RIft valley university

Instructor. Merga
Abuche
CHAPTER ONE
Nature and scope of marketing
 1.2. Core concepts of marketing

• We now examine five core customer

and marketplace concepts:
(1) Needs, Wants, and Demands;
(2) Market offerings (products, services, and
experiences);
(3) Value and satisfaction;
(4) Exchanges and relationships; and
(5) Markets.
 Wants
It is the desire for specific satisfiers of the basic needs, shaped by culture,
individual personality and institutions.
• Needs are general and common or basic and mainly physiological in characters
whereas
• wants are learned and largely psychological
• For example, all people have a need for food but not all people try to satisfy
their hunger or thirsty with identical products.
• Enjera is a favorite food for Ethiopians; rice is a staple food for Indians;
pourage is a favorite food for Kenyans; etc.
Demands
It is a form of human wants that is backed by the people purchasing power.
Demands represent the ability and willingness to purchase specific products.
When backed by an ability to pay - that is, buying power - wants become
demands.
Want + money =Demand
7. Over full demand: Sometimes a demand level that is
beyond an organization’s ability may arise.
• Marketing strategy-De marketing (marketers facing
overfull demand decide a temporary or permanent
reduction or shift of demand).
8. Unwholesome demand: customers may be attracted to
products that have undesirable social consequences.
These products are liked some and disliked by others in the society.
• E.g. cigarettes, alcohol, hard drugs, handguns, etc.
• Marketing strategy-Destroy marketing (marketers
attach cautionary label on the package and reduce
explicit, positive and direct promotion, fear messages,
price hikes, reduce availability to get people to give it
up.
 4. Marketing offer
• A marketing offer is anything that can be offered to the
market with a bundle of benefits to satisfy needs and
wants.
• Products may be tangibles or intangibles.
• Market offerings are not limited to physical products.
• They also include services—activities.
• Examples include banking, airline, hotel, tax
preparation, commodities, transportation, hotel,
telecommunication, persons, places, organizations, and
ideas and home repair services.
5. Customer value and satisfaction
Customer value is the difference between the benefit that
the customer gains from owning and using a product and
the costs of obtaining the product.
Customer satisfaction depends on a product’s perceived
performance in delivering value relative to a buyer’s
expectations.
If the product’s perceived performance equals to
customer expectation, customers are satisfied.
If the product’s perceived performance is greater than
customer expectation, customers are delighted.
If the product’s perceived performance is less than
customer expectation, customers are dissatisfied.
Satisfied and delighted customers will make a repeat
purchase of the company’s products
6. Exchange ,transactions, and
relationship
 Market
A market is the set of actual and potential buyers of a
product.
 Originally a market was a place where buyers and
sellers gathered to exchange goods (such as a village
square).
 Economists use the term to designate a collection of
buyers and sellers
1.4. Marketing management concepts/
philosophies
There are five alternative concepts based on which
organizations design and carry out their marketing
strategies. These include
1.Production Concept
2.Product Concept
3.Selling Concept
4. Marketing Concept and
5. Societal Marketing Concept.
The weight given to the interests of customers,
organization’s objectives and the society’s
interests vary in each philosophy.
 1. Production concept
customers prefer products that are highly available and
affordable.
Excess demand in the market.
Again if producing the product at a small quantity is costly
and producing it in a high volume brings the high unit
production cost, this philosophy is preferred.
Management focuses highly on improving production and
distribution efficiency.
ii. Product concept
• This philosophy holds that customers prefer quality products
and innovative features.
• Management focuses on continuous product quality and
feature improvement.
• Both production concept and product concept lead to
marketing myopia (focusing too narrowly on their own
operations and losing sight of satisfying customer needs and
building customer relationships.
 iii. Selling concept
• Practiced highly for unsought/new products and when the
company faces excess unsold inventory.
• Focuses on creating sales rather than building long-term customer
relationships.
• (inside out perspective)-starts from the company’s existing
products.

