Chapter one

1. An overview of marketing
1.1. What Is Marketing?

What's the first thing you think of when you hear the word marketing? Do you imagine salespeople
talking up their company's products with potential customers? Or Finance managers calculating the
possible profits that a new product may bring in?

Marketing is an essential part of business, and without marketing, even the best products (goods and
services) fail. Companies constantly fail because they don’t know that is happening in the market place
and as a result they are not fulfill their customer’s needs. They mistakenly believe that with proper
amount of advertising customers will buy whatever they are offered.

The American Marketing Association has developed a comprehensive definition: Marketing is the
process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods,
and services to create exchanges that satisfy individuals' and companies' goals.

A distinguished writer, Philip Kotler defined: Marketing as a social and managerial process by which
individuals and groups obtain what they need and want through creating, offering and exchanging
products of value with others; this definition is wholly based on the core concepts of marketing.
1.2. Core concepts of marketing
Marketing can be further understood by defining the core concepts applied by marketing managers.
1. Need, want and demand
2. Product (physical good and service)
3. Value, satisfaction, and quality
4. Exchange, transaction and relationship
5. Market
1. Need, want and demand
a) Needs

Needs are basis for motivation of people and they constitute basic human requirements. People need food,
water, air, and shelter to survive. People also do have strong needs for recreation, education, and
entertainment. Each and every one of us act the way we do, like purchase of goods and services, in order
to satisfy our needs.

Needs can be physical (food, clothing), social needs (belongingness), and individual needs (Knowledge)
etc…

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A human need is a state of deprivation of basic satisfaction. When we are deprived or deficient for
something, we strive or act to fulfill the deficiency. These needs are essential for life or quality of life,
and marketing persons cannot affect the needs themselves, but marketing can influence how those needs
are fulfilled.

Marketers recognize that while need recognition is often a basic simple process, the way a consumer
perceives a need, and becomes motivated to satisfy it; will influence the remainder of the decision
process. A marketer must try to understand the need of the target market. Needs may be stated or
unstated. Stated needs are those which the consumer (i.e. the market) itself is well aware of and are dealt
with by the customer driven marketing. Such needs are straightforward detected by the seller a particular
good or service and the customers’ interest itself is used as a guiding tool to design the right marketing
program. Unstated needs are those, which the buyer has but may not be well conscious about, and need
some level of trigger or initiator from the seller side. Companies sometimes need to work on awareness
strategies so as to convince the customers that the product is worth using or consuming. The appropriate
marketing approach for such need category is customer-driving marketing. This is a strategy where
producers identify that there are some sorts of needs that should be made clear to the user and later
provide offerings that would serve the needs.

b) Wants

Wants are desires for specific satisfiers of needs. Need changed to want when it directed to specific
objects that might satisfy the required need. Ethiopian need food but want Enjera, American wants
hamburger, a person in Mauritius needs food but wants mango, rice, lentils, and beans. Wants are shaped
by ones society. Wants are many and are subjected to cultural shifts and technological dynamism,
whereas needs are few and are innate or inborn.

Marketers strive not to create needs but identify them and develop products (wants) that would satisfy the
needs. Marketers do not create needs: needs preexist marketers. Marketers, for example, might promote
the idea that a Mercedes would satisfy a person’s need for social status. They do not, however, create the
need for social status.

Note: There are several alternative wants to satisfy a single need. A seller always makes concerted efforts
to make his offering/s one of the objects consumers use to satisfy their needs. E.g. an airline company has
to promote its services so that customers use aircrafts to satisfy their intrinsic needs for transportation.

C) Demands
Another core concept that you should understand is demand. Demands are wants for specific products
that are backed by an ability and willingness to buy them. Wants become demand when they are
supported by purchasing power. In the following example, you will be able to clearly distinguish demands

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from wants. Many people want a Mercedes or other luxuries personal automobiles, but only few are able
and willing to buy one.
Marketers should measure not only how many people want their products, but also how many would
actually be willing and able to buy it. Marketers influence demand by making the product more attractive
and appropriate, affordable and easily available to target markets. These activities are collectively named
as marketing mix elements.
2. Product
A product may be defined as a set of tangible and intangible attributes including color, packaging, price
manufacturer’s prestige, and retailer’s prestige and manufacturer’s services, which satisfy the needs and
wants of customers.
The key idea in this definition is that the consumers are buying more than a set of physical attributes.
Fundamentally, they are buying want satisfaction. Plus, a wise firm sells product benefits rather than just
products. In fact though the product features such as packaging, branding, color etc. add new dimensions
to the product, the core of a product is the benefit of basic services.
A product is anything that can be offered to the market for attention, acquisition, use or consumption that
might satisfy a need and includes physical goods, services, experiences, persons, places, ideas, properties,
etc.
Marketing starts with the identification of human needs and culminates with the satisfaction of those
needs. It is by offering something, that the marketing person achieves this. And this offering is the
product.
3. Value, Satisfaction, and Quality
Value is the difference between the benefit the customer gains from owing and using a product and the
costs of obtain the product. When we make choice, we have to consider the bundle of products.
Satisfaction is the extent to which a products perceived performance matches buyer’s expectations. There
are three levels of satisfaction. Dissatisfaction is when products performance falls short of the customers
expectations. Satisfaction is when performance matches expectation. Delight is when performance
exceeds expectation. Promotion can affect satisfaction level. Outstanding marketing companies keep their
customers satisfied and satisfied customers make repeat purchases and they tell others about their good
experiences with the product.
Quality is the totality of feathers and characteristics of a product or service that bear on its ability to
satisfy customer needs. This means that the product is quality product when its product or service meet or
exceed customer expectations. It begins with customer needs and ends with customer satisfaction. Total
quality management (TQM) is a program which designed to constantly improve the quality of products,
services and marketing processes.

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4. Exchange and Transaction
There are four ways for people to obtain a product. Exchange is one of the four ways in which a person
can obtain a product. Let us see the nature of the following ways of obtaining a product and compare it
with exchange mode.
- Self-production: One way of obtaining a product or service is producing it by oneself. For
instance, people can possibly relieve hunger through hunting, fishing, or fruit gathering. These
are ways of self-production. In this case, there is no market and no marketing at all.
- Coercion: This is another possible mode of obtaining a product. By coercion, we mean the use of
force to get something from someone, where no benefit is offered to the other. For instance, a
hungry person can snatch food from another person. Here, the former gets the food, whereas, the
latter obviously gets no benefit.
Begging: This is the third possible way of obtaining a product. Hungry people can approach
others and beg for food. They have nothing tangible to offer to others, except appreciation and
thankfulness.
- Exchange: Exchange is the fourth possible way of obtaining a product. Hungry people can offer
a resource in return for food, such as money, a good, or service. Marketing emerges when people
decide to satisfy needs and wants through exchange.
Exchange, which is one of the core concepts of marketing, is the process of obtaining a desired product
from someone by offering something in return. For exchange potential to exist, five conditions must be
satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Whether exchange actually takes place or not depends upon whether the two parties can agree on terms
that will leave them both (or at least not worse off) than before. Exchange is normally viewed as a value-
creating process as it leaves both parties better off.
A transaction is a trade of values between two or more parties: A gives X to B and receives Y in return.
A transaction can be of a classic monetary mode or barter one. A barter transaction involves trading
goods or services for other goods or services. E.g. A gives salt to B and B gives soap to A.
A transaction differs from a transfer. In a transfer, A gives X to B but does not receive any thing tangible
in return. Gifts, subsidies, and charitable contributions are all transfers.
To make successful exchanges, marketers analyze what each party expects from the transaction.
6. Market, marketer and prospect

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It is unquestionable that you have heard the word market so many times in your entire life. How do you
think should the word market be defined?
There were several definitions provided for the word markets by people from various walks of life.
Many people, traditionally, think that a “market” is a “place” where buyers and sellers gather to exchange
their goods, such as a village square. However, a market is a far more different concept than just a mere
place, and as a student taking the course principles of marketing, that is a basic point for you to grasp. In
today’s rapidly changing technology, where people undertake most of their shopping through the Internet,
it is hardly possible to restrict the meaning of a market as just a place.
Let us have a look at the following definition of markets:
Markets are viewed as collection of buyers and sellers (Economists). The economists commonly define
markets as inclusive of both the buyers and sellers who come together to facilitate exchange. They have
the dominant economy connotation that the supply (sellers) and demand (buyers) regulate the markets and
the general economy. And the definition has its deep root in this connotation.
There is no argument that there must be at least two parties to undertake marketing exchange. But this
definition, from the view point of marketing basics, should be evaluated very critically as to whether it
confirms to the meanings we assign to terms lie marketing, marketers, and prospects. Suppose that the
definition of markets is as stated above (i.e. collection of buyers and sellers). This would leave the
marketers or producers (sellers) with no active role to play in designing marketing programs. This is true
as they are already collectively regarded as part of market. Let you try to answer the following question.
If BGI Ethiopia and its customers are collectively named as markets (i.e. producer and consumer
together), who is going to be responsible for the selling, promotion, pricing etc. of the products then?
Therefore, markets, when we look at them from the viewpoint of the principles of marketing, constitute
the buyers only. The sellers are termed as the industry. A market consists of all the set of actual and
potential customers sharing a particular need or want who might be willing and able to engage in
exchange to satisfy that need or want.
From the above point, we see that it is important to separate the role of the seller side from that of the
buyer. The above definition reaffirms that markets refer to the buyer side for which the seller
(companies/industry) design the appropriate marketing program. The definition also is quit important one
to note as it empowers the marketer (seller) as an active initiator of marketing exchange when compared
to the prospects (potential buyers).
Let us now split the definition and look at some of the important aspects of markets:
Markets, from the definition above, comprise actual and potential customers who:
- Exhibit needs or wants to a specific product or service a marketer is offering.
- Have resources or capacity that interests others, and
- Are willing and have the authority to offer the resources in exchange.

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Therefore, you can understand from the above discussion that, the size of a market depends on the
number of people who exhibit the need or want, have resources that interest others, and willing and able
to offer these resources in exchange for what they want. Whenever a person or an organization does not
fulfill anyone of the criteria mentioned above, he/she/it shall not be part of the market.
A marketer is someone seeking a response (attention, a purchase, a vote, a donation) from one or more
prospects that might engage in exchange of values.
A prospect is someone whom the marketer identifies as potentially willing and able to engage in an
exchange.
11. Marketing Mix
Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the
target market. Marketing mix consists of the 4p’s of marketing. These are product, price, place and
promotion. Actually marketing p’s are not only 4 rather they are 7 but most of the time 7p’s are used in
service marketing.
Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’ four Cs:
Four Ps Four Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
1.3. Importance of Marketing
This particular section of the unit will help you understand the importance of marketing for you as an
individual in particular, for a given organization or company, for the general socio-economic system, and
finally for the global economy as a whole.
1.3.1. Importance of Marketing: Values Added by the Function
Several products are sold in virtually every country in the world and effective marketing is the common
complement in all these diverse situations. Marketing plays a major role in individual’s personal life, in
an organization’s operations, in a country’s socio-economic system and in the general global economy.
Some people feel that marketing is an activity needed by profit making organizations only. To what
extent is this claim true? Do you think marketing is important to you? If you say yes, in what aspects or
terms it helps you?
The importance of marketing is extended to the level one may not even imagine. Although there is a
misunderstanding regarding the attachment of marketing to only profit seeking organizations, this is not
true as marketing affects all types of organizations, including profit and non-profit seeking organizations
such as government organizations, charitable institutions, hospitals, schools, churches, mosques etc.

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Marketing affects our life in several ways and all individuals require the knowledge of marketing for their
marketing related decisions. Marketing influences us daily in our role as producers of goods and services,
as consumers, as employees, as well as, the member of the society.
As producers (marketing executives), we make marketing related decisions that revolve around the
elements of marketing, competitive situations, consumer behaviors, and other related areas. Some of the
basic decisions that we make as producers are as follows:
- Identifying who our clients/customers are,
- Identifying what their needs and wants are,
- What goods and services should we produce,
- Where to sell our products,
- What features of the products to emphasize when we have advertise,
- How to position our offerings
- What price to charge etc…
As consumers, marketing affects us in several ways, and we are concerned with decisions like:
- Where to shop,
- Which sales person to contact,
- What price to pay,
- Which particular product version to select, etc
Socio-Economic Benefits of Marketing: Employment and Utility Creation
Marketing is believed to contribute for raising the standard of living in a given socio-economic system of
a country. The major means by which marketing achieves this purpose are provision of employment
opportunities and utility creation.
Marketing as a Source of Employment
Marketing provides lots of us employment opportunities and carrier development as large people are
employed in marketing activities. Marketing provides several career opportunities for specialization. A
person participates in product planning, pricing, promotion, publicity distribution etc. Marketing creates
more capital for investment, which in turn provides social growth and employment opportunities.
Marketing as a Means of Utility Creation
Marketing is typically a function responsible for creation of various types of utilities. The range of
utilities created by marketing is an indication of its importance in socio-economic system. Utility may be
defined, as the attitude in an item that made it capable of satisfying human wants. Marketing creates six
types of utilities:
a) Place Utility: It is created when a product is made readily available (accessible) to potential
customers at the location where they want it. The role of distribution in marketing is mostly
attached with creating place utility, i.e. people between the producers and end users make the
products easily accessible to the end users regardless of where the items are produced.

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 b) Time Utility: It is created when products are available to customers, as they want them, i.e.
marketers analyze the needs and wants of customers in relation to the time in which the
customers need the product.
c) Possession Utility: As selling is one major activity in marketing, it creates possession utility by
selling the products to the customers. Think of all the items (products) you own at the moment.
Almost all the products you own are the results of the marketing activity. A person/an
organization become the owner or possessor of some property because of marketing exchanges in
most cases.
d) Form Utility: Form entails the physical or chemical changes that take place through production.
Changing the form of one material into another (for example cotton into textile) is mainly the task
of the production department than the marketing department. However, marketers help the change
of form by suggesting design, quality, composition, etc. As it is mostly the marketing people who
are in close contact with the ultimate customers, they are in a better position to suggest the quality
and design requirements of the customers.
e) Information Utility: The marketing function adds a tremendous value by providing the bulk of
information about a firms offering to the target market. This is usually accomplished through the
promotional mix elements such as advertising, public relation, sales promotion etc. You are
equipped with pieces of information related to companies’ products, their after sales services or
their general future program in a particular target market because of the information utility firms
provide.
f) Image Utility: It involves the emotional and psychological values that a person attaches to the
product or a brand, because of the reputation; prestige or high social standing that the product
creates. Marketing, especially advertising and other forms of promotion, often contribute most to
the creation of image utility.
Importance of Marketing to the Global Economy
Trade agreement and economic unifications are altering global business features. Most nations today
regardless of their degree of economic development or even their political philosophy-recognize the
importance of marketing beyond their own borders. Indeed, economic growth in less developed nations of
the world depends greatly on their ability to design effective marketing system to produce global
customers for their raw materials and industrial outputs. Global (international) marketing facilitates the
movement of goods and services and factors of production from one part of the world to the other and
hence plays a great role in resources redistribution across the globe. The establishment of lots of
economic unifications, like the European Union (EU), Economic Community of West African States
(ECOWAS), the North America Free Trade Agreement (NAFTA) etc, among other things, is meant for
facilitating marketing across boarders. The World Trade Organization (WTO) also plays significant roles
in reducing or even avoiding trade barriers like quotas, tariffs etc… in the international market places.

