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MARKETING MANAGEMENT
Overview
The purpose of marketing is to create and keep customers.
For a company to succeed it must be committed to meeting
customer needs more efficiently and effectively than competitors
To do this, the company must continuously monitor the
marketing environment and respond to changes in customer
needs, tastes, and behaviour.
Definitions
 It is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods and services to create
beneficial exchanges that satisfy individual and organizational needs
and objectives.
 It is the process of developing and maintaining a realistic and viable
‘fit’ between an organizations’s objectives, its limited resources
and the changing marketing environment.
 It is the social and managerial process by which individuals and
groups obtain what they need and want through creating and
exchanging products with others.
This definition has the following implications;
 Marketing is a managerial process i.e. marketing is a special
area in management hence all management functions are
applicable in marketing, e.g., planning, control, directing,
organizing, staffing, motivation, etc.
 The entire system must be market driven, customer oriented
i.e. customer needs must be recognized and satisfied
effectively.
 The marketing process is dynamic. Basic marketing activities remain
the same, but the practice of marketing must change with time.
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 The marketing program starts with a product idea and does not end
until the customers are completely satisfied. Relationship marketing
as opposed to transactional marketing leads to loyalty and repeat
purchases.
 Customers must be satisfied for the company to retain them and
make repeat business.
 Marketing is not only limited to business and non-profit oriented
organizations also practice marketing e.g. churches, politicians, NGOs
etc. It is a process by which;
-one identifies the needs and wants of the people.
-one determines and creates a product/service to meet the
needs and wants. [PRODUCT]
-one determines a way of taking the product/service to the market
place. [PLACE]
-one determines the way of communicating the product to the
market place. [PROMOTIONS]
-one determines the value for the product.[PRICE].
-one determines the people, who have needs/ wants.
[PEOPLE] and then creating a transaction for exchanging
the product for
a value, and thus creating a satisfaction to the buyer's needs/wants.
Common concepts used in Marketing
1) Needs; a need is a state of felt deprivation of some basic
requirement
e. g. people need food, clothing, shelter, and safety for survival.
2) Wants; these are desires for specific satisfiers of the needs e.g. a
person needs food but wants fish and chips. He needs shelter but
wants a mansion.
3) Demands; are wants for specific products that are backed up by
the ability and willingness to buy them. A want becomes a demand
when it is backed by purchasing power.
4) Product; It is anything that can be offered to someone to satisfy a
need or want at a profit.
5) Utility; this is the consumer’s estimate of a product’s overall
capacity to satisfy a need.
6) Value is a ratio of the product’s utility and price i.e. value = utility
 Price
A product is said to be of better value than the other if it offers
more for the same price.
7) Exchange; is the act of obtaining a desired product from someone
by offering something in return. Four conditions must prevail for
an exchange to take place;
a) There should be at least two parties,
b) Each party must have something of value to deliver to the other,
c) Each party must be able to communicate and deliver,
d) Each party must be free to accept or reject the other’s offer.
e) Each party must feel it is appropriate or desirable to deal
with the other party.
An exchange is a process and not an event. Two parties are
said to be engaged in an exchange if they are negotiating and
moving towards agreement. If an agreement is reached, then a
transaction takes place.
8) A transaction; is a trade of values between two parties.
9) Transfer; is an act of giving something of value to someone
without getting anything tangible in return e.g. a gift.
10) A market; it consists of all the potential customers sharing a
particular need or want who might be willing and able to engage in
exchange to satisfy the need.
11)A brand; is an offering from a known source/ company. It may
be a name, a sign, symbol, distinctive colouring or lettering that
distinguishes one company’s products from others.
Company orientations towards the market place (marketing concepts)
these are philosophies that guide a company’s marketing efforts.
They indicate the relative weights that should be given to the
interests of the organization, customers, and society in general.
There are six such philosophies under which marketing activities
can be conducted i.e.
 The production concept
 The product concept
 The selling concept
 The marketing concept
 The customer concept
 The societal marketing concept
1. The production concept; It is the philosophy that consumers will
like products that are easily available and highly affordable.
Therefore the company should focus on production and distribution
efficiency. Whatever is produced is quickly sold and product quality is
not important. Hence more products are manufactured since it is
assumed that little marketing effort is needed to achieve more sales
and profits. This philosophy is applicable with convenience
products.
2. The product concept; It holds that consumers will favour products
that offer the highest quality, performance or innovative features.
The company therefore focuses on making superior products and
improving them over time. Product oriented companies trust that
their engineers can design exceptional products hence little or no
customer input is obtained. In a product innovation approach, the
company pursues product innovation, and then tries to develop a
market for the product. Product innovation drives the process and
marketing research is conducted primarily to ensure that profitable
market segment(s) exist for the innovation. The rationale is that
customers may not know what options will be available to them in
the future so we should not expect them to tell us what they will buy
in the future.
The production concept can lead to “marketing myopia”, the folly
that customers buy a product for what it is instead of its benefits.
The concept is however applicable with specialty products.
3. The selling concept; It is the idea that consumers will not buy
enough of the company’s products unless it (the company)
undertakes a large scale selling and promotional effort. The concept
assumes that consumers show buying inertia or resistance and must
be persuaded into buying. It holds the belief that the purpose of
marketing is to sell more products to more people, more often for
more money in order to make more profit. The philosophy is
applicable with unsought products.
4. The marketing concept; It holds that the key to achieving
organizational goals consists of the company being more effective
than
competitors in creating, delivering and communicating superior customer
value to its target markets.
The job is not to find the right customers for your product, but the
right products for the customers. While the selling concept focuses
on the needs of the seller, the marketing concept focuses on the
buyer’s needs. In the consumer-driven approach, consumer wants
are the drivers of all strategic marketing decisions. No strategy is
pursued until it passes the test of consumer research. Every aspect
of a market offering, including the nature of the product itself, is
driven by the needs of potential consumers. The starting point is
always the consumer. The rationale for this approach is that there is
no point spending R&D funds developing products that people will
not buy. History attests to many products that were commercial
failures in spite of being technological breakthroughs. A formal
approach to this customer-focused marketing is known as SIVA
(Solution, Information, Value, and Access). This system is basically the
four Ps renamed and reworded to provide a customer focus.
The SIVA Model provides a demand/customer centric version
alternative to the well-known 4Ps supply side model (product, price,
place, promotion) of marketing management.
Product → Solution
Promotion → Information
Price → Value
Placement → Access
The marketing concept rests on four pillars; target market,
customer needs, integrated marketing, and profitability.
a) Target market: is a selected group of customers with similar
needs and purchase behaviour that a company decides to serve.
b) Customer needs: A company that is able to succeed in the long
run is the one that responds to customer needs and ensures their
satisfaction. In this way it is able to attract more customers and
retain the existing.
c) Integrated marketing: This is when all the company’s
departments work together to serve the customer’s interests.
Firstly the various
 marketing functions e.g. the sales force, advertising, customer
service, marketing research etc. must work together. Secondly,
marketing must be embraced by other departments i.e. marketing
should not just be a departmental but a companywide orientation.
To foster teamwork, the company carries out internal as well as
external marketing. External marketing is directed at people outside
the company while internal marketing is the task of hiring, training
and motivating employees to serve customers well. All departments
of a firm should be geared to satisfying consumer wants/needs. In
this sense, a firm's marketing department is often seen as of prime
importance within the functional level of an organization.
Information from an organization's marketing department would be
used to guide the actions of other department's within the firm. As
an example, a marketing department could ascertain (via marketing
research) that consumers desired a new type of product, or a new
usage for an existing product. With this in mind, the marketing
department would inform the R&D department to create a prototype
of a good/service based on consumers' new desires.
The production department would then start to manufacture the
good, while the marketing department would focus on the promotion,
distribution, pricing, etc. of the product. Additionally, a firm's finance
department would be consulted, with respect to securing appropriate
funding for the development, production and promotion of the
product.
d) Profitability: The ultimate purpose of marketing is to help
organizations achieve their objectives, that of long run profitability in
case of private firms and the objective of survival and attracting
enough funds to perform useful work, for the case of nonprofits
organizations. Private firms should achieve profits only as a
consequence of creating superior customer value, by satisfying
customer needs better than competitors. Circumstances that force
companies to embrace the marketing concept;
 sales decline
 slow sales growth
 changing buying patterns
 increased competition
 increased marketing expenditures
5. The customer concept; whereas the marketing concept works at
the level of the customer segment, the customer concept views
each customer individually by shaping and designing products
unique to each customer’s requirements.
6. The societal marketing concept; It holds that the organization’s
task is to determine the needs and wants of target markets and to
deliver the desired products more effectively than competitors in a
way that
preserves or enhances the consumer’s and society’s well-being.
Consumers are becoming more aware of the environmental and social
implications of their day-to-day consumer decisions and are beginning
to make purchasing decisions related to their environmental and
ethical concerns.
Differences between Selling and Marketing
Concepts
Marketing
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Selling 1. Emphasis is on the

1. Emphasis is placed on consumer’s needs.
the product. 2. Company first determines
2. Company first makes the customer needs then
product then decides on how decides how to make the
to sell it. product to satisfy the
3. Management is sales needs
volume oriented. 3. Management is profit oriented.
4. Planning is short term 4. Planning is long term oriented
oriented, in terms of current in terms of new products,
markets and products. markets and future growth.
5. Focus is on the needs of 5. Focus is on the wants of
the seller. the buyer.
6. Company “bends 6. Company “bends its supply
consumer demand to meet to meet consumer’s
company’s supply”. demands.
7. High pressure selling to 7. Product planning to
sell goods already match products with
produced. demand.
8. ‘Caveat emptor’ (let the 8. ‘Caveat vendor’ (let the
buyer beware). seller beware).
9. Profits are through sales 9. Profits are through
volume. customer satisfaction.