iv. Marketing concept

It is an outside-in perspective-starts from a well defined market
Find the right products to the right customers
 Difference between Selling and Marketing
Selling Marketing
• Starts and focuses with the Starts and Focuses on the
seller existing products and needs of the buyer. Buyer is the
needs centre of the business
• preoccupied with the seller’s Emphasizes on identification of
need to convert his product a market opportunity ,fulfilling
into cash; emphasizes on profitthe needs of the customers.
• views business as a ‘goods views business as a ‘customer
producing processes’ satisfying processes.
• The firm makes the product customer determines what is to
first the then decides how to be offered as a ‘product’ and
sell it and make profit. the firm offering product that
would match the needs of the
customers.
 Selling Marketing
• Emphasizes accepting the Emphasis’s on innovation of
existing technology and adopting the most
reducing the cost of innovative technology.
production. Marketing communications
acts as communicating the
• Seller’s motives dominate benefits of the product
marketing communications. Consumer determines price.
• Costs determine price. views the customer as the
• views the customer as the last very purpose of the
link in the business business.
Buyer determines the shape
• Seller’s convenience of the ‘marketing mix’.
dominates the formulation of
the ‘marketing mix’.
 V. Societal concept
• Societal concept is that marketing strategy should
deliver value to customers in a way that maintains or
improves both the consumers and the society’s well-
being.
• In doing so, companies should balance three
considerations in setting their marketing strategies:
FIG1.4. The Considerations
Underlying the Societal Marketing
 SOCIETAL
PRODUCT MARKETING
CONCEPT CONCEPT

Marketing KEY
MARKETING
Management PHILOSOPHIES
MARKETING
CONCEPT
Philosophies:
PRODUCTION
CONCEPT

SELLING
CONCEPT
CHAPTER TWO
MARKETING ENVIRONMENT
Changes in the marketing environment are often quick
and unpredictable.
• The marketing environment offers both opportunities and
threats.
• The company must use its marketing research and
marketing intelligence systems to monitor the changing
environment.
• Systematic environmental scanning helps marketers to
revise and adapt marketing strategies to meet new
challenges and opportunities in the marketplace.
The marketing environment is made up of a:
1.Micro environment
The microenvironment the components includes ;
• company departments
•Suppliers
• marketing intermediaries
• customers
• competitors and various publics
The
Company’s Company
Microenviron Supplier
publics
ment Forces affecting a
company's ability to
serve customer
competitor intermediaries
s
custome
rs
 2. MARKETING MACRO
ENVIRONMENT
• There are six major forces (outlined below)
a. Demographic.
b. Economic.
c. Natural.
d. Technological.
e. Political.
f. Cultural.
 Demographic

Supplier

Company Publics

The Company’s
Political Company Economic

Macro Customers Competitors

environment Intermediaries
Cultural Natural

Technological
 Chapter Three
3. Types of Markets
• This unit examines how buyers behave
particularly when they are invoked in
decisions to buy products.
• We will look the types of markets
1. consumer market,
2. business market and
3.government and institutional market).
 1. Consumer Markets
• Consumer market individuals and households who buy
product own personal use. Marketers can study consumer
purchase to find answers to questions about what they buy,
where and how much.
• But learning about the why of consumer buying behavior is
not so easy.
• The answers are often locked deep within the consumers’
mind.
Model of Consumer Behavior
• The central question for marketers is how consumers
respond to various marketing efforts the company might
use.
• The starting point is the stimulus-response model of buyer
behavior.
 Factors Affecting Consumer Behavior
• Purchases by individuals acting as a consumer are
influenced by many factors, including their own
background and personality.
• Consumer purchases are influenced strongly by
cultural,
social,
 personal and
psychological characteristics.
Cultural Social Personal Psychological

Culture Reference Age Motivation

Sub culture group Occupation Perception

Learning
Social class Family Economy
Roles and Life style Beliefs and
attitudes
status
Personality
Self concept
 Types of Buying Decision Behavior
• Buying behavior differs greatly for different
products.
• More complex decisions usually involve more
buying participants and more buyer deliberation
1.Complex Buying Behavior
2.Dissonance Reducing Buying Behavior
3.Habitual Buying Behavior
4. Variety Seeking Buying Behavior
 High involvement Low involvement