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MARKETING PHYLOSOPHY
1. The Production Concept
The production concept is oldest orientation which holds that consumers will favor products that are
widely available and low in cost. (at lower cost)
Conditions under which the assumption holds true:
- When demand for a product is greater than its supply
- When unit cost of the product is high.
Managers of production oriented organizations concentrate or achieving high production efficiency
achieving wide distribution coverage.
2. The Product Concept
The product concept holds that consumers will favors those products that offer the most quality,
performance, or innovative features. Managers of these companies pay attention to produce superior
quality products and improving it over time
Managers of such firms will suffer from marketing myopia i.e., to give more affection to their products
without considering consumers' interest.
3, Selling Concept
The selling concept holds that consumers will not buy enough of the firm's product unless extensive
promotions made, and large scale selling goes on {aggressive selling and promotional effort Undertaken}
The concept is practically true
 with unsought goods products that buyers do not normally think of buying -E.G insurance/
blood donation
 When firms face overcapacity!
The selling concept states that firms sell what they make instead of making what is actually wanted in the
market. The concept is not in harmony with the relation ship marketing, it focuses on simple sales
transaction which has short term effects on customer satisfaction and retention.
4, Marketing Concept
The marketing concept is one of marketing management philosophies while holds that achieving
organizational goals depends on determining the needs and wants of target markets and delivering the
desired satisfactions more effectively than competitor do.
There are some basic pillars under which marketing concept operate:
i. Target market
ii. customer needs and wants
iii. integrated marketing
iv. Profit making by satisfying customers

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 Selling and marketing concepts contrasted
starting point Focus means Ends
Factory existing products selling &promotion Profits through
Sales volume
market (target) Customer needs Integrated marketing profits through
customer
satisfaction

The job in the selling concept is to find the right customer for your product whereas for marketing
concept, the right product for your customer.
As indicated in the above selling marketing contrast:
- Selling concept takes inside-out perspective ( from factory to markets)
- marketing concept takes outside-in perspective from well defined market
5. The Social Marketing Concept
This concept holds that the organization task is to determine the needs, wants, and internets of target
market so as to deliver superior quality or value in such a way that maintains or improves the customer's
and societal will- being.
The societal marketing concept maintains the balance between the three major considerations these are
society (Human welfare)

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 Chapter Two
The Marketing Environment
Marketers need to be good at building relationships with customers, others in the company, and
External partners. To do this effectively, they must understand the major environmental forces
that surround all of these relationships. A company’s Marketing Environmental consists of the
actors and forces outside marketing that affect marketing management’s ability to build and
maintain successful relationships with target customers. Successful companies know the vital
importance of constantly watching and adapting to the changing environment.
As we move into the twenty first century, both consumers and marketers wonder what the future
will bring. The environment continues to change rapidly. More than any other in the company,
marketers must be the trend trackers and opportunity seekers. All though every manager in an
organization needs to observe the outside environment, marketers have two special aptitudes.
They have disciplined methods marketing intelligence and marketing research for collecting
information about the marketing environment. They also spend more time in the customer and
competitor environments. By carefully studying the environment, marketers adapt their strategies
to meet new market place challenges and opportunities. The marketing environment is made up
of a macro environment and a micro environment. The macro environment consists of the larger
societal forces that affect the microenvironment demographic, economic, natural, technological,
political, and cultural forces. The microenvironment consists of the actors close to the company
that affect its ability to service its customers- the Company, suppliers, marketing intermediaries,
customer markets, competitors and publics.
2.1. THE COMPANY’S MACRO ENVIRONMENT
The company and all of the other actors operate in a larger macro environment of forces that
shape opportunities and pose threats to company. The figure below shows the six major forces in
the company’s macro environment. In the remaining sections of this unit, we examine these
forces and show how they affect marketing plans.

A. Demographic Environment

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Demographic tell marketers who current and potential customers are; where they are; and how
many are likely to buy what the marketer is selling. Demography is the study of human
population in terms of size, density, location, age, gender, race, occupation and other statistics.
The demographics environment is of major interest to marketers because it involves, people, and
people make up markets. The world population is growing at an explosive rate. It now totals
more than 6.1 billion by the year 2030. Changes in the world demographic environment have
major implications for business. For example, consider China. Twenty five years ago, to curb its
skyrocketing population, the Chinese government passed regulations limiting families to one
child each. As a result, Chinese children known as “little emperors and empresses” are being
showered with attention and luxuries under what’s known as “six pocket syndrome” As many as
six adults two parents and four doting grandparents may be including the whims of each child.
Parents in the average Beijing household now spend about 40 percent of their income on their
cherished only child. Among other things, this trend has created huge market opportunities for
B. Economic Environment
Marketers require buying power as well as people. The Economic Environment consists of
factors that affect consumer purchasing power and spending patterns. Nations vary greatly in
their levels and distribution of income. Some countries have subsistence economies they
consume most of their own agricultural and industrial output. These countries offer few market
opportunities. The other extreme are industrial economies which constitute rich markets for
many different kinds of goods. Marketers must pay close attention to major trends and consumer
spending patterns both across and within their world markets. Following are some of the major
economic trends:
Changes in Income: GDP, Per Capita Income, Disposable Income and so on are economic
variables that may describe a nation’s aggregate favorable or unfavorable nature of the economy.
Individual’s purchasing power is relied on such general truths. These economic variables are
taken as misleading figures for there might be a large amount of money shifting towards one
group, rich people. So, it is advisable to refer to market segment’s income rather than nation
wide margin of earning.

Growth and Recession: These two economic variables affect the marketing environment
differently. An increase in the capacity of an economy to produce goods and services, Compared
from one period of time to another. Economic growth attracts many companies even from highly
developed countries. Ethiopia can be a role model; growth at double digit is a blistering
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phenomenon which attracts large number of multinational companies. Recession is a significant
decline in activity spread across the economy, lasting longer than a few months. It is visible in
industrial production, Employment, real income and wholesale retail trade. The technical
indicator of recession is two consecutive quarters of negative economic growth as measured by a
country’s gross domestic products (GDP).
Changing consumer spending patterns: Consumers at different income levels have different
spending patterns. Ernest Engel, who studied how people shifted their spending as their income
rose, noted some of these differences over a century ago. He found that as family income rises,
the percentage spent on food declines, the percentage spent on housing remains about constant
( except for such utilities as gas, electricity, and public services, which decrease), and both the
percentage spent on most other categories and that devoted to savings increase. Changes in major
economic variables such as income, cost of living, interest rates, savings and borrowing patterns
have a large impact on the market place. Companies watch these variables by using economic
forecasting. Businesses do not have to be wiped out by an economic downturn or caught short in
boom. With adequate warning, they can take advantage of changes in the economic environment.
C. Natural Environment
The natural environment involves the natural resources that are need as inputs by marketers or
that are affected by marketing activities. In many cities around the world, air and water pollution
have reached dangerous levels. World concern continues to amount about the possibilities of
global warming, and may environmentalists fear that we soon will be buried on our own trash.
Marketers should be aware of several trends in the natural environment. The first involves
growing shortages of raw materials. Air and water may seem to be infinite resources, but some
groups see long run dangers. Air pollution chokes many of the world’s large cities and water
shortages are already a big problem in some parts of the world. Renewable resources, such as
oil, coal, and various minerals, pose a serious problem. Firms making products that require these
scarce resources face large cost increases, even if the materials do remain available.
A second environmental trend is increased pollution. Industry will almost always damage the
quality of the natural environment. Consider the disposal of chemical and nuclear wastes, the
dangerous mercury levels in the ocean, the quantity of chemical pollutants in the soil and food
supply; and the littering of the environment with non-biodegradable bottles, Plastics, and other
packaging materials.
A third trend is increased government intervention in natural resource management. The

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Governments of different countries vary in their concern and efforts to promote a clean
environment. Some like the German government vigorously pursue environmental quality.
Others, especially many poorer nations, do little about pollution, largely because they lack the
needed funds or political will.
Even the richer nations lack the vast funds and political harmony needs to mount a worldwide
Environmental effort. The general hope is that companies around the world will accept more
social responsibility and that less expensive devices can be found to control and reduce
pollution. Concern for the natural environment has spawned the so-called green movement.
Today, enlightened companies go beyond what government regulations dictate. They are
developing environmentally sustainable strategies and practices in an effort to create a world
economy that the planet can support indefinitely. They are responding to consumer demands
with ecologically safer products, recyclable or biodegradable packaging, better pollution control,
and more energy-efficient operations. Some organizations run a pollution prevention pays
program that has led to a substantial reduction in pollution and costs. Others use a special
software package to choose the least harmful materials, cut hazardous waste, reduce energy use,
and improve product recycling in its operations. Still others eliminated polystyrene cartons and
now use smaller, recyclable paper wrappings and napkins.
D. Technological Environment
The technological environment is perhaps the most dramatic forces now shaping our destiny.
Technology has released such wonders as antibiotics, organ transplants, laptop computers and
the Internet. It also has released such horrors as nuclear missiles, chemical weapons and assault
rifles. It has released such mixed blessings as the automobile, television and credit cards. Our
attitude towards technology depends on whether we are more impressed with its wonders or its
blunders.
New technologies create new markets and opportunities. However, every new technology
replaces an older technology. Transistors hurt the vacuum-tube industry, Xerography hurt the
carbon paper business, the auto hurt the railroads and compact disks hurt phonograph records.
When old industries fought or ignored new technologies, their business declined. Thus,
marketers should watch the technological environment closely. Companies that don’t keep up
with technological change soon will find their products outdated. They will miss new product
and market opportunities. The marketer should monitor the following trends in technology: the
pace of change, the opportunities for innovation, and increased regulation.

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Accelerating Pace of the Technological Change: many of today’s common products were not
available 40 years ago. For example, personal computers, digital wristwatches, radio recorders or
fax machines were not available some decades ago. More ideas are being worked on; the time
lag between new ideas and their successful implementation is decreasing rapidly; and the timer
between introduction and peak production is shortening considerably. Ninety percent of all the
scientists whoever lived are alive today, and technology feeds upon itself.
The advent of personal computers and fax machines has made it possible for people to
telecommute that is, work at home instead of traveling to offices that may be 30 or more minutes
away. Some hope that this trend will reduce auto pollution, bring the family closer together, and
create more home centered entertainment and activity. It will also have substantial impact on
shopping behavior and marketing performance.
Unlimited Opportunities for Innovation: Scientist today working on a starting range of new
technologies that will revolutionize products and production processes. Some of the most
exciting work is being done in biotechnology, solid-state electronics, robotics and materials
sciences, Researchers are working on AIDS cures, happiness pills, painkillers, totally safe
contraceptives and nonfattening foods. They are designing robots for firefighting, underwater
exploration and home nursing. In addition, scientists also work on fantasy products, such as
small flying cars, three dimensional television, and space colonies. The Challenge in each case is
not only technical but also commercial-to develop affordable versions of these products.
Increased Regulation of Technological Change: as products become more complex, the public
needs to know that these are safe. Consequently, government agencies powers to investigate and
ban potentially unsafe products have been expanded. Safety and health regulations have also
increased in the areas of food, automobiles, clothing, electrical appliances and construction
marketers must be aware of these regulations when proposing, developing, and launching new
products.
E. Political and Legal Environment
Marketing decisions are strongly affected by developments in the political and legal
environment. This environment is composed of laws, government agencies, and pressure groups
that influence and limit various organizations and individuals. Legislation regulating business:
business legislation has three main purposes; to protect companies from unfair competition,
to protect consumers from unfair business practices and to protect the interest of society
from unbridled business behavior. A major purpose of business legislation and enforcement is
to charge businesses with the social costs created by their products or production processes.
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Legislation affecting businesses has steadily increased over the years. Several countries have
been active in establishing a new framework of laws covering competitive behavior, product
standards, product reliability and commercial transactions. And other countries are passing laws
to promote and regulate an open market economy.
Marketers must have a good working knowledge of the major laws protecting competition,
consumers, and society. Companies generally establish legal review procedures and promulgate
ethical standards to guide their marketing managers. As more and more business takes place in
cyberspace, marketers must establish new parameters for dong business ethically.
Growth of Special Interest Groups: the number and power of special interest groups have
increased over the past three decades. Political action committees lobby government officials and
pressure business executives to pay more attention to consumer rights, women’s rights, senior
citizen rights, and minority rights. Many companies have established public affairs departments
to deal with these groups and issues. An important force affecting business is the consumerist
movement- an organized movement of citizens and government to strengthen the rights and
powers of buyers in relation to sellers. Clearly, new laws and growing numbers of pressure
groups have put more restraints on marketers. Marketers have to clear their plans with the
company’s legal, public relations, public affairs and consumer- affairs departments.
F. Cultural Environment
The cultural environment is made up of institutions and other forces that affect a society’s basic
values, perceptions, preferences, and behaviors. People grow up in a particular society that
shapes their basic beliefs and values. They absorb a worldview that defines their relationships
with others. The following cultural characteristics can affect marketing decision making.
Persistence of cultural Values
People in a given society hold many beliefs and values. Their core beliefs and values have a high
degree of persistence. These beliefs shape more specific attitudes and behaviors found in
everyday life. Core beliefs and values are passed on from parents to children and are reinforced
by schools, churches, business, and government. Secondary beliefs and values are more open to
change. Believing in marriage is a core belief; believing that people should et married early in
life is secondary belief. Marketers have some chance of changing secondary values but little
chance of changing core values. For example, family- planning marketers could argue more
effectively that people should get married later than that they should not get married at all.
Although core values are fairly persistent, cultural swing do take place. Consider the impact of
popular music groups, movie personalities, and other celebrities on young people’s hair styling
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and clothing norms. Marketers want to predict cultural shifts in order to spot new opportunities
or threats.
2.2. The Company’s Microenvironment
Marketing Managements job is to build relationship with customers by creating customer value
and satisfaction. However, marketing managers cannot do this alone. Marketing success will
require building relationships with other parties, which combine to make up the company’s value
delivery network.
The Company
In designing marketing plans, marketing management takes other company group into account
groups such as top management, finance, research and development / R and D/ , purchasing,
operation, and accounting. All these inter related groups form the internal environment. Top
management sets the company’s mission, objectives, broader strategies and policies. Marketing
managers make decision within the strategies and plans made by top management. Marketing
managers must also work closely with the other company departments. Finance is concerned
with finding and using funds to carry out the marketing plans. The R and D department focuses
on designing safe and attractive products, whereas an operation is responsible for producing and
distributing the desired quality and quantity of products. Accounting has to measure revenues
and costs to help marketing know how it is achieving its objectives. Together, all of these
departments have an impact on the marketing department’s plans and actions. Under the
marketing concept all of these must “think customers’’. They should work in harmony to provide
superior customer value and satisfaction.
Suppliers
Suppliers form an important link in the company’s overall customer value delivery system. They
provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing. Marketing managers must watch supply availability
supply shortages and delays, labor strikes, and other events can cost sales in the short-run and
damage customer satisfaction in the long run. Marketing managers also damage customer
satisfaction in the long run. Marketing managers also monitor the price trends of their key inputs.
Rising supply costs may force price increases that can harm the company’s sales volume. Most
marketers today treat their suppliers as partners in creating and delivering customer value.
Marketing Intermediaries