Holistic marketing concept; This is a concept based on the

development, design and implementation of marketing programs,
processes and activities that recognise their breadth and
interdependencies.
It recognises that everything matters with marketing and that a
broad, integrated perspective is often necessary. Thus holistic
marketing is an approach to marketing that attempts to recognize
and reconcile the scope and complexities of marketing activities.
There are four components of the holistic marketing concept, i.e.
i. Relationship marketing
ii. Integrated marketing
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iii. Internal marketing
iv. Social responsibility marketing

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 i. Relationship marketing; The key goal of marketing is to develop
enduring relationships with all people or organizations that could
directly or indirectly affect the success of the firm’s marketing
activities. It has the aim of building and mutually satisfying long term
relationships with key parties i.e. customers, suppliers, distributors
and other marketing partners.
It builds strong economic, technical and social ties among these
partners. Relationship marketing involves cultivating the right kind
of relationship with the right stakeholder groups.
Its ultimate outcome is the building of a unique company asset
called a marketing network.
ii. Integrated marketing; The marketer’s task is to devise marketing
activities and assemble fully integrated marketing programs to create,
communicate and deliver value for consumers. The two key
themes of integrated marketing are;
a. Many different marketing activities are employed to communicate and
deliver value.
b. All marketing activities are co-ordinated to maximize their
complimentary effects. The design and implementation of any one
marketing activity is done with all other activities in mind.
iii. Internal marketing; Holistic marketing incorporates internal
marketing ensuring that everyone in the organization embraces
appropriate marketing philosophies and principles especially senior
management.
It is the task of hiring, training and motivating employees with the
aim of serving customers well.
iv. Social responsibility marketing; Holistic marketing incorporates
social responsibility through understanding and implementing
broader societal concerns for ethical, environmental, legal and social
aspects of marketing activities and programs.
The effect and cause of marketing clearly extends beyond the
company and the consumer to society as a whole.
Social responsibility also requires that marketers carefully consider
the role that they are playing and could play in terms of social
welfare.
The Role of Marketing to Society
 Marketing raises people’s standard of living thus marketing
enables people to consume products and services that they would
otherwise not access e.g. imported motor vehicles.
 Employment creation; some are owners while some are employed
by warehousing, retailing, transporting, and advertising
activities that facilitate marketing.
 Revenue generation; from advertisements which can be ploughed
back to bring entertainment and news.
 Transfer of technology from one nation to the other in
form of manpower, capital equipment, foreign-owned
business, etc.
 Encourages competition which leads to high quality products and
low prices.
 Marketing acts as a training ground for entrepreneurs who may
launch their own businesses.
 Marketing provides product variety through offering more
models, brands, flavours and package sizes.
Marketing and Social Responsibility
The social responsibility of marketing derives from the societal
marketing concept which emphasizes that companies should
determine the needs and wants of the consumer and deliver the
desired satisfaction more effectively than competitors in a way
that maintains or improves the consumer’s and society’s general
well being. That marketers should consider the implications of
their activities on different sections of society and ensure that no
undue harm is done on these groups’ interests.
Such orientation especially if on a long term basis helps improve a
company’s public image and eventually add to its profitability.
Marketing issues in Social Responsibility
 Product quality and branding should not be done so as to deceive
the customer. He should get equal value for money.
 It is unethical to build obsolescence into a product to make sure it
does not last too long so as to boost total sales by more frequent
repurchases.
 Running counterfeit brands is socially unacceptable.
  Marketing advertisements should portray the true and correct
quality and quantity of the products advertised.
 It is also unethical to market goods of reduced quality to match an
increase in demand.
Corporate Social Responsibility activities
 Development of social amenities e.g. health, sports, education
and housing, in the area in which a company operates.
 Maintaining a healthy, pollution-free environment.
 Providing opportunities for employment.
 Providing for the unfortunate, sick and homeless in society.
Concepts of social responsibility
i. Profit responsibility
ii. Stakeholder responsibility
iii. Societal responsibility
i. Profit responsibility; It holds that companies have a simple duty i.e.
to maximize profits for their owners or shareholders. This view is
expressed by Nobel Laureate Milton Feldman who said “there is
only one and only one social responsibility of business, i.e. to use
its resources and engage in activities designed to increase its
profits so long as it stays with the rule of the game, which is to say
engaging in open and free competition without deception or
fraud”.
ii. Stakeholder responsibility; This concept focuses on the obligations
an organization has to those who can affect achievement of its
objectives. These constituencies include customers, employees,
suppliers and distributors. The firm must build and maintain long
lasting beneficial relationships with important stakeholders.
iii. Societal responsibility; It refers to the obligations that organizations
have to the preservation of the ecological environment. General
public concerns about the environment and public welfare are
represented by interest and advocacy groups such as the
Greenpeace movement, an international environmental
organization.
Green marketing; It is a concept whereby a company produces
goods or services which do not pollute the environment i.e. they
have little or no harm to the environment. It is an effort to produce,
promote and
 reclaim environmentally friendly products. Green marketing takes
many forms e.g. Shell Oil Company which produces lead-free
gasoline.
Historical Development of Marketing
Before the industrial revolution, production of goods was largely
manual and business was characterized by:-
 Low volume of production
 High cost of production i.e. expensive raw materials
 Higher demand than supply for goods i.e. consumers competed
for limited goods and a competition was among consumers at this
point, producers emphasized on quantity of products rather than their
quality. At the onset of the industrial revolution, at around the
beginning of the 20th century, there was an increase in
merchandized trade due to the following reasons;
 There was a high demand for existing products
 There was a marked increase in supply of raw materials
 Increased volume of production due to
automated/mechanized manufacturing
Existing manufacturers expanded, attracting new entrepreneurs due
to increased profit opportunities.
Competition therefore shifted from consumers to manufacturers in
terms of price and sales volume. Technologically improved
means of communication, transport, and production led to
relatively reduced costs of production and distribution, enabling
manufacturers to sell over a wider market.
Manufacturers started emphasizing customer satisfaction. But in spite
of these changes, most industries concerned themselves with sales
i.e. they engaged in intensive personal selling which was used
because there was no mass media hence media advertising was still
non-existent or limited.
In the middle of the 20th century onwards some suppliers started
thinking of adjusting their products and prices to reflect customer
requirements, hence the start of marketing orientation of business.
This was further triggered by the 2nd world war, which created an
increased demand for most manufactured goods. This period
marked the
development of comprehensive sales and marketing departments in
firms.
The development and evolution of marketing can be looked at
from the following stages;
1) Production-orientation era; Goods were scarce during this period
of the industrial revolution (1850s -1920s).Therefore buyers were
willing to buy virtually any goods that were produced.
Manufacturers had the idea that products would sell themselves,
so the major concern of business was production and not
marketing.
2) Sales era; It existed between the 1920s- 1950s.
During this time the firms discovered that they could produce
more goods than they would be bought because production had
been automated after the invention of many machinery and
equipment. Competition was increasing and the solution was to hire
sales people and engage in aggressive advertising to find new
customers.
3) Marketing- orientation era; This was between the 19500s- 1980s.
As selling became more difficult, it was necessary for firms to get
better methods of making their products popular among the
consumers.
Production thus became more customer-oriented. Marketers were
more involved in designing and production of goods unlike in the past
when they were involved only after the item had been produced.
4) The social responsibility era; (1970s- today) Due to the social,
political and economic pressures that businesses began to
experience during this time, marketers were forced to be sensitive
to the interests of not only customers but the general public.
External pressure such as customer discontent, concern for the
physical environment and political- legal forces had to be
factored in the marketing programs of firms. The marketer had to
be concerned with creating and delivering a better quality of life
and preserve the well being of the customer and society in
general.
Functions of a Marketing Manager
 The marketing manager’s job is to develop effective marketing
strategies that give the company a strong competitive advantage in its
target market. This involves 4 key functions;
 Analysis
 Planning
 Implementation
 Control
1. Marketing analysis involves examining the company’s markets
and marketing environment to find attractive opportunities.
2. Marketing planning involves setting marketing objectives and
deciding on the marketing strategies to achieve the objectives.
3. Implementation is putting the plans into action. It involves day-to-
day activities that translate the plan to work.
4. Marketing control is essential because surprises may occur
during implementation. Control is the process of measuring and
evaluating the results of marketing strategies and taking corrective
action to ensure that objectives are attained.
Marketing Management Tasks
A marketing manager should perform several tasks including
the following;
 Conduct marketing research to generate information on consumers
and products.
 Study competitors’ products and market trends.
 Monitor and estimate future demand for products.
 Develop new products and services through marketing
research, customer feedback and other sources of
information.
 Identify and implement promotion strategies to attract customers.
 Prepare marketing plans, budgets and schedules.
 Decide on price and price offers to customers.
 Monitor customer satisfaction over time.