Significant Complex buying Variety-seeking buying

differences behavior behavior
between brands

Few differences Dissonance- Habitual buying behavior

between brands reducing
buying behavior
 The Buying Decision Process
• The buying process starts long before actual purchase and continues
long after purchase.
• For most purchases buyers pass through five stages.
1. Need recognition
1.Information search
2.Evaluation
3.Purchase decision
4.Post purchase decision
 4. Purchase Decision
• It is actually buying the product.
• Generally the consumers’ purchase decision will be to buy the
most preferred brand but two factors come between purchase
intention and decision.
• These factors are
(1)Attitudes of others (friends and families)
2. unexpected situational factors (income, price and product benefit ).
5. Post Purchase Decision
• Buyers take further actions after purchase based on previous satisfaction
level.
• The marketers’ job does not end when the product is bought.
• The relationship between buyers’ expectation and products’ perceived
performance determines the buyers’ satisfaction level.
• Buyers base their expectation on the information they receive.
• To this end, sellers should promise what their brands can meet.
 B. Business markets and business buyer behavior
• business buyer behavior of all the organizations that buy goods and services to use in the
production of other goods and services or to resell them for other customers.
• Different names have been given to business markets-organizational markets, industrial
markets we use these terms interchangeably.
Characteristics of Business Markets
 Market Structure and Demand
• Business markets contain fewer buyers - not many buyers exist in the
market but Larger buyers: few large buyers do most of the purchase.
• Demand in many business markets is more inelastic—not affected as
much in the short run by price changes.
• Demand in business markets fluctuates more, and more quickly.
 Nature of the Buying Unit
• Business purchases involve more buyers.
Business buying involves a more professional purchasing effort.
Types of Decisions and the Decision Process
• Business buyers usually face more complex buying decisions.
• The business buying process is more formalized.
• In business buying, buyers and sellers work more closely together and
build close long-term r/ps.
Types of Buying Situations
There are three major types of buying situations
1.straight re-buy,
2.new task, and
3.modified re-buy

 Members of the buying center play any of five roles in the purchase
decision process.
Users: members of the organization who will use the product.
Influencers; often help define specifications and also give information
for evaluating alternatives.
Buyers: have formal autonomy in selecting vendors and negotiating
sales terms.
Deciders: those who have formal or informal power to select or
approve the final suppliers.
Gate keepers: those who control the flow of information to others .
 Major Influences on Organizational buying.
• Webster and wind have classified the variant influences on
industrial buyers into four main groups of factors.
• Environmental factors
• Organizational factors
• Interpersonal factors
• Individual factors
 Industrial buying process
• The business buying process has got eight stages.
• Buyers who face a new task buying situation usually go
through all of these stages.
• Buyers making modified or straight re-buy may skip or omit some
of the stages. we examine each of the eight stages for a typical new-
task buying situation.
Stage1. Anticipation or recognition of a need/problem
Stage2. General Need Description
Stage3. Product specification
Stage 4.Supplier search
Stage 5: Proposal Solicitation
Stage 6. Supplier Selection
Stage7 Order-Routine Specification
 c. Governmental markets
• Government buying and business buying are similar in many ways.
• But there are also differences that must be understood by companies
that wish to sell products and services to governments.
Governmental customers range from the smallest to the largest
organizations.
Based on these criteria, government customers are basically classified
in to three groups:
 Local governments: these are the lowest administrative units of the
government.
• They include municipalities, districts, peasant associations and kebeles.
State governments: these are organizations which make major
expenditures in various projects.
 Federal governments: are large buyers of goods and services.
• They include both civilian and military buying units such as agencies,
boards, commissions, departments, etc.
 D. Institutional markets
• Another important market sector is made up of various
types of profit and nonprofit institutions.
• The institutional market consists of schools, colleges, and
universities, hospitals, nursing homes, prisons, and other
institutions that provide goods and services to people in
their care.
 Chapter four
Market Segmentation, Targeting and Positioning
1. Market segmentation
• Segmentation is the key to the marketing strategy of many
companies.
• The market consists of many types of customers, products, and
needs.
• The marketer has to determine which segments offer the best
opportunities.
Bases for Segmenting Consumer Markets
based on
• geographic factors (countries, regions, cities etc.);
• demographic factors (sex, age, income, education etc.);
• psychographic factors (social classes, lifestyles etc.); and
• behavioral factors (purchase occasions, benefits sought, usage rates).
 • Bases for Segmenting Business Markets
• Consumer and business marketers use many of the same
variables to segment their markets.
based on
• geographic factors
• demographic factors
• behavioral factors
Additional such as ;
• operating characteristics
• buying approaches,
• situational factors,
• personal characteristics.
 3. Segmenting International Markets
• Companies can segment international markets using one or
more of a combination of variables.
• The chief factors that can be used are: Geographic location,
Economic factors, Political and legal factors, Cultural
factors.
To be useful, market segments must be:
➤ Measurable: The size, purchasing power, and
characteristics of the segments can be measured.
➤ Substantial: The segments are large and profitable enough
to serve.
➤ Accessible: The segments can be effectively reached and
served.
➤ Differentiable: The segments are conceptually
distinguishable and respond differently to different
marketing mixes.
If two segments respond identically to a particular offer, they
do not constitute separate segments.
➤ Actionable: Effective programs can be formulated for
attracting and serving the segments.
 Market Targeting
• refers evaluating each market segment's attractiveness and
selecting one or more of the market segments to enter. At this
point we will look at how companies evaluate and select target
segments.
1. Evaluating market segments
• In evaluating different market segments, a firm must look at
three factors:
 segment size and growth,
segment structural attractiveness, and
 company objectives and resources.
2. Selecting the Target Market
• After evaluating different segments, the company must now
decide which and how many segments it will target.
• A target market consists of set of buyers who share common
needs or characteristics that the company decides to serve.
 Target Marketing Strategies