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Marketing intermediaries help the company to promote, sell and distribute its goods to final
buyers. They include resellers, physical distribution firms, marketing service agencies, and
financial intermediaries.
Resellers - are distribution channel firms that help the company to find customers or make sales
to them. These include wholesalers and retailers who buy and sell merchandise. Selecting and
partnering with resellers is not easy. No longer do manufacturers have many small, independent
resellers from which to choose.
Physical Distribution firms - help the company to stock and move goods from their points of
origin to their distribution. Working with warehouse and transportation firms, a company must
determine the best ways to store and ships goods, balancing factors such as cost, delivering,
speed and safety.
Marketing Service Agencies - are the marketing research firms, advertising agencies, media
firms, and marketing consulting firms that help the company to target and promote its products to
the customer. When the company decides to use one of these agencies, it must choose carefully
because these firms vary in creativity, quality, service, and price.
Financial intermediaries - Include banks credit companies, insurance companies and other
businesses that help finance transactions or insure against the risks associated with the buying
and selling of goods. Most firms and customers depend on financial intermediaries to finance
their transactions. Like suppliers marketing intermediaries form an important component of the
company’s overall value delivery system. In its quest to create satisfying customer relationships,
the company must do more than just optimize its own performance. It must partner effectively
with marketing intermediaries to optimize the performance of the entire system.
Customer
The company needs to study five types of customer markets closely
- Consumer Markets - consist of individuals and households that buy goods and services for
- Business markets - buy goods and services for further processing or for use in their production
process.
- Reseller markets- buy goods and services to resell at profit
- Government market- is made up of government agencies that buy goods and services to
produce public service or transfer the goods and services to others who need them.
- International markets--- consists of these buyers in other countries including consumers,
producers, resellers, and governments. Each market type has special characteristics that call for
careful study by the seller.
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Competitors
The marketing concept states that to be successful, a company must provide greater customer
value and satisfaction than its competitors too. Thus, marketers must do more than simply adapt
to the needs of target consumers. They also must gain strategic advantage by positioning their
offerings strongly against competitors’ offerings in the minds of consumers. No single
competitive marketing strategy is best for all companies. Each firm should consider its own size
and industry position compared with those of its competitors. Large firms with dominant
positions in an industry can use certain strategies that smaller firms cannot afford. But being a
large is not enough. There are winning strategies for large firms, but there are also losing ones.
And small firms can develop strategies that give them better rates of return than large firms
enjoy.
Public
The companies marketing environment also includes various publics. A public is any group that
has an actual or potential interest in or impact on an organization’s ability to achieve its
objectives. We can identify seven types of publics.
- Financial publics- influence the company’s ability to obtain funds. Banks, investment houses,
and stockholders are the major financial publics.
- Media publics-carry news, features, and editorial opinion. They include newspapers,
magazines, and radio and television stations.
- Government Publics-management must take government developments into account.
Marketers must consult the company’s lawyers on issues of product safety, truth in adverting,
and other matters.
- Citizen action publics-a company’s marketing decisions may be questioned by consumer
organizations, environmental groups, minority groups, and others. Its public relations department
can help it stay in touch with consumer and citizen groups.
- Local Publics-include neighborhood residents and community organizations. Large companies
usually appoint a community relations officer to deal with community, attend meetings, answer
questions, and contribute to worthwhile causes.
- General public-A company needs to be concerned about the general public’s attitude towards
its products and activities. The public image of the company affects its buying.
- Internal Publics- include workers, managers, volunteers, and the board of directors. Large
companies use newsletters and other of directors. Large companies use newsletters and other

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means to inform and motivate their internal publics. When employees feel good about their
company, this positive attitude spills over the external publics.
A company can prepare marketing plans for these major publics as well as its customers markets.
Suppose the company wants a specific response from a particular public, such as goodwill,
favorable word of mouth, or donations of time or money. The company would have to design an
offer to this public what is attractive enough to produce the desired response.
2.3. Responding to the Marketing Environment
Someone once observed “there are three kinds of companies: those who make things happen,
those who watch things happen, and those who wonder what has happened.” Many companies
view the marketing environment as an uncontrollable element to which they must react and
adapt. They passively accept the marketing environment and do not try to change it. They
analyze the environmental forces and design strategies that will help the company avoid the
threats and take advantage of the opportunities the environment provides.
Other companies take a proactive stance toward the marketing environment. Rather than simply
watching and reacting, these firms tale aggressive actions to affect the publics and forces in their
marketing environment. Such companies hire lobbyists to influence legislation affecting their
industries and stage media events to gain favorable press coverage. They run advertorials (ads
expressing editorial points of view) to shape public opinion. They press law suits and file
complaints with regulators to keep competitors in line, and they form contractual agreements to
better control their distribution channels. Marketing management cannot always control
environmental forces. In many cases, it must settle for simply watching and reacting to the
environment. For example would have little success trying to influence geographic population
shifts, the economic environment or major cultural values. But whenever possible, smart
marketing managers will take a proactive rather than reactive approach to the marketing
environment.

Chapter Three
Customer Buyer behavior
3.1. Consumer Markets and Consumer Buyer Behavior
Managers in an organization spend a great deal of time thinking about customers. They want to
know who their customers are, what they think and how they feel, and why customers buy their
product rather than competitors' owners themselves do not know exactly what motivates their
buying. But management needs to put top priority on understanding customers and what makes
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them tick. Thus, understanding buyers’ behavior is an essential but difficult task the company
must carefully produce its product and its image to match buyer needs and desires. But buyers
are moved by a complex set of deep and subtle motivations. Buyer behavior springs from deeply
held values and attitudes, from what they think of themselves and what they want others to think
of them, from rationality and common sense, and from whimsy and impulse. Consumer buyer
behavior refers to the buying behavior of final consumer- individuals and households who buy
goods and services for personal consumption. All of these final consumers make up the
consumer market. Consumers or buyers behaviors involves the activities of people engaged
when selecting, purchasing, using and disposing products, so as to satisfy the need and desire.
Consumers around the world vary tremendously in age, income, educational level, and tastes.
They also buy an incredible variety of goods and services. How these diverse consumers connect
with each other and other elements of the world around them impacts their choice among various
products, services, and companies. Here we examine the fascinating array of factors that affect
consumer behavior. Therefore, marketers need to satisfy consumer needs. And in order to do
this, they need to understand the consumers or buyers behavior. If consumers are satisfied:
- They will buy more of a company’s products
- They advocate or talk favorably about the company and company's product
- They may advice the company for improvement
- They give little attention to other companies and their goods
- They may buy new products of the company.

3.1.2. Characteristics Affecting Consumer Behavior

Consumer purchases are influenced strongly by culture, social groups, personal and
psychological characteristics. For the most part marketers cannot control such factors, but they
must take them into account.
A. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer
needs to understand the role played by the buyer's culture, sub-culture and social class.
I. Culture
It is the most basic cause of a person's wants and behavior. Human behavior is largely learned.

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Growing up in a society, a child learns basic values, perceptions wants and behaviors from the
family and other important institutions. Every group or society has a culture, and cultural
influences onbuying behavior may vary greatly from country to country. Failure to adjust to
these differences canresult in ineffective marketing or embarrassing mistakes. Hence marketers
are always trying to spotcultural shifts in order to imagine new products that might be wanted.
II. Subculture
Each culture contains smaller sub-cultures, or groups of people with shared value systems based
oncommon life experiences and situations. Subcultures include nationalities religions, racial
groups, andgeographic regions. Many subcultures make up important market segments, and
marketers oftendesign products and marketing programs tailored to their needs.
III. Social Class
Almost every society has some form of social class structure. Social classes are society's
relativelypermanent and ordered divisions whose members share similar values, interests, and
behaviors.
Social class is not determined by a single factor, such as income, but is measured as a
combination ofoccupation income, education, wealth and other variables. In some social
systems, members ofdifferent classes are reared for certain roles and can't change their social
position. Marketers areinterested in social class because people with in a given social class tend
to exhibit similar buyingbehavior.
Social classes should distinct product and brand preferences in areas such as clothing,
homefurnishings, leisure activity and automobiles.

B. Social Factors
A consumer behavior also is influenced by social factors, such as consumer's small groups,
family andsocial roles and status. Because these social factors can strongly affect consumer
responses, companiesmust take them in to account when designing their marketing strategies.
I. Groups
Many small groups influence a person’s behavior. Groups which have a direct influence and to
whicha person belongs are called membership groups. Some are primary groups with whom
there is regularbut informal interaction such as family, friends, neighbors and co-workers. Some
are secondarygroups, which are more formal and have less regular interaction. These include
organizations likereligious groups, professional associations and trade unions.

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Reference groups are groups that serve as direct (face to face) or indirect points of comparison
orreference in forming a person’s attitudes or behavior. Reference groups to which they don’t
belongoften influence people. For example, an aspiration group is one to which the individual
wishes to be amember of or wishes to be identified with such as a professional society.
Marketers try to identify the reference groups of their target market. Reference groups influence
aperson in at least three ways. They expose a person to new behaviors and lifestyles.
They influence the person's attitudes and self-concept because he/she wants to "fit in". They
alsocreate pressures to conform that may affect the person's product and brand choices.
The importance of group influence varies across products and brands, but it tends to be strongest
forconspicuous purchases. A product or brand can be conspicuous for one of two reasons. First,
it may benoticeable because the buyer is one of few people who own it. Second, a product can be
conspicuousbecause the buyer consumes it in public where others can see it.
Manufacturers of products and brands subject to strong group influence must figure out how to
reachthe opinion leaders in the relevant reference groups. Opinion leaders are people with in a
referencegroup who, because of special skills knowledge, personality or other characteristics,
exert influence onothers. Opinion leaders are found in all strata of society and one person may be
an opinion leader incertain product areas and an opinion follower in others. Marketers try to
identify the personalcharacteristics of opinion leaders for their products, determine what media
they use, and directmessages at them.

II. Family
Family members can strongly influence buyer behavior. We can distinguish between two
families inthe buyer's life. The buyer's parents make up the family of orientation. Parents provide
a person withan orientation toward religion, politics, and economics and a sense of personal
ambition, self-worth,and love. Even if the buyer no longer interacts very much with parents, they
can still significantlyinfluence the buyer's behavior. In countries where parents continue to live
with their children theirinfluence can be crucial.
III. Roles and Status
A person belongs to many groups – family, clubs, and organizations. The person's position in
eachgroup can be defined in terms of both role and status. For instance, a person plays the role of
a childwith his/her parents. In his/her family, he/she plays the role of marketing manager.

