital business, which brings
the company closer to the customer, allowing them to get to know them better and add value
to the product, expanding distribution channels and increasing sales through the execution of
marketing campaigns. Digital marketing using digital media channels such as search marketing,
online advertising and affiliate marketing

‘Promotion’ in the digital context • The picture presents the range of digital media
and instruments that are available • Through them, any target group can be reached in digital
ecosystems and environments. • Their choices and deployment are determined according to
the strategy, message and target groups Note: The best result will be achieved when digital
instruments and media are combined with traditional marketing media (multichannel
marketing)
Inbound-outbound
Digital marketing enables ‘inbound marketing’ (whereas traditional marketing represents
‘Outbound marketing’). ● Outbound channels are usually less efficient ● Two-way
communication (inbound) permits understanding customers, customizing messages and
creating engagement source: DigitalConnect

Inbound marketing helps entrepreneurs to take this chance by showing them how to be found
by customers on the Internet.

Offline - online Offline (traditional) • Print (newspapers, magazines) • Radio • TV • OOH (=out
of home = outdoor) • Cinema • Events • Fairs

Online (digital) Display banners Video SEO SEM Social media Blogs White papers,
guides, etc. E-mail Native advertising Influencer marketing DOOH (=digital out of home)
● Consumers and buyers go increasingly online -> marketers follow them ● Marketing budgets
are directed increasingly on online media ● Most customer groups can be reached both online
and offline

Offline (printed media, billboards, etc) ● Often broad target group ● Effect difficult to measure
● Slow improvement cycle

Online (digital media) ● Target group can be very specific ● Effect more measurable ● Fast
improvement cycle

Advantages of digital marketing ● Persons who have a need (target groups) can be met at
exactly right time ● Available 24/7 ● Information can be customized and adjusted to customer
types and their specific needs ● Interaction with target groups is possible ● Information about
leads (potential customers) can easily be collected ● The effects of marketing communication
via the internet on sales are easily measurable.

Digital allows personalization ▪ Personalization is for instance: customized content, referring to

topics that interest you, using your name ▪ Is supported by the use of artificial intelligence ▪
40% of consumers purchase more from retailers that provide a personalized shopping
experience across channels(Source: RetailNext).

Marketers use increasingly digital media • The share of digital media is rising, yet traditional
marketing media are still used essentially • The graph shows an average of all advertiser •
There are reasonable variations between different types of organizations

Who does digital marketing tasks in organizations? Source: Hubspot ● In smaller organizations,
there are typically few all-round persons ● Larger organizations have more staff with specified
profiles ● Some organizations outsource (buy) the service or part of it ● Digital marketing is
typically a field of young professionals ● Over all, there is a lack of digital marketing
professionals

What are the Main Channels?

A call to action (CTA) is a marketing term that refers to the next step or the action that the
marketer wants the consumer to take.  Calls to action can be as direct, such as a button that
says, "Buy Now," or a softer CTA such as "Read More."  Through practices such as A/B testing,
marketers can learn which CTAs are most effective in getting the audience to do a specific
action.

The PESO model

Target audience • Digital marketing campaigns are directed towards target audiences that are
mentioned in the strategy • A target audience consists of people who are potential users of
the product/service and benefit from it source: Digital Floats • For stating the right message
and channel, it is necessary to define the characteristics of the target audience and the media
where they can be found • There are many characteristics to consider when building a picture
of your target audience, for instance • Age, income level, hobbies, location, budget • Internet
device • Internet search history

Models to describe the buying process Along the past decades, plenty of models have been
created to describe the buying process. The most commonly used alternatives are called the
Marketing Funnel (a.k.a. AIDA), the Customer journey and the RACE models. These models are
useful in planning marketing and advertising tactics and operations, as they offer topics for
messages and channels where to meet the customer. They suit well in the digital marketing
processes as well. AIDA and Customer journey are models to get more insights in the buyer’s
point of view. RACE helps an organization to reply to these buyer’s stages.

MARKETING FUNNEL

We receive a great number of commercial signals and messages each day - most of them, as
well as the businesses offering them - remain unknown for us. Before we go to action (click a
link, enter a shop, make a purchase), we want to know more about the business or the
product, to get convinced. The Marketing Funnel offers various implications: • the buying
process encompasses a certain path where marketing and sales have a big role • in the upper
part mass advertising is needed, whereas the mid-part is sales work, also called as nurturing
the buyers • only a few processes lead to purchase (action) -> businesses strive to improving
the efficiency of Further reading their funnel

The potential buyer: • Becomes aware of own need, or becomes affected by a certain brand •
Wants to know more, searches information of brand/product/service • Knowledge has risen;
overweighs best solutions • Does comparison; evaluation; intends to be convinced • Has
selected most appropriate solution; makes decision

Buyer touch points (digital): • Advertisement (Google Ads, Display ads, Shopping, Local ads,
Youtube ads, …); Blogs; Websites • Content on businesses´ websites; Social ads; Reviews •
Newsletters; Social media; Q&As´ on businesses´ websites; personified emails • Item related
blogs & websites; social media • Conducting purchase - ordering & shopping online