1.Undifferentiated (Mass) Marketing

• Using undifferentiated market coverage strategy, a firm
might decide to ignore market segment differences and
target the whole market with one offer.
2. Differentiated (segmented) marketing
3. Concentrated (Niche) Marketing
4. Micro Marketing includes local and individual
 Positioning
• After segmenting and targeting its market, then the
company should develop marketing mix program to each
target market that it will tailored to each targeted market
so that customers in each target market will respond in
favor of the company’s product.
• This, the act of – designing the company’s offering and
image to occupy a distinctive place in the mind of the
target customers is what we call positioning.
 CHAPTER FIVE
MANAGING MARKETING MIX ELEMENTS
5.1. Meaning of Product
Product (Goods, Services, and Ideas):
•People satisfy their needs and wants with products.
•A product is anything that can be offered to satisfy a need
or want.
• The concept of product is not limited to physical objects
but also it includes intangible goods such as, service(s), and
idea(s) which may be activities or benefits to customers.
•Sometimes, it may be a combination of physical product
along with services.
Fig. Three Levels of Product
5.1.1. Classification of products
Marketers classically distinguish two factors to broadly categorize
products in to varying types.
A. Durability and tangibility: based on tangibility and durability,
products can be classified in to three:
•Non-durable goods are tangible items that are purchased and
consumed within short period of time and in one or few uses.
E.g. pen, soap, chewing gum etc.
•Durable goods are tangible items that normally survive for long period
of time and many uses.
E.g. TV, Radio, Table etc
•Service- is any activity or benefit that one party can offer to another
that is essentially intangible and doesn't result in the ownership of
anything.
E.g. Repair and maintenance service, training, haircuts, etc.
B. Ultimate use: on the basis of purpose of purchase and use of product, they are
divided in to two:
1. Consumer product
2. Industrial product
1. Consumer products
 Consumer products are those bought by final consumers for personal
consumption. Marketers usually classify these goods further based on how
consumers go about buying them. The basic categories include:
 A. Convenience products: they are consumer goods and services that the
consumer knows enough about before going out buy it and then actually buys it
with a minimum of comparison and buying efforts. Convenience products are
lower priced items and require little shopping as the consumer regularly purchases
them.
• Convenience products can be divided further in to staples, impulse products, and
emergency products.
• Staples are products that consumers buy on a regular basis such as teff, milk,
butter etc.
• Impulse products are purchased with little planning or search effort. These
products are normally widely available. Thus, candy bars and magazines are
placed next to checkout counters in many stores because shoppers may not
otherwise thinks of buying them.
• Emergency products- consumers buy them when their need is urgent-umbrella
during a rainstorm.
 Type of Consumer Product
Marketing Convenience Shopping Specialty Unsought
Considerations