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A role consists ofthe activities people are expected to perform according to the persons around
them. Each of a person'sroles will influence some of his/her buying behavior.
Each role carries a status reflecting the general esteem given to it by society. People often
chooseproducts that show their status in society. For example, the role of marketing manager has
more statusin our society than the role of a child. As a marketing manager, a person will buy the
kind of clothingthat reflects his/her role and status.
C. Personal Factors
A buyer's decisions also are influenced by personal characteristics such as the buyer's age and
lifecyclestage, occupation, economic situation, lifestyles, and personality and self-concept.
I. Age and Lifecycle Stage
People change the goods and services they buy over their life times. Tastes in food, clothes,
furnitureand recreation are often age related. Buying is also shaped by the stage of the family life
cycle – thestages through which families might pass as they mature overtime. Marketers often
define their targetmarkets in terms of life cycle stage and develop appropriate products and
marketing plans for eachstage.
II. Occupation
A person's occupation affects the goods and services bought. Blue-collar workers tend to buy
morework clothes, where as white –collar workers buy more suits and ties. Marketers try to
identify theoccupational groups that have an above – average interest in their products and
services. A companycan even specialize in making products needed by a give occupational
group. For example, computersoftware companies will design different products for marketing
managers, accountants, engineers,lawyers and doctors.
III. Economic Situation
A person's economic situation will affect product choice. A person can consider buying an
expensiveproduct (brand) if he/she has enough spendable income, savings, or borrowing power.
Marketers ofincome sensitive goods closely watch trends in personal income, savings and
interest rates. Ifeconomic indicators point to a recession, marketers can take steps to redesign,
reposition, and re-pricetheir products.
IV. Life Style
People coming from the same subculture, social class, and occupation may have quite
differentlifestyle. Lifestyle is a person's pattern of living as expressed in his/her activities,
interest andopinions. Lifestyle captures something more than the person's social class or
personality. It profiles aperson's whole pattern of acting and interacting in the world.
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Life style classifications are by no means universal – they can vary significantly from country
tocountry. The lifestyle concept, when used carefully can help the marketer understand
changingconsumer values how they affect buying behavior.
D. Psychological Factors
A person's buying choices are further influenced by four major psychological factors:
Motivation,Perception, Learning, Beliefs and attitudes.
I. Motivation
A person has many needs at any given time. Some are biological, arising from states of tension
such ashunger, thirst or discomfort. Others are psychological, arising from the need for
recognition, esteem orbelongingness. Most or these needs will not be strong enough to motivate
the person to act at a givenpoint in time. A need becomes a motive when it is aroused to a
sufficient level of intensity. A motive(drive) is a need that is sufficiently pressing to direct the
person to seek satisfaction. Psychologistshave developed theories of human motivation. Two of
the most popular-the theories of Sigmund Freudand Abraham Maslow – have quite different
meanings for consumer analysis and marketing.
 Freud's Theory of Motivation
He assumes that people are largely unconscious about the real psychological forces shaping
theirbehavior. He sees the person as growing up and repressing many urges. These urges are
nevereliminated or under perfect control, they emerge in dreams, in slips of the tongue, in
neurotic andobsessive behavior, or ultimately in psychoses. Thus, Freud suggests that a person
doesn't fullyunderstand his/her motivation.
 Maslow's Theory of Motivation
Abraham Maslow sought to explain why people are driven by particular need at particular time.
Why does one person spend much time and energy on personal safety and another on gaining the
esteem ofothers? Maslow's answer is that human needs are arranged in hierarchy from the most
pressing to theleast pressing. In order of importance, they are physiological needs, safety needs,
social needs, esteemneeds, and self-actualization needs.
A person tries to satisfy the most important need first. When that important need is satisfied, it
willstop being a motivator and the person will then try to satisfy the next most important need.
Forinstance, a starving man will not take an interest in the latest happenings in the art world, or
in howhe/she is seen or esteemed by others, nor even in whether he is breathing clean air. But as
eachimportant need is satisfied, the next most important need will come in to play
II. Perception
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A motivated person is ready to act. How the person acts is influenced by his/her perception of
thesituation. Two people with the same motivation and in the same situation may act quite
differentlybecause they perceive the situation differently.
Why do people perceive the same situation differently? All of us learn by the flow of
informationthrough our five senses: sight, hearing, smell, touch and taste. However, each of us
receives,organizes, and interprets this sensory information in an individual way. Perception is the
process bywhich people select, organize and interpret information to form meaningful picture of
the [Link] can form different perceptions of the same stimulus because of three perceptual
processes:selective attention, selective distortion and selective retention.
 Selective Attention: the tendency for people to screen out most of the information to
whichthey are exposed. People are exposed to a great amount of stimuli every day. For example,
theaverage person may be exposed to a lot of ads a day. And it is impossible for a person to
payattention to all these stimuli. Thus, marketers have to work especially hard to attract
theconsumer's attention. Their message will be lost on most people who are not in the market
forthe product. Moreover, even people who are in the market may not notice the message unless
itstands out from the surrounding sea of other ads.
 Selective Distortion: it describes the tendency of people to adapt information to
personalmeanings. In other words, noted stimuli do not always come across in the intended way.
Eachperson fits incoming information into un-existing mind-set. People tend to
interpretinformation in a way that will support what they already believe. Thus, marketers must
try tounderstand the mindsets of consumers and how these will affect interpretations of
advertisingand sales information.
 Selective Retention: people also will forget much that they learn. They tend to
retaininformation that supports their attitudes and beliefs. Because of selective retention, a
person islikely to remember good points made about a particular product, which he/she is
familiar, andforget good points made about competing products.
Because of selective exposure, distortion and retention marketers have to work hard to get
theirmessages through. This fact explains why marketers use so much drama and repetition in
sendingmessages to their market.
III. Learning
When people act, they learn. Learning describes changes in an individual's behavior arising
fromexperience. Learning theorists say that most human behavior is learned. Learning occurs
through theinterplay of drives, stimuli, responses and reinforcement.
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The practical significance of learning theory for marketers is that they can build up demand for
aproduct by associating it with strong drives, using motivating cues, and providing
positivereinforcement.
IV. Beliefs and Attitudes
Through doing and learning, people acquire their beliefs and attitudes. These, in turn, influence
theirbuying behavior. A belief is a descriptive thought that a person has about something.
Marketers are interested in the beliefs that people formulate about specific products and
services,because their beliefs make up product and brand images that affect buying behavior. If
some of thebeliefs are wrong and prevent purchase, the marketer will want to launch a campaign
to correct them.
People have attitudes regarding religion, politics, clothes, music, food and almost everything
else. Anattitude describes a person's relatively consistent evaluations, feelings and tendencies
toward an objector idea. Attitudes put people into a frame of mind of liking or disliking things,
of moving toward oraway from them.
Attitudes are difficult to change. A person's attitudes fit into a pattern, and to change one attitude
mayrequire difficult adjustments in many others. Thus, a company should usually try to fit its
products intoexisting attitudes rather than try to change attitudes. Of course, there are
expectations in which thegreat cost of trying to change attitudes may pay off.
We can now appreciate the many individual characteristics and forces acting on consumer
[Link] consumer's choice results from the complex interplay of cultural, social, personal,
andpsychological factors. Although many of these factors cannot be influenced by the marketer,
they canbe useful in identifying interested buyers and in shaping products and appeals to better
serve theirneeds.
3.1.3. Types of Buying Decision Behavior
There are four types of consumer buying behavior based on the degree of buyer involvement and
thedegree of differences among brands.
 Complex Buying Behavior: Consumers undertake complex buying behavior when they
arehighly involved in a purchase and perceive significant brand differences. Consumers may
beinvolved when the product is expensive, risky, purchase infrequently, and highly self-
expressive(e.g. Car). Typically the consumer has to learn about the product
 Dissonance-reducing Buying Behavior: It occurs when consumers are highly involved
withan expensive, infrequent, or risky purchase, but see little difference among brands.
Forexample a consumer buying carpeting may face a high-involvement decision because
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carpetingis expensive and self-expressive. Yet buyers may consider most carpet brands in a
given pricerange to be the same. In this case, because perceived brand differences are not large,
buyersmay shop around to learn what is available, but buy relatively quickly. They may
respondprimarily to a good price or purchase convenience. After the purchase, consumer
mightexperience post-purchase dissonance (after sale discomfort) when they notice
certaindisadvantage of the purchased carpet or hear favorable things about brands not purchased.
Toencounter such dissonance, marketer’s after-sale communications should provide evidence
andsupport to help consumers feel good about their brand choices.
 Habitual Buying Behavior: It occurs under conditions of low involvement and
littlesignificant brand difference. For example, take Salt. Consumers have little involvement in
thisproduct category- they simply go the store and reach a brand. Consumers appear to have
lowinvolvement with most low cost, frequently purchased products.
 Variety-seeking Buying Behavior: Consumers undertake variety-seeking buying behavior
insituations characterized by low consumer involvement, but significant perceived
branddifferences. In such cases, brand switching occurs for the sake of variety rather than
becauseof dissatisfaction.
3.1.4. The Buyer Decision Processes
The consumer passes through five stages: need recognition, information search, evaluation
ofalternatives, purchase decision, and post purchase behavior. Clearly the buying process starts
longbefore actual purchase and continues long after. Marketers need to focus on the entire
buying processrather than on just the purchase decision.
Consumers pass through all the five stages with every purchase. But in more routine purchases,
theyoften skip or reverse some of the stages. However, we use the model in the figure below
because itshows all the considerations that arise when a consumer face a next and complex
purchase situations.
Buyer Decision Process
Need Recognition
The buying process starts with need recognition where the buyer recognizes a problem or need.
Thebuyer senses his/her actual state and some desired state. The need can be triggered by
internal stimuliwhen one of the person normal needs, hunger, thirst, sex – raises to a level high
enough to become adrive. A need can also be triggered by external stimuli. At this stage the
marketer should researchconsumers to find out what kinds of needs or problems arise, what
brought them about, and how theyled the consumer to this particular product.
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Information Search
An aroused consumer may or may not search for more information. If the consumer's drive is
strong and asatisfying product is near at hand, the consumer is likely to buy it then. If not the
consumer may not store theneed in memory or undertake an information search related to the
need. The consumer can obtain informationfrom any of several sources:
- Personal Source: family, friends, neighbors, acquaintances.
- Commercial Sources: advertising, salespersons, dealers, packages, displays
- Public Sources: mass media, consumer-rating organizations.
- Experiential source: Handling, examining, using the product
As more information is obtained, the consumers' awareness and knowledge of the available
brands andfeatures increase. A company must design a marketing mix to make prospects aware
of andknowledgeable about its brand. Consumers should be asked how they first heard about the
brand, whatinformation they received, and what importance they placed on different information
sources.
Evaluation of Alternatives
How does the consumer choose among the alternative brands? The marketer needs to know
aboutalternative evaluation that is, how the consumer processes information to arrive at brand
[Link] basic concepts help explain consumer evaluation process:
1. We assume that each consumer sees a product as a bundle of product attributes. They pay
themost attention to those attributes connected with their needs.
2. The consumer will attach different degrees of importance to different attributes according
tohis/her needs and wants.
3. The consumer is likely to develop a set of brand beliefs about where each brand stands to
eachattribute. The set of beliefs held about a particular brand is known as the brand image.
4. The consumer's expected total product satisfaction will vary with levels of different attributes.
5. The consumer arrives at attitudes toward (through) the different brands through some
evaluationprocedure. Marketers should study buyers to find out how they actually evaluate
brandalternatives.
Purchase Decisions
In the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally,
theconsumer's purchase decision will be to buy most prepared brand, but two factors can come
betweenthe purchase intention and the purchase decision. The first factor is the attitude of others.

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The secondfactor is unexpected situational factors. The consumer may form a purchase intention
based on factorssuch as expected income, expected price, and expected product benefits.
Post Purchase Behavior
The marketer's job doesn't end when the product is bought. After purchasing the product, the
consumerwill be satisfied or dissatisfied and will engage in post purchase behavior of interest to
the marketer.
The negative feeling that may occur after a commitment purchase has been made is called
cognitivedissonance. What determines whether the buyer is satisfied or dissatisfied with a
purchase? Theanswer lies in the relationship between the consumer's expectations and the
product's perceivedperformance. If the product falls short of expectations, the consumer is
disappointed, if it meetsexpectations, the consumer is satisfied, if product's performance exceeds
expectations, the consumer isdelighted.
3.2. Business Market and Buying Behavior
Business market comprises all the organizations that buy goods and services for use in the
productionof other products and services that are sold, rented, or supplied to others. It also
includes retailing andwholesaling firms that acquire goods for the purpose of reselling or renting
them to others at a profit.
In the business buying process business buyers determine which products and services
theirorganizations need to purchase, and then find, evaluate, and choose among alternative
suppliers andbrands. Companies that sell to other business organizations must do their best to
understand businessmarkets and business buyer behavior.
Characteristics of Business Markets
In some ways, business markets are similar to consumer markets. Both involve people who
assumebuying roles and make purchase decisions to satisfy needs. However, business markets
differ in manyways from consumer markets. The main differences are in the market structure and
demand, the natureof the buying unit, and the types of decisions and the decision process
involved.
1. Market structure and demand.
Business markets typically deal with far fewer but far larger buyers. They are more
geographicallyconcentrated. Business markets have derived demand (business demand that
ultimately comes from orderives from the demand for consumer goods). Many business markets
have inelastic demand; that is,total demand for many business products is not affected much by
price changes, especially in the shortrun. A drop in the price of leather will not cause shoe
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manufacturers to buy much more leather unlessit results in lower shoe prices that, in turn, will
increase consumer demand for shoes. Finally, businessmarkets have more fluctuating demand.
The demand for many business goods and services tends tochange more—and more quickly—
than the demand for consumer goods and services does. A smallpercentage increase in consumer
demand can cause large increases in business demand. Sometimes arise of only 10 percent in
consumer demand can cause as much as a 200 percent rise in businessdemand during the next
period.
2. Nature of the Buying Unit:
Compared with consumer purchases, a business purchase usually involves more decision
participantsand a more professional purchasing effort. Often, business buying is done by trained
purchasing agentswho spend their working lives learning how to make better buying decisions.
Buying committees made up of technical experts and top management are common in the buying
ofmajor goods. Companies are putting their best and brightest people on procurement patrol.
Therefore,business marketers must have well-trained salespeople to deal with well-trained
buyers
3. Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers.
Purchasesoften involve large sums of money, complex technical and economic considerations,
and interactionsamong many people at many levels of the buyer's organization. Because the
purchases are morecomplex, business buyers may take longer to make their decisions. The
business buying process tendsto be more formalized than the consumer buying process. Large
business purchases usually call fordetailed product specifications, written purchase orders,
careful supplier searches, and formalapproval. The buying firm might even prepare policy
manuals that detail the purchase process.
Finally, in the business buying process, buyer and seller are often much more dependent on each
other.
Consumer marketers are often at a distance from their customers. In contrast, business marketers
mayroll up their sleeves and work closely with their customers during all stages of the buying
process—from helping customers define problems, to finding solutions, to supporting after-sale
operation. Theyoften customize their offerings to individual customer needs. In the short run,
sales go to supplierswho meet buyers' immediate product and service needs.
Major Types of business Buying Situations

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There are three major types of buying situations. At one extreme is the straight re-buy, which is
afairly routine decision. At the other extreme is the new task, which may call for thorough
research. Inthe middle is the modified re-buy, which requires some research.
In a straight re-buy the buyer reorders something without any modifications. It is usually
handled ona routine basis by the purchasing department. Based on past buying satisfaction, the
buyer simplychooses from the various suppliers on its list. "In" suppliers try to maintain product
and servicequality.
In a modified re-buy, the buyer wants to modify product specifications, prices, terms, or
[Link] modified re-buy usually involves more decision participants than the straight re-
buy. The insuppliers may become nervous and feel pressured to put their best foot forward to
protect an [Link] suppliers may see the modified re-buy situation as an opportunity to make
a better offer and gainnew business.
A company buying a product or service for the first time faces a new-task situation. In such
cases, thegreater the cost or risk, the larger the number of decision participants and the greater
their efforts tocollect information will be. The new-task situation is the marketer's greatest
opportunity andchallenge. The marketer not only tries to reach as many key buying influences as
possible but alsoprovides help and [Link] buyer makes the fewest decisions in the
straight re-buy and the most in the new-task decision.
In the new-task situation, the buyer must decide on product specifications, suppliers, price
limits,payment terms, order quantities, delivery times, and service terms. The order of these
decisions varieswith each situation, and different decision participants influence each choice.
The Business Buying Process
There are eight stages of the business buying process. Buyers who face a new-task buying
situationusually go through all stages of the buying process. Buyers making modified or straight
re-buys mayskip some of the stages. We will examine these steps for the typical new-task buying
situation.
A. Problem Recognition
The buying process begins when someone in the company recognizes a problem or need that can
bemet by acquiring a specific product or service. Problem recognition can result from internal or
externalstimuli. Internally, the company may decide to launch a new product that requires new
productionequipment and materials. Or a machine may break down and need new parts. Perhaps
a purchasingmanager is unhappy with a current supplier's product quality, service, or prices.

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Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from
asalesperson who offers a better product or a lower price. In fact, in their advertising,
businessmarketers often alert customers to potential problems and then show how their products
providesolutions.
B. General Need Description
Having recognized a need, the buyer next prepares a general need description that describes
thecharacteristics and quantity of the needed item. For standard items, this process presents few
[Link] complex items, however, the buyer may have to work with others—engineers,
users, consultants—to define the item. The team may want to rank the importance of reliability,
durability, price, and otherattributes desired in the item. In this phase, the alert business marketer
can help the buyers define theirneeds and provide information about the value of different
product characteristics.
[Link] Specification
The buying organization next develops the item's technical product specifications, often with the
helpof a value analysis engineering team. Value analysis is an approach to cost reduction in
whichcomponents are studied carefully to determine if they can be redesigned, standardized, or
made by lesscostly methods of production. The team decides on the best product characteristics
and specifies themaccordingly. Sellers, too, can use value analysis as a tool to help secure a new
account. By showingbuyers a better way to make an object, outside sellers can turn straight re-
buy situations into new-tasksituations that give them a chance to obtain new business.
D. Supplier Search
The buyer now conducts a supplier search to find the best vendors. The buyer can compile a
small listof qualified suppliers by reviewing trade directories, doing a computer search, or
phoning othercompanies for recommendations. Today, more and more companies are turning to
the Internet to findsuppliers. For marketers, this has leveled the playing field—smaller suppliers
have the sameadvantages as larger ones and can be listed in the same online catalogs for a
nominal fee:The newer the buying task, and the more complex and costly the item, the greater
the amount of timethe buyer will spend searching for suppliers. The supplier's task is to get listed
in major directories andbuild a good reputation in the marketplace. Salespeople should watch for
companies in the process ofsearching for suppliers and make certain that their firm is considered.