THE MARKETING ENVIRONMENT
It consists of forces that affect the marketer’s ability to
develop and maintain profitable business with customers. The
environment is characterized by the following;
 It is uncertain and unpredictable
 It is dynamic i.e. constantly changing
 It offers both opportunities and threats
 Every organization has its own unique environment
 The process of continually acquiring information on events
occurring outside the firm in order to identify and interpret threats
and opportunities is called environmental scanning. It is aimed at
answering the questions;
What is happening? Why does it happen? How does it affect the
firm? Events in the environment may cause a threat or opportunity,
strength or a weakness. Threats are impediments/ limitations i.e.
events which make it difficult for the attainment of organizational
objectives.
Opportunities are events which if carefully managed may lead to
the organization’s increased profitability and survival. A strength
is an internal asset that the organization possesses which is
essential and is lacked by competing organizations. A weakness is
an essential internal asset that the organization lacks but it’s
possessed by other competitors. The environment of the
business consists of two main levels;
 The external environment which consist of uncontrollable
factors (macro environment)
 Internal environment which is made up of controllable factors
(micro- environment)
The internal environment consists of resources both tangible and
intangible which the organization can efficiently utilize to attain its
objectives. It starts with the identification of the organization’s
resource allocations, an enumeration of its strengths and their
strategic significance. Tangible assets include financial, material,
machinery and personnel resources while intangible assets include
corporate image and company reputation. An internal analysis
helps to reveal the organization’s strengths and weaknesses.
Value chain analysis
It is a way of looking at a business as a chain of activities that
transform inputs to outputs that customers value.
It attempts to understand how a business creates customer value
by examining the contributions of different activities within the
business to that value;
Inputs (raw materials, machinery) conversion outputs
(products, services)
 Customer value is derived from the following;
 Activities that differentiate the product(quality)
 Those that lower costs(affordability)
 Activities that meet customers need quickly(speedy delivery)
The external environment consists of opportunities and threats in
the following forms;
Social forces, Economic forces, Technological forces, Regulatory forces,
and Competitive forces
Social forces
These include the characteristics of the population, its income and
culture.
a) Demographics; this refers to study of population in terms of size,
growth rate, age distribution, ethnic mix, educational levels, family
size etc. The following factors come to the fore;
 The population factor is important to the marketer because
people make up markets for goods and services.
 The population size may be a relevant factor for basic
convenience products bought by a high percentage of
population.
 Since different age groups buy different goods and services,
age distribution is important since the trend may mean the
market of a given product is either expanding or shrinking.
 The marketer needs to know whether the market is densely or
sparsely populated because a densely populated market is easier
and less costly to serve than if otherwise.
 The population may be experiencing geographic shifts with
people moving from rural to urban areas.
 It is also becoming better educated and more sophisticated and
this increases the demand for better quality products.
b)Culture; This includes the values, beliefs, attitudes and
lifestyles of people. As people’s culture changes so does the
demand for various types of products. Culture describes the
accepted norms of a society and will determine what people buy
and consume.
Economic forces
 They are factors that affect consumer demand and purchasing power.
They determine the level of disposable income and people’s
consumption patterns. They include the following;
 The general economic conditions i.e. depression, recession, boom.
 Interest rate levels
 General levels of inflation i.e. the persistent rise in the general prices
of goods and services in an economy.
 The trend of growth in the GDP (Gross Domestic Product)
 Unemployment levels
 Exchange rate levels which directly impact on import/export trade.
 The general conditions of the physical infrastructure which affects
the cost of doing business
 Income distribution among individuals e.g. the upper, middle and
lower classes who have different buying patterns due to their
income differences.
It is important that the marketer considers such factors to
estimate market potential.
Technological forces
Technology refers to the means chosen by society to do useful work.
As a marketer it is important that we use technology to improve
the speed and efficiency of doing business. To avoid product
obsolescence and promote innovation, a firm must be aware of
technological changes that influence its industry. Innovative use
of technology can lead to possibilities of a new product, product
improvements or improvements in production and marketing
techniques.
Regulatory forces
They define legal framework brought about by government legislation
and within which firms must operate. The legislation is aimed at
protecting companies from unfair competition, to protect customers
from unfair business practices and for environmental conservation.
Such actions reduce the profit potential of firms. However, others such
as patent laws are designed for the benefit and protection of firms.
Competitive forces
 The competitive environment is defined by the industry within
which a firm operates. An industry is a group of companies that
offer products that satisfy similar customer needs e.g. the
banking industry.
Analyzing competitive forces is aimed at the following;
a) Identifying business opportunities i.e. new market trends and
niches a firm can serve.
b) Providing a bench mark for evaluating the company relative
to competitors.
c) Shortening the company’s response time to competitor’s moves or
pre- empting such moves.
d) Helping a firm to gain a competitive advantage through
development and implementation of successful strategy.
Competitive forces determine the profitability of an industry. Different
forces are more prominent in shaping competition in each
industry.
Michael Porter’s five forces of *industry] competition can be used
to
gain an insight into an industry’s profitability and competitiveness.
They are;
 Threat of new entrants
 Threat of substitute products
 Bargaining power of buyers
 Bargaining power of suppliers
 Rivalry among existing companies
Threat of new entrants
New entrants in an industry come with a desire to gain market
share and profits at the expense of existing firms. The threat is
dependent on the barriers to entry and the reaction of existing
competitors. When barriers to entry are high, competition in the
industry declines over time. The barriers include;
 Initial capital requirements
 Access to technological knowhow
 The extent of government control of an industry
Threat of substitute products
Substitutes are products that fulfil the same customer needs
e.g. vehicles and trains are substitute means of transport. The
threat is greater where there is little or no product
differentiation.
 Product differentiation refers to the extent to which buyers
perceive products offered by the firms in the industry as
different from others. Differentiation may be based on durability,
more features, better packaging or after sales service.
Bargaining power of buyers
In some industries buyers can exert power to producers by
forcing down prices, demanding higher quality or more after sales
service. This is dependent on the following;
 The buyers are few and buy in large quantities
 The product is not differentiated
 There are other alternative suppliers.
Bargaining power of suppliers
Suppliers can exert pressure for higher prices or by reducing the
quality of their supplies thereby influencing on the industry’s
profitability. A supplier group is powerful if;
 It is made up of a few firms
 There few or no substitute products
 The product is unique or differentiated
Rivalry among existing firms
This is often based on tactics like price competition, new product
introductions and heavy advertising, all of which involve added costs
to a firm. This rivalry is dependent on the following factors;
 Competitors are many in the industry
 They are almost equal in size and in strength
 The product lacks differentiation
Market growth is slow, leading to fights for market share
Generic Competitive Strategies
Michael Porter has suggested 3 main strategies that can be pursued
to overcome competition. These are;
 Overall cost of leadership
 Product differentiation
 Focus strategy
Overall cost leadership involves producing and delivering the product
or service at a lower cost than competitors. Low cost producers
maximize economies of scale and implement cost-cutting
technologies which enable them to charge lower prices or enjoy
higher profit margins. They depend on some unique capability to
achieve and sustain their low cost position e.g. having a dominant
market share position or having technology that cannot be copied.
A differentiation strategy requires that a company creates a
product that is recognized as being unique, thus permitting the
firm to charge a higher price or attract more customers.
Differentiation can be in the form of a unique product attribute or
better customer service.
The focus strategy involves targeting a particular target market and
serving the narrow market than competitors who serve a broader
market. The idea is to achieve differentiation within the narrow
market where the product is tailored to the unique demands of
the smaller market.
SWOT analysis/ SWOT matrix
It is an organization’s appraisal of its internal strengths and
weaknesses and its external opportunities and threats.
SWOT analysis is based on the assumption that an effective
strategy results from a sound “fit” between a firm’s internal
resources and its external situation.
An opportunity is a favourable situation in a firm’s environment e.g.
identification of a previously overlooked market segment, favourable
changes in regulatory circumstances, improved buyer purchasing
power, technological changes etc.
A threat is a major impediment to a firm’s current or desired
position
e.g. entrance of a new competitor, slow market growth,
new unfavourable regulations.
A strength is a unique resource (distinctive competence) that gives a
firm a competitive advantage in the market.
A weakness is a limitation or deficiency in resources
relative to competitors that impedes the firm’s effective
performance.
 S,O S,T
2
1
A SWOT analysis presents a company W, W, four possible
in scenarios; S O T
3 4
W

O T
Cell 1 is the most favourable situation where the firm faces several
opportunities and has numerous strengths to pursue those
opportunities.
In cell 2 the firm has identified key strengths but faces an
unfavourable environment. In this situation, strategy would be to
redeploy the strong resources to build long term opportunities.
A firm in cell 3 faces opportunities but is constrained by weak
internal resources. The strategy would be to focus on
eliminating the weaknesses so as to pursue the opportunities.
Cell 4 is the least favourable and calls for strategies that reduce
or redirect involvement in products or markets (product
elimination, market withdrawal).