Customer buying Frequent purchase; little Less frequent purchase; Strong brand preference Little product
behavior planning, little much planning and and loyalty; special awareness; knowledge
comparison or hopping shopping effort; purchase effort; little (or, if aware, little or
effort; low customer comparison of brands on comparison of brands; low even negative interest
involvement price, quality, and style price sensitivity

Price Low price Higher price High price Varies

Distribution Widespread Selective distribution in Exclusive distribution in Varies

distribution; convenient fewer outlets only one or a few
locations outlets per market area

Promotion Mass promotion by the Advertising and More carefully targeted Aggressive advertising
producer personal selling by both promotion by both the and personal selling by
the producer and resellers producer and resellers the producer and
reseller

Toothpaste, magazines, Major appliances, Luxury goods, such as Life insurance and Red
Examples
and laundry detergent televisions, furniture, Rolex watches or fine Cross blood donations
and clothing crystal
 2. Industrial products
• Industrial products are those purchased for
further processing or for use in business
operation.
• There are three groups of industrial products:
I. Material and parts: are industrial products that become a
part of the buyer's product, through further processing or
as components.
II.Capital items: are industrial products that aid in the
buyer's production or operations.
They include installations and accessory equipment.
III. Supplies and services are industrial products that do not
enter the finished product at all.
 5.1.2 Product and service decisions
• Marketers make product and service decisions at three
levels: individual product decisions, product line decisions,
and product mix decisions.
• FIG. Individual Product and service decisions

Product support
Product Branding Packaging Labeling services
attributes
 5.1.3.New product development process
• There are numerous connotations of new product but the major categories are:
 Products that are really innovative & truly unique: these products are new to the
market and world and satisfy a real need that is not being satisfied at the time it is
introduced.
 Replacements or modifications: that are significantly different from existing
products in terms of form, function, and benefits provided.
 Imitative products: that is new to a particular company but not new to the market.
1. Idea Generation the systematic search for new-product ideas.
2. Screening and Ability The purpose of the succeeding stages is to reduce number
of idea to a manageable few which deserve further attention.
3. product concept /testing/Requirement )
4. Marketing Strategy Development
5. Business Analysis
6. Product Development =actual product.
7. Test Marketing
8. Commercialization
5.1.4. Product Life Cycle and its Management

• Product life cycle is a concept that attempts to describe a product’s

sales, profits, market share, competitors
• Products are created, they live and then they die.
• This link is called the product life cycle.
• The length of duration in the product life cycle is not the same for all
products.
• The basic product life cycle consists of four major stages: Introduction,
growth, maturity, and decline.
• Factors, which affect the length of product life cycle, include customer
preferences, seasons, technological changes, competition, and the
rate of acceptance of consumers for new ideas.
Fig. Factors affecting price decisions
 External factors affecting pricing
decisions
 External factors that affect pricing decision include the nature of the
market, demand level, competition and other environmental
elements.
Pure competition/perfectly competitive
• Under pure competition, the market consists of many buyers and sellers
trading in a uniform commodity. No single buyer or seller has much
effect on the going market price. A seller cannot charge more than the
going price because buyers can obtain as much as they need at the
going price.
Monopolistic competition
• Under monopolistic competition, the market consists of many buyers
and sellers that trade over a range of prices rather than a single market
price.
A range of prices occurs because sellers can differentiate their offers to
buyers.
Oligopolistic competition
• Under oligopolistic competition, the market consists of a few sellers that
are highly sensitive to each other's pricing and marketing strategies.
• Each seller is alert to competitors' strategies and moves.
Pure monopoly
• A single seller exists in the market being a sole supplier of a particular
product.
Pricing Approaches:
 pricing strategies
Market skimming pricing
•Some companies use market penetration
pricing for new innovations i.e. they set an
initial low price in order to penetrate the
market quickly and deeply.
Market penetration pricing
•Several conditions must be fulfilled for this
low price strategy to work. These include:
1.The market must be highly price sensitive so
that a low price produces more market growth.
2.Production and distribution costs must fall as
sales volume increases.
3.The low price must help keep out the
competition,
 Market penetration pricing
• Some companies use market penetration
pricing for new innovations i.e. they set an
initial low price in order to penetrate the
market quickly and deeply.
• Several conditions must be fulfilled for this
low price strategy to work. These include:
1.The market must be highly price sensitive so
that a low price produces more market
growth.
2.Production and distribution costs must fall
as sales volume increases.
3.The low price must help keep out the
competition,
5.3. Promotion Decisions(Integrated marketing
communications)
Marketing communications are the
means by which firms attempt to inform,
persuade and remind customers-
What is marketing communication
directly or indirectly about the products
and brands that they sell.
The marketing communications mix
A company’s total marketing communications mix-
also called its promotion mix consists of
1.Advertising
2.Sales promotion
3.Public relation and publicity
4. Personal selling and direct marketing.
 The marketing communications (promotion)mix
A company’s total marketing communications mix- also
called its promotion mix consists of