E. Proposal Solicitation
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In the proposal solicitation stage of the business buying process, the buyer invites qualified
suppliersto submit proposals. In response, some suppliers will send only a catalog or a
salesperson. However,when the item is complex or expensive, the buyer will usually require
detailed written proposals orformal presentations from each potential supplier.
Business marketers must be skilled in researching, writing, and presenting proposals in response
tobuyer proposal solicitations. Proposals should be marketing documents, not just technical
[Link] should inspire confidence and should make the marketer's company
stand out from thecompetition.
F. Supplier Selection
The members of the buying center now review the proposals and select a supplier or suppliers.
Duringsupplier selection, the buying center often will draw up a list of the desired supplier
attributes and theirrelative importance. In one survey, purchasing executives listed the following
attributes as mostimportant in influencing the relationship between supplier and customer:
quality products and services,on-time delivery, ethical corporate behavior, honest
communication, and competitive prices. Otherimportant factors include repair and servicing
capabilities, technical aid and advice, geographiclocation, performance history, and reputation.
The members of the buying center will rate suppliersagainst these attributes and identify the best
suppliers. As part of the buyer selection process, buyingcenters must decide how many suppliers
to use. In the past, many companies preferred a large supplierbase to ensure adequate supplies
and to obtain price concessions. These companies would insist onannual negotiations for contract
renewal and would often shift the amount of business they gave toeach supplier from year to
[Link], however, companies are reducing the number of suppliers. There is even a
trend towardsingle sourcing, using one supplier. With single sourcing there is only one supplier
to handle and it iseasier to control newsprint inventories. Using one source not only can translate
into more consistentproduct performance, but it also allows press rooms to configure themselves
for one particular kind ofnewsprint rather than changing presses for papers with different
[Link] companies, however, are still reluctant to use single sourcing. They fear that
they may becometoo dependent on the single supplier or that the single-source supplier may
become too comfortable inthe relationship and lose its competitive edge. Some marketers have
developed programs that addressthese concerns.
G. Order-Routine Specification
The buyer now prepares an order-routine specification. It includes the final order with the
chosensupplier or suppliers and lists items such as technical specifications, quantity needed,
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expected time ofdelivery, return policies, and warranties in the case of maintenance, repair, and
operating items.
H. Performance Review
In this stage, the buyer reviews supplier performance. The buyer may contact users and ask them
torate their satisfaction. The performance review may lead the buyer to continue, modify, or drop
thearrangement. The seller's job is to monitor the same factors used by the buyer to make sure
that theseller is giving the expected satisfaction. We have described the stages that typically
would occur in anew-task buying situation. The eight stage model provides a simple view of the
business buyingdecision process. The actual process is usually much more complex. In the
modified re-buy or straightre-buy situation, some of these stages would be compressed or
bypassed. Each organization buys in itsown way, and each buying situation has unique
requirements. Different buying center participants maybe involved at different stages of the
process. Although certain buying process steps usually do occur,buyers do not always follow
them in the same order, and they may add other steps. Often, buyers willrepeat certain stages of
the process.
Participants in the Business Buying Process
The decision-making unit of a buying organization is called its buying center: all the individuals
andunits that participate in the business decision-making process. The buying center includes all
membersof the organization who play any of five roles in the purchase decision process.
 Users: are members of the organization who will use the product or service. In many
cases,users initiate the buying proposal and help define product specifications.
 Influencers: often help define specifications and also provide information for
evaluatingalternatives. Technical personnel are particularly important influencers.
 Buyers: have formal authority to select the supplier and arrange terms of purchase.
Buyersmay help shape product specifications, but their major role is in selecting vendors
andnegotiating. In more complex purchases, buyers might include high-level
officersparticipating in the negotiations.
 Deciders: have formal or informal power to select or approve the final suppliers. In
routinebuying, the buyers are often the deciders, or at least the approvers.
 Approvers: are parties that responsible for the approval of the item that to be purchasedafter
the decision process is made

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 Gatekeepers: control the flow of information to others. For example, purchasing agentsoften
have authority to prevent salespersons from seeing users or deciders. Othergatekeepers include
technical personnel and even personal secretaries.
Major Influences on Business Buyers
Business buyers are subject to many influences when they make their buying decisions.
Somemarketers assume that the major influences are economic. They think buyers will favor the
supplierwho offers the lowest price or the best product or the most service. They concentrate on
offeringstrong economic benefits to buyers. However, business buyers actually respond to both
economic andpersonal factors. Far from being cold, calculating, and impersonal, business buyers
are human andsocial as well. They react to both reason and emotion.
Today, most business-to-business marketers recognize that emotion plays an important role in
businessbuying decisions. When suppliers' offers are very similar, business buyers have little
basis for strictlyrational choice. Because they can meet organizational goals with any supplier,
buyers can allowpersonal factors to play a larger role in their decisions. However, when
competing products differgreatly, business buyers are more accountable for their choice and tend
to pay more attention toeconomic factors. The major factors that affect business buyers are the
following:
I. Environmental Factors
Business buyers are influenced heavily by factors in the current and expected economic
environment,such as the level of primary demand, the economic outlook, and the cost of money.
As economicuncertainty rises, business buyers cut back on new investments and attempt to
reduce their inventories.
An increasingly important environmental factor is shortages in key materials. Many companies
noware more willing to buy and hold larger inventories of scarce materials to ensure adequate
[Link] buyers also are affected by technological, political, and competitive
developments in theenvironment. Culture and customs can strongly influence business buyer
reactions to the marketer'sbehavior and strategies, especially in the international marketing
environment. The business marketermust watch these factors, determine how they will affect the
buyer, and try to turn these challengesinto opportunities.
II. Organizational Factors
Each buying organization has its own objectives, policies, procedures, structure, and systems.
Thebusiness marketer must know these organizational factors as thoroughly as possible.

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Questions such asthese arise: How many people are involved in the buying decision? Who are
they? What are theirevaluative criteria? What are the company's policies and limits on its buyers?
III. Interpersonal Factors
The buying center usually includes many participants who influence each other. The business
marketeroften finds it difficult to determine what kinds of interpersonal factors and group
dynamics enter intothe buying process. Participants may have influence in the buying decision
because they controlrewards and punishments, are well liked, have special expertise, or have a
special relationship withother important participants. Interpersonal factors are often very subtle.
Whenever possible, business marketers must try to understand these factors and design strategies
thattake them into account.
IV. Individual Factors
Each participant in the business buying decision process brings in personal motives, perceptions,
andpreferences. These individual factors are affected by personal characteristics such as age,
income,education, professional identification, personality, and attitudes toward risk. Also, buyers
havedifferent buying styles. Some may be technical types who make in-depth analyses of
competitiveproposals before choosing a supplier. Other buyers may be intuitive negotiators who
are adept atpitting the sellers against one another for the best deal.
CHAPTER FOUR

MARKET SEGMENTATION, TARGETING AND POSITIONING

Markets consist of buyers differs in one or more ways, they may differ in their wants, resources,
locations, buying attitudes, and buying practices. Through market segmentation, companies
divide large, heterogeneous markets in to smaller segments that can be reached more efficiently
and effectively with products and services that match their unique needs. The specific group of
customer (people or Organization) for whom the marketer designs a particular marketing mix is a
target market.

4.1, Market segmentation

Market segmentation is the process of dividing the total market for a good or service in to several
smaller, internally homogenous groups. It is activity of dividing a market into distinct groups
with distinct needs, characteristics, or behavior who might require separate products or
marketing mixes. The essences of segmentation in that member of each group are similar with
respect to the factors that influence demand. A major element in a company's success is the

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ability to segment its markets effectively. In segmenting, one first identifies the wants of the
customers within submarket and then decides if it is practical to develop a marketing mix to
satisfy those wants.
Levels of marketing segmentation
a) Mass Marketing
Companies have not always practiced target marketing. In fact, for most of the 1900s, major
consumer products companies held fast to mass marketing—mass producing, mass distributing,
and mass promoting about the same product in about the same way to all consumers. The
traditional argument for mass marketing is that it creates the largest potential market, which
leads to the lowest costs, which in turn can translate into either lower prices or higher margins.
However, many factors now make mass marketing more difficult. The proliferation of
distribution channels and advertising media has also made it difficult to practice "one-size-fits-
all" marketing.

b. Segment Marketing

A company that practices segment marketing isolates broad segments that make up a market and
adapts its offers to more closely match the needs of one or more segments. Thus, Marriott
markets to a variety of segments—business travelers, families, and others—with packages
adapted to their varying needs. Segment marketing offers several benefits over mass marketing.
The company can market more efficiently, targeting its products or services, channels, and
communications programs toward only consumers that it can serve best and most profitably. The
company can also market more effectively by fine-tuning its products, prices, and programs to
the needs of carefully defined segments. The company may face fewer competitors if fewer
competitors are focusing on this market segment.
C) Niche Marketing
Market segments are normally large, identifiable groups within a market—for example, luxury
car buyers, performance car buyers, utility car buyers, and economy car buyers. Niche marketing
focuses on subgroups within these segments. A niche is a more narrowly defined group, usually
identified by dividing a segment into sub segments or by defining a group with a distinctive set
of traits who may seek a special combination of benefits. Whereas segments are fairly large and
normally attract several competitors, niches are smaller and normally attract only one or a few

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competitors. Niche marketers presumably understand their niches' needs so well that their
customers willingly pay a price premium.
d) Micro marketing
Segment and niche marketers tailor their offers and marketing programs to meet the needs of
various market segments. At the same time, however, they do not customize their offers to each
individual customer. Thus, segment marketing and niche marketing fall between the extremes of
mass marketing and micro marketing. Micro marketing is the practice of tailoring products and
marketing programs to suit the tastes of specific individuals and locations. Micro marketing
includes local marketing (Local marketing involves tailoring brands and promotions to the needs
and wants of local customer groups—cities, neighborhoods, and even specific stores. and
individual marketing (tailoring products and marketing programs to the needs and preferences of
individual customers)

4.1.1, Basis of segmenting consumer market

There is no single way to segment the market, so marketers had better consider different basis in
segmenting their market. The major bases of segmenting consumer market are
I. Geographic segmentation: - is the basis for dividing a market in to different geographical
units such as nations, states, regions, counties, cities where people live and work. The reason for
this is simply that consumers' wants and product usage often are related to one or more of these
subcategories. When a company decides to same (operate in) one geographical site it should
focus its operations on differences in needs and wants of that site.
II. Demographic segmentation: - is the most common type of segmentation. Demographic
factors are the most popular bases for segmenting customer groups. The reasons for the
popularity are that consumer needs and wants are closely related to demographic variables and
they are easier to measure than most other types of variables. The most common demographic
variables include are, gender, income family size, occupation, education, religion, race etc.
III. Psychographic segmentation: is segmenting market in to different groups based on social
class, lifestyle, or personality characteristics. Markets will be segmented based on attitude of
consumers towards the use of the product. Marketers engaged in psychographic segmentation
which involves examining attributes related to how a person thinks, feels and behaves.
iv. Behavioral segmentation: divides buyers into groups based on their
knowledge of usage pattern and consumption of the product
Examples of these behavioral variables may be:

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  Occasions: - time of using products by some consumer group. E.g. weekends, holidays,
lunch time etc.(movie cinemas centers)
 Benefits desired: - to group buyers according to the different benefits that they seek
from the product. Because some consumers want (aim) to get some benefits of products.
E.G Tooth paste may be bought for flavor, Dental care; foam etc laundry may be needed
fresh smell, strength, and penalty wash etc…
 User status: - Markets can be segmented into groups of nonuser, ex-
users, potential users, first time users, and regular (actual) users of a
product. Market share leaders focus on attracting potential users,
whereas smaller firms focus on attracting current users away from the
market leader.
 Usage rate: - Markets can also be segmented in to light medium, and
heavy product users. Most companies target heavy users and pay
attention on their treatment.

 Loyalty Status:- Markets can also be segmented by consumer loyalty. Buyers can be
divided into groups accordant to their degree of loyalty. Hardcore loyal, split loyal, shift
loyal, switchers are types of consumers based on their loyalty.

A. Hard core loyal: - remain very loyal to a particular brand. Buy always the
same brand.
B. Split loyal: consumers who are loyal to two or three of brands of a given
product. They favor one brand while sometimes buying others.
C. Shifting loyal consumers: use a given brand for sometime and then shift to
another after a period of time.
D. Switchers: No loyalty to any brand, they seek new brand every time they may
want something new (different) each time they buy or they buy whatever's on
sale.
Loyalty status then determines the segmentation of market and hence companies should
understand how many different loyal consumer they have!
v. Buyer's Readiness stage

 Unaware- No information about the product, so first design awareness creation

advertising packages.

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  Aware: there is no need for awareness advertisements
 Interested -aware and also identified the benefits.
 Intend to buy - much lesser marketing task is required, slight motivation may lead to
purchase decision.
Vi. attitude- May is positive, indifferent, negative, hostile etc.

4.1.2 Procedures in market segmentation

Markets are sometimes segmented intuitively, that is a marketer relies on experience and
judgment to decide what segments exist in a market and how much potential they offer. Others
follow the lead of competitors or earlier market entrants. Another alternative is to perform a
structured analysis, often supported by some marketing research in order to identify segments
and measure their potential This approach, even if done with a small budget, often produces in
sights and opportunities that would be over looked otherwise.

There are different stages/procedures in market segmentation

1. Survey stage
At this stage, the marketer identifies the current and potential wants that exists within a market.
The marketer carefully examines the market to determine the specific needs being satisfied by
current offerings, the needs current offerings fail to successfully satisfy, and the future needs that
may not be recognized. The survey step may involve interviewing, or observing the customers
or firms to determine their behaviors, levels of satisfactions and dissatisfactions.
It can also be conducted by selecting certain group of people from market and ask them for
information about different characteristics of the market through questionnaires, interviews, etc.
2. Analysis stage
This stage involves analyzing of data conducted by in first stage which help in identification of
the characteristics that distinguish the segments, The question is what do prospects who share a
particular want have in common that distinguishes them from other segments in the market with
different wants? In this phase the marketer understands the Size locations for business firms,
Attitude and behavioral patterns for consumers.
3. Profile stage
The final step is to estimate how much demand or potential sales each segment represents.
These forecasts, will determine which segments are worth pursuing (serving in the future)
A group that shares a want distinguishable from the rest of the market is a market segment. This
group is identified by profiling (ranking) its characteristics that distinguishes it from others.

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Requirements of effective segmentation
Marketers, to make effectives segmentation, should follow market segmentation that fulfills at
least the following requirements;
 Measurable: the degree to which the size, purchasing power, and profiles of a
market segment can be measured.
 Accessible: the segment must be accessible through the existing market institutions
Middle men, advertising media, company sales force with a minimum cost.
 Substantiality: each market segment should be large enough to be profitable for the
company.
 Differentiable: there must be difference in the buying pattern of the segments otherwise
there is no need for segmenting.
 Actionability: is the degree to which effective programs can be designed for attracting
and serving a given market segment.