Environmental forecasting techniques

Environmental variables are dynamic and forecasting enables a firm
to assess the future and make plans for it.
Forecasting techniques can be classified as either qualitative
or quantitative.
Qualitative techniques are based primarily on opinions and
judgements, on data that cannot be statistically analyzed.
Quantitative techniques are based on the analysis of data by use of
statistical techniques.
Qualitative forecasting techniques
1. Delphi method
This is a method of developing a consensus of expert opinion. A
panel of experts is chosen to study a particular problem. Panel
members do not meet as a group. They are asked to give an
opinion about certain future events. After the first round of
opinions has been collected, the
 co-coordinator summarizes the opinions and sends the information to
panel members. Based on this information, the panel members rethink
their earlier responses and make a second forecast. The same
procedure continues until a consensus is reached.
2. Executive judgment
This is a method of forecasting based on the intuition of one or
more executives. The approach may work well where the forecaster
has past market experience. A major demerit is that the forecaster
may be too pessimistic or optimistic.
3. Customer surveys
In this case customers are asked what types and quantities of
products they intend to buy during a specified period of time. But
this may only be possible where the business has few customers
who may be able to make accurate estimates of future product
requirements. The
disadvantage is that a customer survey may only reflect
customers’ purchase intentions and not actual purchases.
4. Sales force forecasting survey
Sales people are asked to estimate the anticipated sales in
their territories for a specified period.
Merits;
 Sales people are closer to customers and are better placed to know
the customers’ future product needs.
Demerits;
 The sales people can be too pessimistic or optimistic.
 They tend to underestimate the sales potential in their territories.
5. Test marketing
It is useful for new products for which no previous sales figures
exist. It becomes necessary to estimate likely demand for the product
by testing it on a sample of the market. It involves the limited
launch of a product in a closely defined geographical area e.g. a city.
The test market results can then be generalised for the whole
market.
Quantitative techniques
1. Time series analysis
This technique forecasts future demand based on what has
happened in the past. The idea is to fit a trend line to historical
data and then
 extrapolate this line into the future. The method assumes that
historical data will form a similar pattern into the future.
2. Regression modelling
This is a forecasting technique in which an equation with one or
more variables is used to predict another variable. The one being
predicted is called the dependent variable and the other variables
used to predict it are the independent variables. The technique
determines how changes in the independent variables affect the
dependent variable. Once a relationship is established, future
values for the dependent variable can be forecast based on
predicted values of the independent variables.

MARKETING PLANNING
Definition
 Marketing planning is a systematic process that involves assessing
marketing opportunities and resources, determining marketing
objectives and developing marketing strategies for implementation
and control.
The process is aimed at understanding basic needs of customers
and delivering products that satisfy the needs.
Benefits of marketing planning
 It helps to appraise performance, capitalise on strengths,
minimize weaknesses and threats and open up new
opportunities.
 It makes the company to be customer oriented.
 It results in readiness to confront changes i.e. It puts a company
to be in a pro active rather than a reactive position.
 It specifies expected results so that the firm can anticipate
what its situation will be at the end of the current planning
period.
 It identifies resources needed to carry out the planned activities so
that budgets can be developed.
 It describes in detail the activities that are to take place so
that responsibilities for implementation can be assigned and
schedules determined.
Types of marketing plans
1) Short range plans: - they cover a period of one year or less.
2) Medium range plans: - those that cover one to five years.
3) Long range plans: - those that extend over five years.
Approaches to planning
1. Top down planning; this is where top management sets the goals
and plans for all the lower levels of management. [it assumes
that employees cannot take responsibility and prefer to be
directed]
2. Bottom up planning; it is where organizational units prepare their
own goals and plans and set them to higher management for
approval.[the approach assumes that employees like responsibility
and will be more committed if they participate in planning].
3. Goals-down, plans-up planning; under here top management sets
corporate goals and various company units then develop plans to
help the company achieve corporate goals. The plans have to be
approved by top management.
 Levels of marketing planning
 Corporate level
 Business unit level
 Functional level
1. Corporate level; Large corporations often have several lines of
businesses. The portfolio of businesses (S.B.Us) is often
coordinated with a corporate strategy consisting of a common
mission and goals.
A corporate mission is the purpose of existence of the firm. It
sets the overall direction for the firm. The firm may also have a
vision which is a long term aspiration that the firm pursues and
does not have to be accomplished e.g. coca cola vision; “to put a
coke within arms reach of every consumer in the world”
A corporate goal is a targeted level of performance set in advance
of work. Goals provide strategic performance targets that the entire
organization must reach to pursue its vision and mission. Examples of
goals;
 Maximize long-run profits
 Increase sales
 Increase market share (which is the ratio of sales revenue of all
firms in the industry)
 Quality improvement
2. Business unit level; Strategy at this level establishes how an S.B.U.
will help the organization accomplish its mission. Each S.B.U. must
define its mission and goals.
The S.B.U. goals are a statement that specifies the products and
markets in which a business will compete. While a corporate vision
is something to be pursued, a mission is something to be
accomplished. A business unit goal is a performance target the
business unit seeks to reach in an effort to achieve the overall
original mission.
3. Functional level strategy; It is concerned with the implementation
of the corporate and business unit strategies. It entails the
formulation of marketing programs i.e. day-to-day activities
designed to execute top- level strategy.
The Strategic Marketing Planning Process
It consists of the following steps;
1. Defining /Evaluating the organizational/business mission
2. Situation analysis (SWOT)
3. Setting/revising marketing objectives
4. Developing/ revising marketing strategies
5. Implementing marketing programs
6. Evaluating performance/ control of the implementation process
Defining the organization’s mission
Marketing planning starts with a clearly defined mission.
 The mission defines the fundamental reason for the
organization’s existence
 It is an overall goal of the organization that provides a sense of
direction and guide to decision making for all levels of
management are developed from the mission.
 It refers to the long term commitment to type of business and its
place in the market.
 It states the unique purpose of the firm that sets it apart from
others and identifies the scope of a firm’s operations
 It describes the company’s products, markets and
principle technologies to be used.
 It should be long term and not to be revised from time to time.
 It defines the customer needs to be satisfied and the functions
to be performed to satisfy the customer needs.
Components of a mission statement
A good mission should contain the following;
a) Purpose; the purpose may be to make money for
shareholders, or satisfying all stakeholders e.g. employees,
customers, shareholders, suppliers and the general public.
b) Corporate culture (shared culture and beliefs); the mission
should include sections on corporate responsibility that outline
the ethical principles the firm will follow in dealing with
stakeholders, charitable contributions, environmental protection
etc.
c) Internal resources and competencies. The mission should identify
the firm’s source of competitive advantage and distinctive
competencies and resources will be matched with opportunities.
d) Products and markets should clearly specify which products
and markets the firm will operate in e.g. “transport
business”.
e) It should specify the technologies to be used and functions to
be performed.
f) It should outline the policies and philosophies that define
how managers and employees should act and behave.
g) Opportunities and threats.
The mission should guide the firm toward product markets
where customer needs and competitive conditions offer attractive
growth opportunities. It should also steer the firm away from
industries and markets where strong competition or new
technologies may pose threats. E.g. Motorola mission
statement;
“The purpose of Motorola is to serve the needs of the community
by providing products and services of superior quality at a fair
price to our customers; so as to earn an adequate profit which is
required for the entire enterprise to grow and by so doing provide
the opportunity for our employees and shareholders to achieve
their reasonable personal objectives.
The role of the mission in marketing planning
 It provides an outline of how the marketing plan should seek to
fulfil the mission.
 It provides a means of evaluating and screening the marketing
planning; are marketing decisions consistent with the mission?
 It provides an incentive to implement the marketing plan.
Situation analysis
Under here an organization seeks to establish its strengths,
weaknesses, opportunities and threats. The analysis tries to answer
two questions; where are we now? And where do we want to be in
future? Situation analysis is in three forms; environmental, industry
and competitor analysis.
Developing or revising marketing objectives
These are formulated taking into account the internal and external
company situation. Objectives may be such as adding new products,
product modification, expanding the market size etc.
Developing/ revising marketing strategies
 The strategies outline the manner in which the marketing mix is
used to attract and satisfy the target markets. They revolve
around product design, distribution, promotion and price. If e.g. a
firm has a marketing objective of increasing market share, it can
improve its product image, or increase its sales force, do
extensive advertising, introduce a new product, reduce prices or
sell through more retail outlets.
Implementing marketing programs
This is the process that turns marketing strategy into action. It
involves day-today activities that translate the plan to work.
Implementation control; It is the process of measuring the results of
marketing strategies and taking corrective action to ensure that
objectives are attained.
The marketing plan
A marketing plan is a road map for the marketing activities of an
organization for a specified future period of time e.g. a year. It can
be developed for each business product or brand.
Contents of a marketing plan
1. Executive summary
It is a brief summary of the main goals and recommendations
of the plan. [it highlights the key issues]
2. Company description
The section highlights the recent history and successes of the firm.
The corporate vision/mission and goals are stated.
3. Situation analysis
It involves analysis of the current market situation, competitors,
customers and SWOT.
4. Marketing objectives
The section defines product and market objectives in the areas of
sales, profits, market share, new products or new markets to be
pursued.
5. Marketing strategies
It describes the marketing mix actions that will be used to
achieve the objectives.
It identifies the target market and the product, price, place
and promotion strategy that will be used to offer the firm’s
products to
 markets. Each strategy is intended to utilize resources to respond to
threats and opportunities to attain objectives.
6. Action programs for implementation
The section specifies the daily activities that translate the plan
into action. It specifies what will be done, assigns responsibilities,
schedules the work, sets timetables and allocates resources to
every activity.
7. Financial projections
The revenue and expense effects of the action programs
for implementation are projected to show the expected
return on investment for the plan.
8. Evaluation and control
This section indicates how the progress of the plan will be
monitored by setting performance standards, predicting problems
and the corrective action that might be taken.
The place of marketing planning in overall strategic planning
 Strategic planning is concerned with the overall direction of
the business. It is concerned with all management tasks e.g.
marketing, production, HRM, etc.
 The objective of strategic planning is to set the direction of a
business and create its shape so that the products it provides
meet overall business objectives.
 Marketing links the business with its environment.
Strategic marketing planning seeks to answer the following questions;
 Where are we now?
 How did we get there?
 Where are we heading?
 Where would we like to be?
 How do we get there?
 Are we on course?
The marketing audit
It is a comprehensive, systematic and independent and periodic
examination of a company’s environment, objectives, strategies
and activities to determine problem areas and opportunities
and to
recommend a plan of action to improve the company’s marketing
performance.
 The audit must cover all major marketing areas of a business
e.g. marketing research, promotion, sales etc.
It should be conducted by an objective experienced outside party
independence of the company’s marketing department.
It should be carried out periodically and not only during a crisis.
The auditor carries out an investigation of the marketing activities and
develops a set of findings and recommendations for management.
Aims of the audit
 To describe the current activities and their effect to sales, costs,
prices and profits.
 To gather information about customers, competitors and
other environmental developments that may affect sales.
 Identifying reasons for the successes and failures of marketing and
their analysis for appropriate action.