1. Advertising
2. Sales promotion
3. Public relation and
publicity
4. Personal selling and
direct marketing.
 Promotion mix
Advertising- any good Public relation- building
relationships with the
paid form of non- company’s various publics by
personal obtaining favorable publicity,
presentation of building up a good corporate
ideas, goods, or image and handling or
heading off unfavorable
services by an rumors, events and stories.
identified sponsor. It Personal selling-
includes print personal presentation by
media, internet, the firm’s sales force for
broadcast, outdoor, the purpose of making
etc. sales and building
Sales promotion- customer relationships.
short term incentives Direct marketing- direct
to encourage the connections with carefully
targeted individual
purchase or sale of customers to both obtain
products. E.g. an immediate response
coupons, premium, and lasting relationships-
the use of telephone, fax,
specialty ad, e-mail, mail, the internet
discount, sample, and other tools to
communicate directly with
 Sales Promotion Uses
• Introduce new products
• Get existing customers to buy more
• Attract new customers
• Combat competition
• Maintain sales in off season
• Increase retail inventories
• Tie in advertising & personal selling
• Enhance personal selling efforts
 Publicity
on-paid, unsponsored, nonpersonal (media) communications
Advantages
Most credible
Low cost mass communication Disadvantages

 Very little control

 Requires media cooperation.

 Can be negative.
 Steps in developing effective
communication
The marketing
marketing communicator
communicator
must do
do the
the following:
following:
1.Identifying
1.Identifying the
the target
target audience,
audience,
2.Determining
2.Determining thethe communication
communication
objectives,
objectives,
3.
3. Design
Design aa message,
message,
4.Choose
4.Choose the
the media
media through
throughwhich
which
to
to send
send the
the message,
message,
5.
5. Select
Select the
the message
message source
sourceand
and
collect
collect feedback.
feedback.
 Marketing Channels
5.4. The nature and importance of marketing channels
• Some producers sell their marketing offers directly to final consumers.
• On the other hand, most companies use marketing intermediaries to bring
their products into the target market.
 channel of distribution refers to the route through which products move
and change hands between and among the participants in the value
delivery network.
 Some key functions performed by marketing channel
members are the following.
• Information
• Promotion,
• Contact
• Matching
• Negotiation
• Physical distribution
• Financing
• Risk taking
A company’s product may reach to final consumers through intensive
distribution, selective distribution or exclusive distribution.
Intensive distribution means stocking the product in as many
outlets as possible.
 Selective distribution – it is the use of more than one but less than
all, of intermediaries
• Exclusive distribution – the producer gives only a limited number
of dealers the exclusive right to distribute its products in their
territories. Such disagreements generate channel conflict. Conflict
can occur at two levels.
• Horizontal conflict – occurs among firms at the same level of the
channel. E.g. some Ford dealers in Chicago might complain the other
dealers in the city for pricing too low or advertising outside their
assigned territories.
• Vertical conflict – conflicts between different levels of the same
channel.
End of chapters