4.2 . Targeting Market

Market segmentation reveals the firm's market segment opportunities the firm now has to
evaluate the various segments and decide how many and which ones to target. In targeting the
market the firm must first evaluate each segment and then after select the best segment
4.2.1 Evaluating market segments
In evaluating different market segments, a firm must look at three basic factors
i. segment size and growth
ii. segment structural attractiveness
iii. Company objectives and resources.
I. Segment size and growth
Over the long run, a business firm must generate a profit to survive, that is an organization
should seek markets that will generate sufficient sales volume at low enough cost to result in a
profit. It must first collect and analyze date on current segment sales, growth rates and expected
profitability for various segments.
II. Segment's structural attractiveness
A company ordinarily should seek a market segments where there are the least and smallest
competitors. A sever should not enter a market, that is already saturated with competition unless
it has some overriding differential advantage that will enable it to take customers from existing
firms. Market is less attractive if it already contains many strong competitors. An existence of
many actual or potential substitute products and buyers with strong bargaining power also

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reduces attractiveness of the market. So it is no worth to prefer these types of markets to other to
serve!
III. Company objectives and resources
The market segment to be targeted should also be consistent with firm's long run objectives.
That is, the market opportunities represented in the target markets should be in harmony with
company's resources. A company should consider whether it has the skills, expertise knowledge
and resources needed to successfully operate in a specific market segment. If the company has
no enough the strengths needed to compete successfully in a segment and can not readily obtain
them, it should not enter the segment. Incase, the company possesses the referred skills it should
employee the skills more than competitors to win the competition, otherwise it is still good not to
enter
4.2.2. Target market selection strategies
The next activity after evaluating the segments is to decide on which and how many segments to
target. The company should not suffer from overcapacity or incapacity in an effort exerted to
satisfy the needs. The company should enter only segments in which it can offer superior value
and gain advantages over its rivals. There are different strategies for market selection

1. Single segment concentration

This strategy involves selecting one segment from within the total market, single segment
strategy enables as seller to penetrate one market in depth and to acquire reputation as a
specialist or an expert in the limited market.
Advantages: -specification in need identification and satisfying
-Using overall effort to one group of customers (market)
- Low cost operation (avoids cost wastage)
Disadvantage - Change of consumers from one to other place
-Loss if preferences /or tastes of consumes change b/c no other segment is
under the marketer
p1 p2 p3

m1
m2

m3
2. Selective specialization

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In selective specialization a firm focuses on selected segments for profitability. There segments
are:
- assumed to be having no basic similarity
- are all profitable
Advantage: firms can diversify their risk exposures by using other alternatively to supply for
p1 p2 p3
M1
M2
M3

M1 and p1
M2 and p2 are selectively specialized tares.
M3 and p1
3. Product specialization
Perused when a business organization decides to provide a single product to all the market
segments identified. The approach is more workable when the firm capacity and the technology
changes are harmonized. This approach poses a risk of the product being supplanted by on
entirely new technology. It is offering one type (category) of product to different market.
Advantages: - Attracts attention of customer for other products of the company.
-Helps the company to produce special products.
Serving different market segments using the same product (m1, m2, m3 = p2).
p1 p2 p3
m1
m2
m3
4. Market specialization
Firms following this approach provide different products to the same market.
Disadvantage the buyers (the market) may decide to have its budget cut.

p1 p2 p3
m1
m2
m3

5. Full market coverage/Mass marketing

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By adopting a mass marketing strategy, seller treats its total market as a single segment. An
aggregate market's members are considered to be alike with respect to demand for the product.
That is, customers may make some compromises on less important dimensions in order to enjoy
the primary benefit the product offers.
Even though the notion of mass marketing is relatively uncommon, a firm my select the strategy
after examining market segments and concluding that the majority of customers in the total
market are likely to respond in very similar fashion to one marketing mix.
The strategy is more workable for firms that are marketing undifferentiated staple products.
(E.G.) salt, sugar, gasoline)
Mass marketing strategy is usually accompanied by the product different ion. In eyes of the
customer, one firm distinguishes its products from competitive brands offered to the same
aggregate market. General need is given attention and minor difference is ignored and Products
are standardized and production costs are relatively lower
4.3 The concept of positioning
Since all marketing strategies are built on segmentation, targeting and positioning, every
company must decide on what positions it want to occupy in the segments and target markets
that it has already decided on.
Accompany discovers different needs and groups in the market place, targets those needs and
groups that it can satisfy in a superior way, and then positions its offering so that the target
market recognizes the company's distinctive offering and image.
Positioning is the act of designing the company's offering and image to occupy a distinctive
place in the mind of the target market. It involves inserting the brand's unique benefits and
differentiation in customers' minds.
The end result of positioning is the successful creation of a customer focused value proposition, a
basic reason why the target market should buy the product. Positioning is not what you do to a
product but what you do to the mind of the prospect.
Firms may have three strategic alternatives in positioning

i. Strengthen its own current position in the consumers'

ii. Mind grasp an unoccupied position
iii. De-position or repositions the competition in the customer's mind
Positioning in general involves three steps:
a. Identifying a set of possible competitive advantages up on which to build a position.

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b. Choosing the right competitive advantages. Competitive advantage is said good and right if it
fulfils the requirements like important, distinctive, superior, communicable, affordable and
profitable
c. Communicating and Delivering the Chosen Position.
Before implementing the position strategy the company must answer the following six questions
1. What position, if any do we have in the mind of prospect?
2. What position do we want to own?
3. What kind of company can be affected
4. Do we have enough money to occupy and hold that position?
5. Do we have enough skill to apply consistently?
6. Does our creative approach match with our positioning strategy
CHAPTER FIVE
MARKETING MIX ELEMENTS

The term marketing mix refers to the four major areas of decision making in the marketing
process that are blended to obtain the results desired by the organization. The four elements of
the marketing mix are sometimes referred to the four Ps of marketing. The marketing mix shapes
the role of marketing within all types of organizations, both profit and nonprofit. Each element in
the marketing mix product, price, promotion, and place—consists of numerous sub elements.
Marketing managers make numerous decisions based on the various sub elements of the
marketing mix, all in an attempt to satisfy the needs and wants of consumers.

Fig. 5.1. Marketing mix elements

5.1. Designing Product

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Marketing starts with the product since it is what an organization has to offer its target market.
Organizations attempt to provide solutions to a target market’s problems. These solutions
include tangible or intangible (or both) product offerings marketed by an organization.

In addition to satisfying the target market’s needs, the product is important because it is how
organizations generate revenue. It is the “thing” that for-profit companies sell in order to realize
profits and satisfy stakeholders and what non-profit organizations use to generate funds needed
to sustain it. Without a well-developed product strategy that includes input from the target
market, a marketing organization will not have long-term success.

Product is anything that can be offered to a market for attention, acquisition, use or
consumption that might satisfy the human needs and wants. Product is the heart of marketing
mix. Now a day’s, as products become more commoditized, many companies are moving to a
new level in creating value for their customers.

The first element in the marketing mix is the product. A product is any combination of goods and
services offered to satisfy the needs and wants of consumers. Thus, a product is anything
tangible or intangible that can be offered for purchase or use by consumers. A tangible product is
one that consumers can actually touch, such as a computer. An intangible product is a service
that cannot be touched, such as computer repair, income tax preparation, or an office call. Other
examples of products include places and ideas.

Levels of Products

In planning its market offering, the marketer needs to think through the levels of products. Each
level adds more customer value, and it constitutes a customer value hierarchy.

Typically, a product is divided into five basic levels. The first level is often called the core
product, what the consumer actually buys in terms of benefits. For example, consumers don't
just buy trucks. Rather, consumers buy the benefit that trucks offer, like being able to get around
in deep snow in the winter. Next is the second level, or actual product, that is built around the
core product. The actual product consists of the brand name, features, packaging, parts, and
styling. These components provided the benefits to consumers that they seek at the first level.
Third, level of the product is an expected product, a set of attributes and conditions that buyers

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normally expect when they buy the product. At the fourth level, the marketer prepares an
augmented product that exceeds customer expectations. The augmented component
includes additional services and benefits that surround the first two levels of
the product. Examples of augmented product components are technical
assistance in operating the product and service agreements. At the fifth level
stands the potential product, which encompasses all of the possible augmentations and
transformations the product might undergo in the future.
5.2. Product Classification

Marketers classically distinguish two essential factors to broadly categorize products into
varying types: (durability & tangibility and uses).

A. Durability and Tangibility

Products are classified by how long they can be used—durability—and their tangibility. Products
that can be used repeatedly over a long period of time are called durable goods. Examples of
durable goods include automobiles, furniture, and houses. By contrast, goods that are normally
used or consumed quickly are called nondurable goods. Some examples of nondurable goods
are food, soap, and soft drinks. In addition, services are activities and benefits that are also
involved in the exchange process but are intangible because they cannot be held or touched.
Examples of intangible services included eye exams and automobile repair.

B. Ultimate User

Another way to categorize products is by their users. Products are classified as either consumer
or industrial goods.

I. Consumer goods

Are the types of goods purchased by the ultimate consumers for their final consumption purpose.
The shopping patterns of consumers are also used to classify products. Products sold to the final
consumer are arranged as follows: convenience goods, shopping, specialty, and unsought
goods.

a. Convenience goods: are products and services that consumers buy frequently
and with little effort. Most convenience goods are easily obtainable and low-priced, items
such as bread, candy, milk, and etc…

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b. Shopping goods: are those products that consumers compare during the selection and
purchase process. Typically, factors such as price, quality, style, and suitability are used as bases
of comparison. With shopping goods, consumers usually take considerable time and effort in
gathering information and making comparisons among products. Major appliances such as
refrigerators and televisions are typical shopping goods.

c. Specialty goods: are products with distinctive characteristics or brand identification for which
consumers expend exceptional buying effort. Specialty goods include specific brands and types
of products. Typically, buyers do not compare specialty goods with other similar products
because the products are unique.

d. Unsought goods: are those products or services that consumers are not readily aware of or do
not normally consider buying. Life insurance policies and burial plots are examples of unsought
goods. Often, unsought goods require considerable promotional efforts on the part of the seller in
order to attract the interest of consumers.

II. Industrial goods

Are the types of goods that purchased for the purpose of further processing, conducting business
or re-selling.

a. Material and Parts: are goods that enter the manufacturer’s product completely. it
includes raw material (natural state& agricultural products), manufactured (fabricated)
materials (like yarn of cotton ) , and manufactured (fabricated) components
(wheel ,motors,& others),
b. Capital Items: are long-lasting goods that facilitate developing or managing the finished
product. it includes heavy equipments (installations)& light equipments (accessories)
c. Operating Supplies and Business Services: are short-lasting goods and services that
facilitate developing or managing the finished product.
New Product Development Process
New products are the lifeblood of many marketing-oriented companies. The product life cycle
shows that competing products are introduced as the market becomes receptive. This means that
the competitive advantage of the new product is soon lost.
To develop new product company follows the following eight steps
Idea generation

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All new products begin with a new idea. Ideas come from several methods.
New-product development starts with idea generation—the systematic search for new-product
ideas. A company typically has to generate many ideas in order to find a few good ones. Major
sources of new-product ideas include internal sources, customers, competitors, distributors and
suppliers, and others. Using internal sources, the company can find new ideas through formal
research and development.
Idea Screening
The purpose of idea generation is to create a large number of ideas. The purpose of the
succeeding stages is to reduce that number. The first idea-reducing stage is idea screening, which
helps spot good ideas and drop poor ones as soon as possible. Product development costs rise
greatly in later stages, so the company wants to go ahead only with the product ideas that will
turn into profitable products.
Product Concept development
An attractive idea must be developed into a product concept. It is important to distinguish
between a product idea, a product concept, and a product image. A product idea is an idea for a
possible product that the company can see itself offering to the market. A product concept is a
detailed version of the idea stated in meaningful consumer terms. A product image is the way
consumers perceive an actual or potential product.
Concept testing calls for testing new-product concepts with groups of target consumers. The
concepts may be presented to consumers symbolically or physically. For some concept tests, a
word or picture description might be sufficient. However, a more concrete and physical
presentation of the concept will increase the reliability of the concept test.
Development of marketing strategy
The marketing strategy statement consists of three parts. The first part describes the target
market; the planned product positioning; and the sales, market share, and profit goals for the first
few years. The second part of the marketing strategy statement outlines the product's planned
price, distribution, and marketing budget for the first year. The third part of the marketing
strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy
Business analysis
Once management has decided on its product concept and marketing strategy, it can evaluate the
business attractiveness of the proposal. Business analysis involves a review of the sales, costs,
and profit projections for a new product to find out whether they satisfy the company's
objectives. If they do, the product can move to the product development stage.

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To estimate sales, the company might look at the sales history of similar products and conduct
surveys of market opinion. It can then estimate minimum and maximum sales to assess the range
of risk. After preparing the sales forecast, management can estimate the expected costs and
profits for the product, including marketing, R&D, operations, accounting, and finance costs.
The company then uses the sales and costs figures to analyze the new product's financial
attractiveness.
Product development
So far, for many new-product concepts, the product may have existed only as a word description,
a drawing, or perhaps a crude mock-up. If the product concept passes the business test, it moves
into product development. Here, R&D or engineering develops the product concept into a
physical product. The product development step, however, now calls for a large jump in
investment. It will show whether the product idea can be turned into a workable product. The
R&D department will develop and test one or more physical versions of the product concept.
R&D hopes to design a prototype that will satisfy and excite consumers and that can be produced
quickly and at budgeted costs. Developing a successful prototype can take days, weeks, months,
or even years. Often, products undergo rigorous functional tests to make sure that they perform
Market testing
If the product passes functional and consumer tests, the next step is test marketing, the stages at
which the product and marketing program are introduced into more realistic market settings. Test
marketing gives the marketer experience with marketing the product before going to the great
expense of full introduction. It lets the company test the product and its entire marketing program
—positioning strategy, advertising, distribution, pricing, branding and packaging, and budget
levels. The amount of test marketing needed varies with each new product. Test marketing costs
can be enormous, and it takes time that may allow competitors to gain advantages. When the
costs of developing and introducing the product are low, or when management is already
confident about the new product, the company may do little or no test marketing. Companies
often do not test market simple line extensions or copies of successful competitor products.
Launch (commercialization)
Test marketing gives management the information needed to make a final decision about
whether to launch the new product. If the company goes ahead with commercialization—
introducing the new product into the market—it will face high costs. The company will have to
build or rent a manufacturing facility. The company launching a new product must first decide
on introduction timing. Next, the company must decide where to launch the new product—in a
single location, a region, the national market, or the international market. Few companies have
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the confidence, capital, and capacity to launch new products into full national or international
distribution. They will develop a planned market rollout over time. In particular, small
companies may enter attractive cities or regions one at a time. Larger companies, however, may
quickly introduce new models into several regions or into the full national market.
Product Life Cycle
After launching the new product, management wants the product to enjoy a long and healthy life.
Although it does not expect the product to sell forever, the company wants to earn a decent profit
to cover all the effort and risk that went into launching it. Management is aware that each
product will have a life cycle, although the exact shape and length is not known in advance.
The following figure shows a typical product life cycle (PLC), the course that a products sales
and profits take over its lifetime. The .product life cycle has five distinct stages:

Products have a life of their own, just as people do. The stages of a product are: introduction,
growth, maturity, and decline. Each stage has its own characteristics.
Introduction
The introduction stage starts when the new product is first launched. Introduction takes time, and
sales growth is apt to be slow. In this stage, as compared to other stages, profits are negative or
low because of the low sales and high distribution and promotion expenses. Much money is
needed to attract distributors and build their inventories. Promotion spending is relatively high to
inform consumers of the new product and get them to try it. Because the market is not generally
ready for product refinements at this stage, the company and its few competitors produce basic
versions of the product. These firms focus their selling on those buyers who are the readiest to
buy.
Growth
If the new product satisfies the market, it will enter a growth stage, in which sales will start
climbing quickly. The early adopters will continue to buy, and later buyers will start following
their lead, especially if they hear favorable word of mouth. Attracted by the opportunities for
profit, new competitors will enter the market. They will introduce new product features, and the
market will expand. The increase in competitors leads to an increase in the number of
distribution outlets, and sales jump just to build reseller inventories. Prices remain where they are
or fall only slightly. Companies keep their promotion spending at the same or a slightly higher
level. Educating the market remains a goal, but now the company must also meet the
competition.