THE MARKETING MIX

Definition –It is the set of controllable marketing variables that the
firm blends to produce the response it wants from its target market.
It consists of everything the firm can do to influence the demand
for its product.
The major marketing management decisions can be classified in one
of the following four categories: Product, Price, Place (distribution),
and Promotion
These variables are known as the marketing mix or the 4 P's of
marketing. They are the variables that marketing managers can
control in order to best satisfy customers in the target market
The firm attempts to generate a positive response in the target
market by blending these four marketing mix variables in an
optimal manner.
Product
The product is the physical product or service offered to the
consumer. In the case of physical products, it also refers to any
services or conveniences that are part of the offering.
Product decisions include aspects such as function, appearance,
packaging, service, warranty, etc.
Price
Pricing decisions should take into account profit margins and the
probable pricing response of competitors. Pricing includes not only
the list price, but also discounts, financing, and other options such
as leasing.
Place
Place (or placement) decisions are those associated with
channels of distribution that serve as the means for getting the
product to the target customers. The distribution system performs
transactional, logistical, and facilitating functions.
Distribution decisions include market coverage, channel member
selection, logistics, and levels of service.
Promotion
Promotion decisions are those related to communicating and selling
to potential consumers. Since these costs can be large in proportion
to the product price, a break-even analysis should be performed
when making promotion decisions. It is useful to know the value of
a customer in order to determine whether additional customers
are worth the cost of acquiring them.
Promotion decisions involve advertising, public relations, media
types, etc.
A Summary Table of the Marketing Mix
The following table summarizes the marketing mix decisions,
including a list of some of the aspects of each of the 4Ps.

Product Price Place Promotion

Functionality List price Channel members Advertising
Appearance Discounts Channel motivation Personal selling
Quality Allowances Market coverage Public relations
Packaging Financing Locations Message
Brand Leasing options Logistics Media
Warranty Service Budget
Service/Support levels
 PRODUCT STRATEGY
Definition; what is a product?
A product is everything that can be offered to a market for
attention, acquisition, use or consumption that might satisfy a
want or need. It includes physical objects, services, persons, places,
organizations and ideas.
It is the need satisfying offering of an enterprise. When consumers
buy a product, they are actually buying satisfaction or the
benefits that the product would offer.
A physical product can be viewed at five levels;
1. Core product; This is the most basic level. It addresses the
question; what is the customer really buying? It consists of the
problem solving or core benefits that consumers obtain when they
buy a product.
2. Basic product; It is a product’s physical parts i.e. its features,
brand name, packaging and other attributes that combine to deliver
the core product benefits.
3. Expected product; It is a set of attributes and conditions
consumers normally expect when they purchase the product.
4. Augmented product; It is the part of a product which exceeds
customer expectations.
5. Potential product; It encompasses all the possible augmentations
and transformations the product might undergo in the future.
Product classifications
 They can be categorized as tangibles e.g. physical goods or
intangibles
e.g. services
 Physical goods can be described as being durable or non-
durable. Durable goods are those used over an extended
period of time and normally survive many uses. Non-durable
goods are those that are normally consumed in one or a few
uses.
 Products can also be classified into consumer and business
products. Consumer goods are those bought by final consumers
for personal consumption. Industrial / business/organizational
products are those bought to be used in the production of other
goods and services. Types of consumer products: They include;
convenience products, shopping products, specialty products,
and unsought products.
1. Convenience products; They are those goods that the customer
usually buys frequently, immediately and with a minimum of
comparison and buying effort. They are usually low priced and
widely available.
They are of two main types;
a) Staples; are those that are bought often, routinely and without
much thought.
b) Impulse/emergency products; are those that are bought because of
a strongly felt need. The consumer will not have planned to buy
and only decides to do so on sight.
2. Shopping goods; They are products that a customer feels are
worth the time and effort to compare with other products on
suitability, quality, price etc. they are of two types;
a) Homogenous shopping goods; are those the customer sees as
basically the same and selects one with the lowest price e.g.
T.V.s, music systems.
b) Heterogeneous shopping goods; are those the consumer sees
as different and wants to compare for quality and suitability e.g.
furniture and clothing.
3. Specialty goods; They are those that the customer wants and
makes a special purchase effort to search for them because of
their unique characteristics or brand identification. Customers
have specific expectations of the product and substitutes would not
be accepted e.g. cars like Ferrari, clothes like Calvin Klein.
4. Unsought goods; These are products that potential customers
don’t know about or know about them but do not normally think
of buying. They don’t search for them and won’t buy if they see
them unless promotional effort is undertaken. They include life
insurance. They are of two types;
a. New unsought products; are those offering really new ideas that
potential customers don’t know about yet. Informative promotions
can help convince customers to accept these products.
b. Regularly unsought products; they are products which may
satisfy a certain need but potential customers are not
motivated to satisfy it. Personal selling is usually used to
persuade customers to buy.
 Types of business products: Installations, accessories, raw materials,
component parts, and office Supplies.
ii. Installations; They are such as buildings and heavy machinery
used in manufacturing. They are durable products therefore
they are not bought very often. They are usually expensive
hence many people including top management are involved in the
purchase decision and purchase negotiations may take a long
time. To achieve buyer satisfaction suppliers offer special after-
sales services.
iii. Accessories; Include tools and equipment such as fax machines,
computers, photocopiers etc. They cost less and are less durable
than installations therefore fewer people are involved in the
purchase process and negotiations take a shorter time.
iv. Raw materials; These are unprocessed farm products (e.g. cotton,
wheat, leather) or natural raw materials e.g. timber, oil, mineral
ore, that are moved to the next stage in the production process
with little or no handling to produce a company’s finished
products.
v. Component parts; Are processed items that become part of a
finished product e.g. batteries, tyres, etc.They are bought from
another supplier and their quality is paramount and the buyer tries
to buy from sources that help assure good product quality.
vi. Supplies; These are items that do not become part of a
finished product. They include the following;-
 Repair and maintenance supplies e.g. nuts, bolts and lubricating
oil.
 Operating supplies that include stationery and electricity.
 Professional services; these are specialised services such as
catering, security and computer maintenance services that are
outsourced by the company.