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Profits increase during the growth stage, as promotion costs are spread over a large volume and
as unit manufacturing costs fall. The firm uses several strategies to sustain rapid market growth
as long as possible. It improves product quality and adds new product features and models. It
enters new market segments and new distribution channels. It shifts some advertising from
building product awareness to building product conviction and purchase, and it lowers prices at
the right time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current profit.
By spending a lot of money on product improvement, promotion, and distribution, the company
can capture a dominant position. In doing so, however, it gives up maximum current profit,
which it hopes to make up in the next stage.
Maturity
At some point, a product's sales growth will slow down, and the product will enter a maturity
stage. This maturity stage normally lasts longer than the previous stages, and it poses strong
challenges to marketing management. Most products are in the maturity stage of the life cycle,
and therefore most of marketing management deals with the mature product in their maturity
phase.
The slowdown in sales growth results in many producers with many products to sell. In turn, this
overcapacity leads to greater competition. Competitors begin marking down prices, increasing
their advertising and sales promotions, and upping their R&D budgets to find better versions of
the product. These steps lead to a drop in profit. Some of the weaker competitors start dropping
out, and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long periods, most
successful ones are actually evolving to meet changing consumer needs. Product managers
should do more than simply ride along with or defend their mature products—a good offense is
the best defense. They should consider modifying the market, product, and marketing mix.
In modifying the market, the company tries to increase the consumption of the current product. It
looks for new users and market segments. The manager also looks for ways to increase usage
among present customers. Or the company may want to reposition the brand to appeal to a larger
or faster growing segment. The company might also try modifying the product—changing
characteristics such as quality, features, or style to attract new users and to inspire more usage. It
might improve the product's quality and performance—its durability, reliability, speed, or taste.
Or it might add new features that expand the product's usefulness, safety, or convenience..
Finally, the company can improve the product's styling and attractiveness.

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Finally, the company can try modifying the marketing mix—improving sales by changing one or
more marketing mix elements. It can cut prices to attract new users and competitors' customers.
It can launch a better advertising campaign or use aggressive sales promotions trade deals, cents
off, premiums, and contests. The company can also move into larger market channels, using
mass merchandisers, if these channels are growing. Finally, the company can offer new or
improved services to buyers.
Decline
The sales of most product forms and brands eventually dip. Sales may plunge to zero, or they
may drop to a low level where they continue for many years. This is the decline stage.
Sales decline for many reasons, including technological advances, shifts in consumer tastes, and
increased competition. As sales and profits decline, some firms withdraw from the market. Those
remaining may prune their product offerings. They may drop smaller market segments and
marginal trade channels, or they may cut the promotion budget and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There are
many hidden costs. A weak product may take up too much of management's time. It often
requires frequent price and inventory adjustments. It requires advertising and sales force
attention that might be better used to make "healthy" products more profitable. A product's
failing reputation can cause customer concerns about the company and its other products. The
biggest cost may well lie in the future. Keeping weak products delays the search for
replacements, creates a lopsided product mix, hurts current profits, and weakens the company's
foothold on the future.
Special forms of PLC
A specific brand's life cycle can change quickly because of changing competitive attacks and
responses. The PLC concept can also be applied to what are known as styles, fashions and fads.
Once a style is invented, it may last for generations, coining in and out of vogue. A style has a
cycle showing several periods of renewed interest.
A fashion is a currently accepted or popular style in a given field. Fashions pass through many
stages.
First, a small number of consumers typically take an interest in something new that sets them
apart. Then other consumers take an interest out of a desire to copy the fashion leaders. Next, the
fashion becomes popular and is adopted by the mass market. Finally, it fades away as consumers
start moving towards other fashions that are beginning to catch their eye. Thus fashions tend to
grow slowly, remain popular for a while, and then decline slowly.

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Fads are fashions that enter quickly, are adopted with great zeal, peak early and decline very fast.
They last only a short time and tend to attract only a limited following. Fads often have a novel
or quirky nature. Fads appeal to people who are looking for excitement, a way to set themselves
apart or something to talk about to others. They do not survive for long because they normally do
not satisfy a strong or lasting need nor satisfy it well.
PLC critics
 Managers may have trouble identifying which stage of the PLC the product is in,
pinpointing when the product moves into the next stage and determining the factors (That
affect the product's movement through life stages). In practice, it is difficult to forecast
the sales level at each PLC stage, the length of each stage and the shape of the PLC
curve.
 Using the PLC concept to develop marketing strategy can also be difficult because
strategy is both a cause and a result of the product's life cycle. The product's current PLC
position suggests the best marketing strategies, and the resulting marketing strategies
affect product performance in later life-cycle stages. Yet when used carefully, the PLC
concept can help in developing good marketing strategies for different stages in the
product life cycle.
The concept of product mix
A product mix (also called product assortment) is the set of all products and items that a
particular marketer offers for sale.
At Kodak, the product mix consists of two strong product lines: information products and image
products. At NEC (Japan), the product mix consists of communication products and computer
products.
The product mix of an individual company can be described in terms of width, length, depth, and
consistency. The width refers to how many different product lines the company carries. The
length refers to the total number of items in the mix. The depth of a product mix refers to how
many variants of each product are offered. The consistency of the product mix refers to how
closely related the various product lines are in end use, production requirements, distribution
channels, or some other way. These four product-mix dimensions permit the company to expand
its business by (1) adding new product lines, thus widening its product mix; (2) lengthening each
product line; (3) deepening the product mix by adding more variants; and (4) pursuing more
product-line consistency.
Brand Decisions
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Perhaps the most distinctive skill of professional marketers is their ability to create, maintain,
protect, and enhance brands of their products and services. A brand is a name, term, sign,
symbol, or design, or a combination of these, that identifies the maker or seller product.
Consumers view a brand as an important part of a product, and branding can add value to a
product.
The brand name should be carefully chosen since a good name can add greatly to a product’s
success. Desirable qualities of a good brand name include:
1). It should suggest something about the product’s benefits and qualities.
2). It should be easy to pronounce, recognize, and remember.
3). It should be distinctive.
4). It should translate easily into foreign languages.
5).It should be capable of registration and legal protection
Packaging
Packaging involves designing and producing the container or wrapper for a product. The package
may include the product's primary container, secondary and shipping package.
Traditionally, the primary function of the package was to contain and protect the product. In
recent times, however, numerous factors have made packaging an important marketing tool.
Increased competition and clutter on retail store shelves means that packages must now perform
many sales tasks—from attracting attention, to describing the product, to making the sale.
Companies are realizing the power of good packaging to create instant consumer recognition of
the company or brand. Developing a good package for a new product requires making many
decisions. First, the company must establish the packaging concept, which states what the
package should be or do for the product. Should it mainly offer product protection, introduce a
new dispensing method; suggest certain qualities about the product, or something else?
Decisions then must be made on specific elements of the package, such as size, shape, materials,
color, text, and brand mark. These elements must work together to support the product's position
and marketing strategy. The package must be consistent with the product's advertising, pricing,
and distribution.
Labeling
Labels may range from simple tags attached to products to complex graphics that are part of the
package. They perform several functions. At the very least, the label identifies the product or
brand. The label might also describe several things about the product—who made it, where it

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was made, when it was made, its contents, how it is to be used, and how to use it safely. Finally,
the label might promote the product through attractive graphics.
Types of label
Brand label: identifies the product or brand.
Grade label: The quality levels of the product like A, B& C
Descriptive Label: who made it, where it was made, when it was made, what it contains,
how it is to be used, and how to use it safely.

5.3. Placing the product

This part tries to examine four major questions concerning marketing channels: what is the
nature of marketing channels and why are they important? How do channel firms interact and
organize to do the work of the channel? What problems do companies face in designing and
managing their channels? What roles do physical distribution and supply-chain management play
in attracting and satisfy customers?
Meaning and Important Distribution
Ownership of a product has to be transferred somehow from the individual or organization that
makes it to the consumer who needs and buys it. Goods also must be physically transported from
where they are produced to where they are needed. Services ordinarily cannot be shipped but
rather are produced and consumed in the same place. Distribution’s role within a marketing mix
is getting the product to its target market.
The most important activity in getting a product to market is arranging for its sale the transfer of
title from producer to final customer. Other common activities (or functions) are promoting the
product, storing it, and assuming some or the financial risk during the distribution processes.
Few producers sell their goods directly to the final users. Instead, most use intermediaries to
bring their products to market. They try to forge a marketing channel /or distribution channel/ a
set of independent organizations involved in the process of making a product user. A company’s
channel decisions directly affect every other marketing decision. The company’s pricing depends
on whether if works with national discount chains, uses high – quality specialty stores, or sells
directly to consumers via the web. The firm’s sales force and communications decisions depend
on how much persuasion, training, motivation, and support its channel partners need. Whether a

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company develops or acquires certain new products may depend on how well those products fit
the capabilities of its channel members. Distribution channel decisions often involve long-term
commitments to other firms. Therefore, management must design its channels carefully, with an
eye on tomorrow’s likely selling environment as well as today’s.
Selecting the Type of Channel
Firms may rely on existing channels, or they may devise new channels to better serve current
customers and to reach new prospects. Most distribution channels include intermediary, but some
do not. A channel consisting only of producer and final customer, with no intermediaries
providing assistance is called direct distribution. In contrast, a channel of producer, final
customer, and at least one level of intermediaries represent indirect distribution. With indirect
distribution, a producer must determine the type (s) of intermediary that will best serve its needs.
The main common channels for consumer goods, business goods, and services are described
next.
1. Distribution of consumer goods: five channels are widely used in marketing tangible
products to ultimate consumers:
- Producer – Consumer. The shortest, simplest distribution channel for consumer goods
involves no intermediaries. The producer may sell from door to door or by mail.
- Producer – Retailer – Consumer. Many large retailers buy directly from manufactures and
agricultural producers
- Producer–Wholesaler–Retailer–Consumer. If there is a traditional channel for consumer
goods, this is it. Small retailers and manufacturers by thousands find this channel the only
economically feasible choice
- Producer – Agent – Retailer – Consumer. Instead of using wholesalers, many producers
prefer to rely on agent intermediary to reach the retail market, especially large –scale retailers
- Producer –Agent – Wholesaler – Retailer – Consumer. To reach small retailers, producers
often use agent intermediary, who in turn call on whole sellers that sell to large retail chains
and/or small retail stores.
2. Distribution of business goods: A variety of channels is available to reach organizations
that incorporate the products into their manufacturing process or use them in their operations.
- Producer – User. This direct channel accounts for a greater dollar volume of business
products than any other distribution structure. Large installations, such as jet engines, air
conditioning systems, and elevators sold directly to users.

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- Producer – Industrial Distributor – User. Producer of operating supplies and small accessory
equipment frequently use industrial distributors to reach their markets. Manufactures of
building materials and air-conditioning equipment are two examples of heavy users of
industrial distributors.
- Producer – Agent – User. Firms without their own sales departments find this a desirable
channel. Also, a company that wants to introduce a new produce or enter a new market may
prefer to use agents than its own sales force.
- Producer – Agent – Industrial Distributor – User. This channel is similar to the preceding
one. It is used for some reason, when it is not feasible to sell through agents directly to the
business user. For example, the order size may be too small to justify direct selling.
3. Distribution for services: The intangible nature of services creates special distribution
requirements. There are only two common channels for services:
- Producer – consumer. Because service in intangible the production process and/or sales
activity often require personal contact between producer and customer. Thus direct
channel is used. Example, Health care, legal advice, Haircutting and the like.
- Producer – agent – consumer. Producer- customer contact may not always be required
for distribution activities. Agents frequently assist a service producer with transfer of
ownership (the sales task). Many services notably travel, lodging, advertising media,
entertainment, and insurance, are sold through agents.
Factors Affecting Channel Decision / Choice
In a firm is customer-oriented (and it better be if it hopes to prosper), its channels are determined
by consumer buying patterns. The nature of the market should be the key factor in management’s
choice of channels. Other considerations are the product, the intermediary, and the company
itself.
1. Market Considerations: A logical starting point is to consider the target market -its needs,
structure, and buying behavior.
- Type of market. Because ultimate consumers behave differently than business users, they are
reached through different distribution channels. One analyst explained the situation in the
personal computer field “There’s a large corporate market and a large home market and they
shop in different places.” Because of those distinct buying patterns, numerous traditional
computer dealers have been able to prosper despite the onslaught of other distribution means
such as a mail order, superstores, and various retailers. Retailers, by definition, serve ultimate
consumers. So they are not in channels for business goods.

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- Number of potential customers. A manufacturer with few potential customers (firms or
industries) may use its own sales force to sell directly to ultimate consumers or business
users. In other case, for large number of customers, the manufacture would likely use
intermediaries.
- Geographic concentration of the market. When most of a firm’s prospective customers are
concentrated in a few geographic areas, direct sale is practical. When customers are
geographically dispersed, direct sale is likely to be impractical because of high travel costs.
Sellers may establish sales branches in densely populated markets and use intermediaries in
less concentrated markets.
- Order size. When either order size or total value of business is large, direct distribution is
economical. Thus food products manufacture would sell directly to large supermarket chains.
The same manufacturer, however, would use wholesalers to reach small grocery stores,
whose orders are usually too small to justify direct sale.
2. Product Considerations: While there are numerous product- related factors to consider, we
will highlight three.
- Unit value. The price attached to each unit of a product affects the amount of found available
for distribution. For example, a company can afford to use its own employee to sell a
machine that costs more than $90,000. But it would not make sense for a company sales
person to call on a household or a business firms to sell a $2 product. Consequently, products
with low unit values usually are distributed through one or more levels of intermediary.
However, if order size is large because customer buys many units of a product at the same
time from the company, then a direct channel may be economically feasible.
- Perishability. Some goods physically deteriorate fairly quickly. Other goods, such as
clothing, perish in a fashion sense. Perishable products require direct or very short channels.
- Technical nature of a product. A business product that is highly technical is often
distributed directly to business users. The producer’s sales force must provide considerable
presale and post sale services; wholesalers normally cannot do this. Consumer products of a
technical nature provide a real distribution challenge. As much as possible, they try to sell
directly to retailers, but even then product servicing often poses problems.
3. Intermediary considerations: Here we begin to see that a company may not be able to
arrange exactly the channel it desires:
- Services provided by intermediaries. Each producer should select intermediary offering
those marketing services that the producer either unable to provide or cannot economically
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 perform. For instance, independent agents have the capability to explain the technical aspects
of competing products from different insurance companies to prospective buyers.
- Availability of desired intermediary. The intermediaries preferred by a producer may not be
available. They may carry competing products and, as a result, not want to add another line.
- Producers may not want to add other policies. When intermediaries are willing to join a
channel because they consider a producer’s policies to be unacceptable, the producer has
fewer channel options. Some retailers or wholesalers, for example, will carry a producer’s
line only if they receive assurance that no competing intermediary will carry the line in the
same territory.
4. Company Considerations: Before choosing a distribution channel for a product, a company
should consider its own situation.
- Desire for channel control. Some producers establish direct channel because they want to
control their products distribution, even though a direct channel may be more costly than an
indirect channel. By controlling the channel, producers can achieve more aggressive
promotion and can better control both the freshness of merchandise stocks and their
product’s retail prices.
- Service provided by seller. Some producers make decisions about their channel based on the
distribution functions desired by intermediaries. For example, numerous retail chains will not
stock a product unless the producer presells it through heavy advertising.
- Ability of management. The marketing experience and managerial capabilities of a producer
influence decisions about which channel to use. Many companies lacking marketing know-
how turn the distribution job over to intermediaries.
- Financial resources. A business with adequate finances can establish its own sales force
grant credit to its customers, and/or warehouse its own products. A financially weak firms
use intermediaries to provide these services.
- Market Intensity: The organization must decide on the amount of market coverage--
intensive, selective, or exclusive--needed to achieve its marketing strategies. In terms of
number of intermediaries to use, an organization has three basic strategies it can follow.
Retailing and Wholesaling
A. Retailing
Retailing involves all the activities in selling product or services, directly to final consumers for
their personal, non-business use. Many institutions, manufacturers, wholesalers, and retailers do
retailing. Although most retailing is done in retail stores, in recent years non-store retailing has

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been growing much faster than store retailing. Non-store retailing includes selling to final
consumers through direct main, catalogs, telephone, the Internet, TV home shopping shows,
home and office parties, door-to-door contact, vending machines, and other direct selling
approaches.
Types of Retailers
Retail stores come in all shapes and sizes, and new retail types keep emerging. The most
important types of retail stores are discussed in the following sections.
Amount of service: Difficult products require different amount of service, and customer service
preferences vary. Retailers may offer one three levels of service - self-service, limited service,
and full service.
a. Self-service: retailers serve customers who are willing to perform their own “locate-compare-
select” process to save money. Self-service is the basis of all discount operations and is
typically used by sellers of convenience goods (such as supermarkets) and nationally
branded, fast-moving shopping goods.
b. Limited-service retailers: provide more sales assistance because they carry more shopping
goods about which customers need information their increased operating costs result in
higher prices.
c. Full-service retailers: such as specially stores and first-class department stores, sales people
assist customers in evening phase of the shopping process. They provide more services,
resulting in much higher operating costs, which are passed along to customers as high prices.
Product Line: Retailers can be classified by the length and breadth of their product assortments.
a. Specialty stores: carry narrow products lines with deep assortments within those lines. The
increasing use of market segmentation, market targeting, and product specialization has
resulted in a greater need for stores that focus on specific products and segments. In contrast,
department stores carry a wide variety of product lines. Supermarkets are the most frequently
shopped type of retail store today; however, they are facing slow sales growth because of an
increase in competition from convenience stores, discount food stores, and super stores.
b. Convenience stores: are small stores that carry a limited line of high-turnover convenience
goods.
c. Superstores: are much larger than regular supermarkets and offer a large assortment of
routinely purchased food products, non-food items, and services.
Relative Prices: Retailers can also be classified according to the prices they charge. Most
retailers charge regular prices and offer normal-quality goods and customer service. Others offer
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high quality goods and services at higher prices. The retailers that feature low prices are discount
stores and “off-price” retailers.
a. Discount stores: sell standard merchandise at lower prices by accepting lower margins and
selling higher volume.
b. Off-price retailers: when the major discount stores traded up, a new wave of off-price
retailers moved in to fill the low-price, high volume gap. Ordinary discounters buy at regular
wholesale prices and accept lower margins to keep prices down. In contrast, off-price
retailers buy at less-than-regular wholesale prices and charge consumers less than retail. Off-
price retailers can be found in all areas, from food, clothing, and electronics to no-frills
banking and discount brokerages.
B. Wholesaling
A wholesaler or distributor is a commercial establishment that purchases products from various
manufacturers for stock and offers complete assortments of specified merchandise for resale to
the retail store.
A manufacturer’s agent is an individual or firm acting as an intermediary between the
manufacturer and the wholesaler, usually in a specified territory. The agent may handle two or
more related but non-competing lines. The manufacturer fixes prices and selling terms governing
sales. Compensation is generally on a commission basis. The agent does not take title or stock
products sold. A manufacturer's sales branch is a wholesale establishment owned and operated
by the manufacturer. The branch offers maximum control of sales and service to customers. It
also provides good maximum feedback.
A selling agent is an individual or firm that operates on a contractual basis with a manufacturer
and undertakes the sale of the entire output of that manufacturer. The agent takes over full
authority in marketing the manufacturer’s product. In effect, the selling agent replaces the
manufacturer’s sale department. A broad range of marketing functions and activities; including
pricing, terms and conditions of sale, and customer contact, are assumed by the agent. A broker
and commission agent is an individual or firm that negotiates contracts of purchase and sale
between parties on a fee or commission basis. He or she does not take title to, stock, or handle
the products involved in the transaction. He or she may have physical control but not ownership
of the products. The most important function of the broker is to bring the buyer and seller
together. He or she is a specialist in market conditions of the products involved, generally dry
goods and foodstuffs.

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 5.4 Promotion
Promotion is the activities the companies use to communicate with others about their product or
service and to convince them to use it. Promotion is decision /activities to motivate customers to
buy company’s offerings. Companies must also communicate with their present and potential
customers, retailers, suppliers, other stakeholders, and the general public.
The Promotion Mix
A company’s promotion mix – also known as Marketing Communications Mix – consists of
Advertising, Sales Promotion, Public Relations, Personal Selling and Direct Marketing.
Advertising: Any paid form of no personal promotion of ideas or product by an identified
sponsor. Advertising can reach masses of geographically dispersed buyers at a low price per
exposure. Because of its nature, consumers tend to view advertised products as more legitimate.
A disadvantage is that it is impersonal and not directly persuasive.
Sales Promotion: Short-term incentives to encourage the sales or purchase of a product or
service. These include coupons, raffles, contests, premiums etc. They attract consumer attention
and dramatize product offers. Advertisement says, “Buy our product” whereas sales promotion
says, “Buy it now”. However, a disadvantage is that it is not as effective as personal selling.
Public Relations: Building good relations with the company’s various publics by obtaining
favorable publicity, building up a good corporate image and removing unfavorable stories,
rumors and events. News stories, events and feature look more real to readers that advertisements
and the message get across like“news” rather a sales-directed communication.

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Personal Selling: Personal presentation by the firm’s sales force for the purpose of making sales
and building customer relationships. All allows all kinds of customer relationships to spring up.
However it needs long-term commitment.
Direct Marketing: Direct connections with carefully targeted individual consumers to obtain
immediate response and cultivate lasting customer relations – through the use of mail, telephone,
fax, internet etc. Direct Marketing is immediate, nonpublic, customized and interactive.
Developing and managing the advertising campaign
Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or
services by an identified sponsor. Advertisers include not only business firms but also museums,
charitable organizations, and government agencies that direct messages to target publics. Ads are
a cost-effective way to disseminate messages. In developing an advertising program, successful
firms start by identifying the target market and buyer motives. Then they can make critical
decisions, on advertising objectives, how much to be spent, what message should be sent and
how should the results be evaluated.
Setting the Advertising Objectives
Advertising objectives can be classified according to whether their aim is to inform, persuade, or
remind.
➤ Informative advertising figures heavily in the introduction stage of a product category, where
the objective is to build primary demand.
➤ Persuasive advertising becomes important in the competitive stage, where the objective is to
build selective demand for a particular brand. Some persuasive advertising is comparative
advertising, which explicitly compares two or more brands.
➤ Reminder advertising is important with mature products. Coca-Cola ads are primarily
intended to remind people to purchase Coca-Cola. A related form of advertising is reinforcement
advertising, which seeks to assure current purchasers that they have made the right choice.
The advertising objective should emerge from a thorough analysis of the current marketing
situation. If the product class is mature, the company is the market leader, and brand usage is
low, the proper objective should be to stimulate more usage. If the product class is new, the
company is not the market leader, but the brand is superior to the leader, then the proper
objective is to convince the market of the brand’s superiority.
Deciding on the Advertising Budget
Management should consider these five factors when setting the advertising budget:

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1. Product life cycle stage: New products typically receive large budgets to build awareness and
to gain consumer trial. Established brands usually are supported with lower budgets as a ratio to
sales.
2. Market share and consumer base: High-market-share brands usually require less advertising
expenditure as a percentage of sales to maintain their share. To build share by increasing market
size requires larger advertising expenditures. On a cost-per-impression basis, it is less expensive
to reach consumers of a widely used brand than to reach consumers of low-share brands.
3. Competition and clutter: In a market with a large number of competitors and high advertising
spending, a brand must advertise more heavily to be heard. Even simple clutter from
advertisements that are not directly competitive to the brand creates a need for heavier
advertising.
4. Advertising frequency: The number of repetitions needed to put across the brand’s message to
consumers has an important impact on the advertising budget.
5. Product substitutability: Brands in a commodity class (cigarettes, beer, soft drinks) require
heavy advertising to establish a differential image. Advertising is also important when a brand
offers unique benefits or features.
Sales-promotion
Sales promotion consists of a diverse collection of incentive tools, mostly short term, designed to
stimulate trial, or quicker or greater purchase, of particular products or services by consumers or
the trade. Whereas advertising offers a reason to buy, sales promotion offers an incentive to buy.
Sales promotion includes tools for consumer promotion, trade promotion and business and sales
force promotion.
Major Decisions in Sales Promotion
In using sales promotion, a company must establish its objectives, select the tools, develop the
program, pretest the program, implement and control it, and evaluate the results.
Sales Promotion Objectives
Sales-promotion objectives are derived from broader promotion objectives, which are derived
from more basic marketing objectives that are developed for the product. The specific objectives
for sales promotion vary with the target market. For consumers, objectives include encouraging
purchase of larger-size units, building trial among nonusers, and attracting switchers away from
competitors’ brands. For retailers, objectives include persuading retailers to carry new items and
higher levels of inventory, encouraging off-season buying, offsetting competitive promotions,
building brand loyalty, and gaining entry into new retail outlets. For the sales force, objectives
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include encouraging support of a new product or model, encouraging more prospecting and
stimulating off-season sales.
Major Consumer-Promotion Tools
Samples: Offer of a free amount of a product or service.
Coupons: Certificates offering a stated saving on the purchase of a specific product.
Cash Refund Offers (rebates): Provide a price reduction after purchase: Consumer sends a
specified “proof of purchase” to the manufacturer who “refunds” part of the purchase price by
mail.
Price packs (cents-off deals): Promoted on the package or label, these offer savings off the
product’s regular price.
Premiums (gifts): Merchandise offered at low or no cost as an incentive to buy a particular
product.
Prizes (contests, sweepstakes, and games): Prizes offer consumers the chance to win cash,
trips, or merchandise as a result of purchasing something.
Major Trade-Promotion Tools
Price-Off (off-invoice or off-list): A straight discount off the list price on each case purchased
during a stated time period. The offer encourages dealers to buy a quantity or carry a new item
that they might not ordinarily buy.
Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s
products in some way. An advertising allowance compensates retailers for advertising the
manufacturer’s product. A display allowance compensates them for carrying a special product
display.
Free Goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity
or who feature a certain flavor or size. Manufacturers might offer push money or free specialty
advertising items to retailers that carry the company’s name.
Major business and sales force promotion tools
Trade shows and conventions: Industry associations organize annual trade shows and
conventions where firms selling products and services to this industry buy space and set up
booths and displays to demonstrate their products. Participating vendors expect several benefits,
including generating new sales leads, maintaining customer contacts, introducing new products,
meeting new customers, selling more to present customers, and educating customers with
publications, videos, and other audiovisual materials.

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Sales Contests: A sales contest aims at inducing the sales force or dealers to increase sales over
a stated period, with prizes going to those who succeed. Incentives work best when they are tied
to measurable and achievable sales objectives (such as finding new accounts or reviving old
accounts) for which employees feel they have an equal chance.
Specialty Advertising: Specialty advertising consists of useful, low-cost items (such as
calendars) bearing the company’s name and address, and sometimes an advertising message, that
salespeople give to prospects and customers.

Public relations / publicity

A public is any group that has an actual or potential interest in or impact on a company’s ability
to achieve its objectives. Public relations involve a variety of programs that are designed to
promote or protect a company’s image or its individual products. It also means building good
relations with the company’s various publics by obtaining favorable publicity, building up a
good corporate image and removing rumors, undesirable stories and events.
Public relation departments typically perform the following functions:
1. Press relations (presenting news and information about the organization in the most positive
light);
2. Product publicity building and releasing good news about certain product.
3. Lobbying dealing with legislators and government officials to promote or defeat legislation
and regulation
4. Financial community relations: maintain good relations with financial sources.
Major tools in marketing public relations
Publications: Companies rely extensively on published materials to reach and influence target
markets, including annual reports, brochures, articles, printed and on-line newsletters and
magazines, and audiovisual materials.
Events: Companies can draw attention to new products or other company activities by arranging
special events like news conferences, on-line chats, seminars, exhibits, contests and
competitions, and sport and cultural sponsorships that will reach the target publics.
News: One of the major tasks of public relation professionals is to find or create favorable news
about the company, its products, and its people. The next step getting the media to accept press
releases and attend press conferences—calls for marketing and interpersonal skills.
Speeches: Speeches are another tool for creating product and company publicity and building
the company’s image.
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Public-Service Activities: Companies can build goodwill by contributing money and time to
good causes.
Personal selling
Selling is one of the oldest professions in the world. Those who sell having many names:
salespeople, sales representative, sales consultants, sales engineers etc. Salespeople are educated,
well-trained professions who work to build customer relationships and keep them going. The
term salesperson covers a wide range of positions: salesperson is an individual who is
prospecting, communicating, servicing and gathering information.
Personal selling is the interpersonal arm of the promotion mix. It is face to face interaction with
one or more prospective purchasers for the purpose of making presentation, answering questions,
and procuring orders. The sales force serves as a critical link between a company and its
customer. They do two things: they represent the company to customers and also represent
customers to the company. The old view was that the salespeople should worry about the sales
and company should worry about profits. However, the current view is that salespeople should
work with others in the company to produce customer value and company profit.
Direct marketing
Direct marketing consists of direct connections with targeted individual consumers to obtain
immediate response and cultivate lasting customer relationships. For example, del interacts
directly with customers by telephone, website etc. There are many benefits of direct marketing to
both buyers and sellers. Buyers can, from the comfort of their homes, browse websites at any
time and access a wealth of information. For sellers, direct marketing is a powerful tool for
building customer relations. These can be done using database marketing. Direct marketing also
offers sellers a low-cost alternative for reaching markets. As a result, direct marketing has
become the fastest growing form of marketing.
a customer database is an organized collection of comprehensive data about individual
customers including demographic, geographic, psychographic and behavioral data. Many
companies confuse customer data with a customer mailing list. Companies use databases to
locate good potential customers and generate sales leads. They mine their databases to learn
about consumers in detail.

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Major channels for direct marketing
Direct marketers can use a number of channels for reaching prospects and customers. These
include direct mail, catalog marketing, telemarketing, television and other direct-response media,
and on-line channels.
Direct mail
Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a
person at a particular address. Using highly selective mailing lists, direct marketers send out
millions of mail. Direct mail is a popular medium because it permits target market selectivity, it
can be personalized, it is flexible, and it allows early testing and response measurement.
Although the cost per thousand people reached is higher than with mass media, the people
reached are much better prospects.
Catalog marketing
Catalog marketing occurs when companies mail product catalogs (full-line merchandise catalogs,
specialty consumer catalogs, or business catalogs in print, on cd, or on-line) to selected mail or
electronic addressees.
Telemarketing
Telemarketing describes the use of telephone operators to attract new customers, to contact
existing customers to ascertain satisfaction levels, or to take orders. In the case of routinely
taking orders, it is called telesales. Many customers routinely order goods and services by
telephone.

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