Product mix (Product Assortment) Decisions

A product mix is the range of products a company offers i.e. the
set of all products and items that a particular seller offers for
sale. It is also called a company’s product portfolio. A product
mix may consist of several product lines.
 A product line is a group of products that are closely related either
because they function in a similar manner or are sold through the
same type of retail outlets e.g. cosmetics, cooking fats and
detergents.
 A product mix can be described as having a certain breadth,
length, depth and consistency.
 A product mix breadth refers to the number of different product
lines the company offers e.g. detergents, toothpastes and
lotions.
 Product mix length is the total number of items the company
offers, i.e. different brands and package sizes.
 The depth of the mix is the number of versions offered of each
product in a product line, e.g. different versions/brands of
cooking oil.
 Product-mix consistency refers to how closely related a
company’s product lines are in production requirements or
end-use.
The dimensions of the product mix provide the means for defining
the company’s product strategy. It can add new product lines thus
widening its product mix breadth. It can lengthen its existing
product lines by adding new products (product line stretching).
It can also add more product versions to each product, thus
deepening its product mix.
The company can remove unprofitable items from its product lines
(product line pruning or product elimination).
Product Attribute Decisions
Developing a product involves defining the benefits that it will
offer. The benefits are communicated and delivered through
product attributes which are; quality, features, and design.
a) Product quality; is the ability of a product to perform its
functions. It includes product durability, reliability, ease of
operation and repair. A firm creates customer satisfaction and
value by consistently meeting customer’s needs and preference
for quality.
b) Product features; are the means through which the product
delivers its benefits e.g. safety features of a car. They are a
competitive tool for product differentiation.
c) Design; is the appearance of a product, its shape, colour or
beauty. A good design attracts attention.
Product positioning
 A product’s position is how potential buyers see the product.
It is expressed relative to the position of competitors e.g.
Mercedes is positioned as a luxury car, Volvo for safety.
It is the sum total of perceptions the market has of a particular
company, product or service in relation to the market’s
perception of other similar competing products.
A firm can positively influence market perceptions hence the
position its product through effective promotion activities. The
company makes itself and its products admirable and visible or
noticeable by the potential customer.
Product positioning process
a. Defining the product’s target market.
b. Identifying the attributes that define product’s position.
c. Collecting information from a sample of customers about
their perceptions of each product attribute.
d. Determine the target market’s preferred combination of attributes.
e. Deliver the attributes to effectively and positively position
your product.
Positioning bases/variables
 Solves problems better.
 Provides more benefits
 Enhances the buyer’s image.
 The company’s brand is more affordable.
The Product Life Cycle
After launching a product, management wants it to enjoy a long
and profitable life. A product often goes through the following
five stages:-
1. Product development: Begins when the company finds and
develops a new product idea. Sales are zero and investment
costs add up due to marketing research, product development,
and market testing activities.
2. Introduction: Starts when the product is first launched on a
large scale.
Features:
-Sales growth is slow
-Profits are negative or low
-High distribution and promotion expenses
-Basic versions of a product are offered.
Strategies:
-Set a lower price to encourage product acceptance
-Promote to create awareness.
3. Growth stage:
Features:
-Sales start climbing
-New competitors enter the market
-New product features and versions are introduced as the market
expands
-Prices remain the same or fall just slightly
-Increases in the number of distribution outlets
-Promotion spending remains the same or slightly increased
-Profits increase.
Strategies:
-Improve product quality
-Add new product features and models
-Entrance to new market segments
-Entrance to new market distribution channels
-Advertising shifts from building product awareness to building
preference and conviction.
4. Shake-out stage: The period is marked by a drop in overall
growth rate characterized by price reductions. Weaker
competitors exit the market changing the industry’s competitive
structure. During this stage, the firm should eliminate weaker items
from its product line, emphasize on promotional pricing and
strengthen its channel relationships.
5. Maturity stage:
Features:
-Lasts longer than the previous stages
-There is a slow-down in sales growth
-There is increased competition e.g. price cuts, product modifications,
increased promotion
-Weaker competitors start dropping out
Strategies:
 -Market modification i.e. trying to increase consumption of the
product by looking for new uses, new users and increasing the
usage rate
-Product modification i.e. changing product characteristics to attract
more users and usage. This may be achieved through product
quality improvement i.e. increasing product performance,
durability, ease of operation, safety, convenience etc.
6. Decline stage
Features:
-Sales decline
-Profits are low or zero
-Competitors are few or non-existent
-Reduced number of product offering
-Promotion and prices are further reduced
Strategies:
-Maintain the brand in the hope that competitors will leave
-Harvest the product i.e. reduce various costs e.g. promotion and get
as much out of the product as possible
-Drop the brand i.e. Stop its manufacture or sell it.
Product elimination
There are some products which cannot be improved or modified to
suit the market. In this case the more profitable alternative would
be to
withdraw the product. The process of withdrawal is called “product
elimination”.
This can be done after establishing that the product cannot be
modified to suit the needs of consumers.
Reasons suggesting product elimination
 Continuous decline in the sales of the product
 Emergence of superior improved products
 Downward trend in prices
 Product life-cycle stage i.e. if the product is in its decline stage,
this would necessitate elimination
New Product Development
Companies need to develop new products due to the following:-
 Customer changes in tastes and fashion
 Increased competition
 Technological changes
 To be able to expand and increase their profitability
New products may take any of the following forms:-
 Additions to existing product line i.e. new products that supplement
a company’s established product lines e.g. package sizes,
flavours, colouring etc.
 Improvements of existing products i.e. new products which
provide improved performance or greater perceived value.
 Repositioning i.e. existing products that are targeted to new markets
or market segments.
 New products: they are products that create an entirely new
market and new product life-cycle.
The process:
1) Idea generation: A product idea is a possible product the
company might offer to the market.
Sources of new product ideas include; customers,
scientists, competitors, employees, and channel
members.
2) Idea screening: It is aimed at dropping poor product ideas as
quickly as possible. The company at this stage must avoid making
two types of errors;
-Drop error: where the company dismisses an otherwise good idea.
-Go- error: Occurs when the company permits a poor idea to move
into development and commercialization resulting into product
failure which may be described as absolute, partial or relative.
Absolute: A heavy loss where even variable costs are not covered.
Partial: Where a new product’s sales cover all variable costs and some
fixed costs.
Relative: Where the sales yield a profit that is less than the
company’s target rate of return.
3) Concept development and testing: A product concept is an
elaborated version of the idea expressed in meaningful
consumer terms. The company should identify which group of
customers e.g. infants, teenagers, adults would use the product
and its primary benefits. Concept testing involves presenting the
product concept to appropriate target consumers and getting
their reactions.
 4) Marketing strategy development: It is a preliminary marketing
strategy plan for introducing the new product into the market. The
plan describes the following:
The target market’s size and
behaviour The planned product
positioning
The sales volume, market shares and profit goals for the first
year. The planned price, distribution strategy and promotion budget
for the first year.
5) Business analysis: Its aim is to evaluate the proposal’s business
attractiveness. Estimates on future sales, costs, and profits are done
to determine whether they satisfy company objectives.
6) Product development: The company develops the physical version
of the product concept, having the key attributes that can be
produced within the budgeted costs. The physical product must
be able to communicate its psychological aspects e.g. colouring
and taste. The prototype must then be put through customer tests
either in the company’s labs or by giving them samples to use at
home.
7) Market testing: The product is branded, packaged and introduced
in a market setting to learn how large the market is and
customers’ reaction to the product. This permits the company to
assess the impact of marketing strategy.
8) Commercialization: This is when the product is launched to
the market on a full scale.
Questions to answer:-
 When?
 Where?
 To whom?
When (timing)
If a company learns that its competitor is about to launch a
similar product in the market, it has three options;
First entry; the first firm that enters a market usually enjoys
the advantages of hooking up key distributors and customers.
But if the product is rushed to the market it may fail.
 Parallel entry; the firm might time its entry to coincide with the
competitor’s entry. The market may pay more attention when
two companies are advertising the new product.
Late entry; the firm might delay its launch until after the
competitor has entered. The competitor will have borne the cost
of educating the market and its product may reveal faults that the
late entrant can avoid.
If a new product replaces an older product, the company might
delay introduction until the old product’s stock is finished. If the
product is seasonal, it might be delayed until the right season
arrives.
Where (geographic strategy)
The company must decide whether to launch the new
product in a single locality or several regions.
Factors to consider:
 Company size; small companies will first enter an attractive city
with a heavy promotional campaign and enter others one at a
time.
 Cost of communication media.
 Competitive penetration.
 Market potential and knowledge.
To whom (Target- market prospects)
The company must target its initial distribution and promotion to
the best prospect groups who would have the following
characteristics; Early adopters, heavy users, opinion leaders,
reached at a low cost, etc. Reasons that may lead to new product
failures
-Top management may push through their favourite new product
idea
despite poor marketing research findings.
-The market size may have been over-estimated.
-The product may not have been designed as well as it should have
OR may have been incorrectly positioned, priced highly or
advertised poorly.
-The cost of product development may have become higher than
expected.
-Competitors may fight back harder than expected.
The new product adoption process
It consists of the following stages;
Awareness Interest Evaluation Trial
Adoption
This is the process through which an individual progresses from the
first awareness of new product to a final rejection or acceptance.
Awareness: The stage where an individual becomes aware of a
product which he previously didn’t know it exists. Such information
may be obtained from the mass media, magazines, friend’s etc.
Interest: At this stage the individual is more psychologically involved
by developing desire to give attention to or be concerned about a
product. Evaluation: Under here a person decides whether to
proceed further or to forget about the new product. A search for
more information is done to act as a basis for evaluation.
Trial: It is where the individual uses a new product on a small
scale to determine whether it is applicable to his/her problem.
Adoption: The consumer decides to make full and regular use of
the new product.
Individual differences in adapting to a new product (innovation), and
adopter categories
After a slow start, an increasing number of people adopt a new
product. The five adopter categories are as follows:
Innovators: Are the first group of people to buy a new product.
They are venturesome i.e. the take new ideas at some risk.
They tend to be relatively younger, and have higher incomes.
They are more receptive to unfamiliar things and rely more on
their own values and judgment. They are less brand loyal and
one more likely to take advantage of special promotions e.g.
discounts and samples.
Early adopters: Are opinion leaders in their community and adopt
new ideas early but carefully.
Early majority: These adopt new ideas before the average person.
Late majority: They are sceptical and adopt an innovation only
after a majority of people have tried it.
Laggards: Are tradition-bound and are suspicious of changes and adopt
the innovation only when most other people are already using it.
Influence of product characteristics on the rate of adoption.
 Relative advantage; the degree to which it appears superior to
existing products.
 Compatibility; the degree to which the product fits the values
and experiences.
 Complexity; the extent to which it is difficult to use or understand.
 Divisibility; the degree to which it may be tried on a limited
basis, i.e., sampled.
 Communicability; the degree to which results of its consumption
can be observed or described to others.

MARKETING OF SERVICES
A service is any act or performance that one party can offer to
another that is essentially intangible and does not result in
ownership of anything.
Categories of services
1. Product-support services; This is where a firm offers a physical good
e.g. a car and related product-support services like delivery, repairs
and maintenance, warranties etc.
2. Hybrid; Where the company’s offering consists of equal parts of
goods and services e.g. people go to restaurants for both food
and service (courtesy, cleanliness, speed and convenience).
3. Major Service with accompanying minor goods and services; E.g.
airline passengers buy transportation service but the trip includes
food, drinks and airline magazines.
4. Pure service; the offering consists primarily of a service e.g.
massage, baby sitting.
Other categories
 People based services which skilled or unskilled workers may provide.
 Equipment based services e.g. vending machines, ATM.
 Client-presence services which require that the client be present
e.g. beauty salon services.
 Personal services and business services.
Characteristics of service and their marketing implications
1. Intangibility
 Services can’t be seen, tasted, felt, heard or smelt before they
are bought.
 For the buyer to reduce uncertainty he will look for the evidence
of the service quality from the place, people, equipment,
communications material and price they can see.
 They seek personal sources of information such as from early
adopters, opinion leaders and reference group members during
the purchase decision process.
2. Inseparability
 Services are produced and consumed simultaneously.
 The provider is part of service and provider-client interaction
becomes an important feature in service marketing.
3. Variability
 Service quality depends on who provides it, when and where it is
being provided.
 Service firms can take steps towards quality control through
recruiting the right employees and providing them with training,
standardizing the service provision process through laid down
procedures and flow charts and monitoring customer satisfaction
through suggestion and complaint systems.
4. Perishability
 Services cannot be stored. Business is lost during periods of
low demand.
The following strategies can be used to produce a better match
between supply and demand in a service business;
1. Differential pricing may be used to shift demand from peak to off
peak periods.
2. Complementary services can be developed during peak time to
provide alternatives to waiting customer e.g. ATM’s in banks.
3. Part time employees can be hired to serve during peak
demand. Marketing strategies for service firms/ the extended
marketing mix for service marketing
Apart from the traditional four P’s, three other additional P’s
are relevant for service marketing.
 People
 Physical evidence/environment
 Process
1. People: The people aspect of the marketing mix requires a high
degree of interpersonal skills. The people aspect should include;-
 Investing in staff training about the product and the organization.
 Empowerment of staff i.e. encouraging staff to take initiative to
make decisions relating to the delivery of service.
 Internal marketing i.e. communicating to staff and motivating
them to perform better.
2. Physical environment: It refers to the place where the service is
being prepared and delivered.
The physical element of the service brings some consistency,
and guarantee of quality.
The physical environment of e.g. a restaurant can be presented
through staff wearing uniforms, similar interior design and the same
menus. The environment plays a major role in standardizing the
quality perception of the organization and service.
3. Process: This refers to developing processes for the delivery of
service that will give value to the customer e.g. faster, more
efficient, not time wasting etc.
Service differentiation
Apart from differentiating services through price, the service provider
can develop a differentiated offering, delivery or image.
1. Offering: What the customer expects is called the primary
service package. To this the provider can add secondary service
feature e.g. providing music, video or T.V. in addition to
transport service.
2. Faster and better delivery: Where a company can differentiate by
designing a delivery system that is reliable and speedy in their on-
time delivery and order completeness.
3. Image: Service companies can also differentiate through symbols
and branding that enhance the image of the company and its
services e.g. lion or eagle to represent strength and reliability for
KCB and Barclays respectively.
Managing internal marketing relationships
 Internal marketing is the concept that a service organization must
focus on its employees (the internal market) before successful
programs can be directed at customers.
The concept holds that an organization’s employees will be
influenced to develop a market orientation if market-like activities
are also directed at them.
Internal marketing refers to employee development through
effective recruitment, training, communication and motivation so
that they can work as a team to provide customer satisfaction.
It is designed to ensure that everybody within the organization
contributes towards developing a market oriented, customer focused
culture in order to improve the level of service to customers.
Internal marketing process
1. Determine the expectations of the internal customer and
deliver rewards that satisfy the expectations.
2. Identify the tasks that deliver customer value and emphasize on
these tasks. Customer value is the unique combination of benefits
received by target buyers that include quality, price, convenience, on-
time delivery and after-sales service.
3. Provide training in order that employees have the appropriate skills
to undertake the tasks.
4. Provide appropriate human and financial resources.
5. Establish a marketing excellence recognition program to
reward outstanding performance annually.
Developing a marketing orientation
Most firms often find that they are not consumer driven but
instead are product driven. To be market driven, a firm must do
the following;
 Developing a company wide passion for the customer.
 Organize around customer segments instead of around products.
 Developing a deep understanding of customers through
marketing research.
 Study customer needs and wants in well defined segments.
 Develop winning offerings for each target segment.
 Measuring company image and customer satisfaction on a
continuous basis.
 Continuously gathering and evaluating ideas for new products,
product improvements and services to meet customer’s needs.
 Influence all company departments and employees to be
customer centred in their thinking and practice.
 Hire skilled marketing talent.
 Develop strong in-house marketing training programs.
 Establish an annual marketing excellence recognition program
to reward outstanding performance as a means for
motivation. Hurdles faced by companies when converting to a
marketing orientation
 Resistance to change.
 Slow learning.
 Fast forgetting.
Managing the marketing of services
In service marketing, the employee plays a major role in attracting,
building and maintaining relationships with customers.
The 4 P’s in service marketing
1. Product
a) Exclusivity; Services lack exclusivity because of their inability to
be patented. A patent gives the manufacturer of product exclusive
rights to its manufacture for a specified no. of years. Hence
competitors can quickly copy service innovations.
b) Branding; Because services are intangible and more difficult to
describe, the brand name, symbol or identifying logo are important
in differentiation.
2. Pricing; In the service industry price plays two main roles;
a) It is used to communicate the quality of service i.e.
consumers sometimes use price to judge the quality of a
service.
b) It is used to manage fluctuations in demand where the service
provider charges different at different times to reflect the
variations.
3. Place; Services are inseparable hence intermediaries are rarely
used because the distribution site and service provider are the
tangible components of the service. Service firms use multiple
locations for the distribution of services e.g. banks.
4. Promotion; Personal selling is the most commonly used component
of the promotion mix in service marketing. The firm may also use
publicity and public relations to build its corporate and brand
image in supporting its personal selling efforts.
Key components in the design of a service offering
1. Core product;
The service provider must answer the question,” what is the benefit
that customers are really buying” e.g. when the customer is
buying transportation service the core product is the timely,
safety and convenience of travelling from one point to another.
2. Service delivery process
The marketer has to consider the extent and nature of the
customer’s role in the delivery process and the prescribed level, style
and speed of the service to be offered.
1. Augmented/supplementary services
They help in enhancing the value of the service. They include
courtesy, empathy, helpfulness etc.
2. Delivery sequence
A service delivery process may contain several elements which
should be delivered in a certain sequence e.g. hotel/restaurant
services.
Customer relationship management
This involves three things;
 Customer acquisition
 Customer retention
 Strategic customer care
In customer acquisition stage the focus of the company is
on transactions and the product mix sold to each
customer. In the retention phase, loyalty is assessed
through tools like customer satisfaction surveys.
The strategic stage calls for integration of customer needs, aspirations
and expectations in new product development, modification and
distribution changes.
Customer service
An effective strategy used in differentiating an offer from that of
competitors is to excel in delivering quality service to the customer.
 Service quality
Customer satisfaction is a function of customer expectation from the
firm and the actual performance by the firm.
I.e. customer satisfaction = actual performance by the firm ÷ customer
expectations.
When positive perceptions are not confirmed by the actual
performance of the firm, a gap occurs. This gap is called the
service quality gap.
Customer perceptions of the firm and its offer are shaped by;
a) Word of mouth publicity i.e. recommendations from friends,
relatives, peer groups etc.
b) Personal experiences of the customer.
c) Personal needs of the individual customer.
d) External communications like the publicity of the firm, its adverts
and other corporate communications.
Service quality parameters (SERVQUAL)
According to Zeithml et al customers assess the service of a firm
using the following;
1) Tangibles; the appearance of physical facilities, equipment,
personnel and communications material.
2) Reliability; the ability to perform the desired service dependably
and accurately.
3) Responsiveness; the willingness to help customers and provide
prompt service.
4) Assurance; the competence of the firm in delivering the promised
service, courtesy extended to the customer and the extent to
which the customer feels secure.
5) Empathy; the caring, individualized attention that the firm
provides to customers.
BRAND MANAGEMENT
It is the application of marketing strategy and plans to ensure the
success of a specific brand. Strong brands can charge a higher price
and customers are willing to pay a premium price for them.
Definition; a brand is a name, term, sign, symbol or a combination
of any or all of these intended to identify the products of one seller
and to
 differentiate them from those of competitors. It may consist of the
following;
a) Brand name; the part of a brand that can be vocalised.
b) Brand mark; that which can only be recognised e.g. a symbol, or
distinct colouring.
c) Slogan, e.g. “my country my beer”, “makes us equal has no equal”,
Nike “just do it”
Importance of branding
 A brand name tells the buyer something about a product’s quality.
It is a promise to the customer.
 It increases the buyer’s efficiency.
 A brand name helps attract a buyer’s attention to anew product.
 It helps create variety.
 Branding provides legal protection for unique product features that
may be copied by competitors.
 It helps the seller to attract a loyal set of customers
 It helps the seller to segment markets.
 Strong brands help to build corporate image e.g. Omo, Blueband.
 Branded products often command higher prices than generic
(non- branded) products.
Qualities of a good brand name
 Should be protectable under trademark law.
 Easy to remember.
 Easy to recognise.
 Not portray negative meaning in any language of potential
customers.
 Attract attention.
 Suggest product benefits.
 Should suggest good company or brand image.
 Distinguish the product’s positioning relative to competition.
 Should be associated with a positive value or characteristic e.g.
pilsner.
Types of brands
1. Individual product branding;
Under here every product has its own brand name without any
obvious connection to other brands – Unilever, Procter and
Gamble.
 Advantages
 The firm does not tie its reputation to the failure of one product.
 Each brand builds its own separate equity which allows the firm, if
it chooses, to sell off an individual brand without impacting on
others e.g. Kimbo.
 The firm is at liberty to choose the best name for each of its new
products.
 If one brand receives negative publicity, it is unlikely to affect
other brands.
Disadvantage
 High promotion expenditure required to build and maintain new
brands.
4. Family branding;
This refers to selling related products under one family/ blanket
name
e.g. Nice & lovely.
Advantage
 The cost of introducing new product extensions is less.
Disadvantage
 The market may have established certain perceptions of the brand
e.g. low-end, low priced product making it difficult for the firm to
offer a high-end product.
 Negative publicity for one brand could impact on others.
5. Co-branding;
This is where one firm partners with another to create a brand
e.g. credit card companies and banks e.g. Citibank MasterCard.
6. Private /store branding;
This means when large retailers contract with manufacturers to
produce the retailer’s own branded products e.g. Ukwala sugar/
cooking fats.

7. Generic branding;
This is offering a brandless product. They are seen as low price
alternatives that are affordable to buyers.
8. Brand licensing;
 It is a contractual arrangement where a firm that owns a brand
name allows others to produce and sell non- competing products
using the same brand name e.g. Nike watches.
7. Multi brand strategy;
This refers to offering two or more brand names in the same
product category e.g. cooking fat.
Advantages
 More shelf-space
 The firm is able to capture brand switchers
 It can protect its core brands (major brands) by setting up flanker
brands.
 More variety to customers
Disadvantages
 More marketing costs
Concepts in brand management
 The brand image;
It is what is created in people’s minds and consists of all
information and expectations by buyers associated with the
product.
 A brand which is widely known in the market acquires brand
recognition.
 Brand identity
Is how the brand owner wants consumers to perceive the brand
and by extension the product and the company. It symbolizes the
brand’s differentiation from the competitors.
 Brand personality;
Is the attribution of human personality traits to a brand as a way
to achieve differentiation. Such traits include; warmth and
youthfulness.
 Brand promise
Is a statement from the brand owner to customers which identify
what consumers should expect in all interactions with the brand
e.g. BMW- “the ultimate driving machine”, Nissan- “shift
expectations”.
 A generic product
It refers to the product that is not branded e.g. tea, sugar
which is weighed, packaged in plain wrappers/ containers
and sold.
 A product item
It refers to different brands of a product category or class e.g.
Unilever toothpaste product line consists of Close-up, Pepsodent
and Aim, which are product items.
 Brand extensions
This is where a firm uses its existing brand name to launch new
products in other categories e.g. Honda (automobiles, land
mowers, generators, motorcycles etc).
 Line extensions
It consists of introducing additional items in the same category
under the same brand name e.g. new flavours, colours, added
ingredients & package sizes e.g. toothpastes (Colgate).
Brand repositioning/Rebranding
 It is an attempt to change consumer perceptions of a particular
brand.
 It is changing the appeal of a brand in order for it to attract new
market segments.
 Rebranding can be at brand, product or even company level e.g.
Celtel to Zain.
Reasons for repositioning
 The company is entering new businesses and the current positioning
is no longer appropriate.
 A new competitor with a superior value, proposition enters your
industry forcing as company to re emphasize its product position.
 Competition has usurped your brand’s position or rendered it
ineffectual.
 Product/brand is slipping or sliding into decline stage.
 When a contemporary image is required in some categories due
to changing psychographics.
 When a brand seeks to communicate improved offerings.
Brand equity
Definition; it is the positive effect that knowing the brand name has
on customer response to a product. It results in customers
showing a preference for one product over another when the two
are basically identical.
 It is the sum total of brand loyalty, awareness, brand association,
and perceived high quality.
It is the net worth of the brand to the brand owner.
Importance of brand equity
 The firm can charge a higher price than competitors because the
brand has perceived higher quality.
 The firm can easily launch brand extensions because the brand
name has high credibility e.g. Colgate.
 A successful brand guards the firm against price competition.
Packaging
It consists of the activities of producing and designing the
container or wrapper of a product.
The package of a product can be looked at from three levels;

3
1- Primary package
2- Secondary package
2
3- Shipping package
1

a. Primary; refers to the product’s immediate container.

b. Secondary; the carton or box that protects the primary package
and which is often discarded.
c. Shipping package; the larger container carrying several pieces of
the secondary package which is necessary for storage and long-
distance transportation.
Importance
 It makes the product more convenient to use and store.
 It protects and prevents spoilage or damage.
 It makes the product easier to identify.
 It promotes the product at the point of purchase i.e. performs the
task of attracting attention and describing the product.
 It suggests certain qualities about the product.
Labelling
It consists of printed information that appears on the container or
wrapper of a product. Attractive graphics on the package help
promote the product at the point of sale. Labelling also assists in
describing product ingredients and usage.

PRICING STRATEGY
Importance of pricing
 It is the only aspect a marketer can change quickly to
respond to changes in demand or the action of
competitors.
 It is the only element in the marketing mix that generates
income. It is the determinant that focuses on maximizing
revenue in order to meet profit objectives of the company.
 Because price has a psychological impact on customers, marketers
can raise a product’s price to emphasize its high quality.
 Forms of prices
 Premium: charged by insurance companies.
 Fee: charged for a lawyer’s services.
 Fare: charged for a taxi.
 Toll: charged for the use of a road or bridge.
 Rent: paid for the use of equipment or house / office.
 Taxes: paid for government services.
Definition; Price is the amount of money charged for a product or
the sum of values consumers exchange for the benefits of having or
using a product.
Pricing objectives
1. Survival: the company sets price levels that cover variable costs
and some fixed costs so as to stay in business.
2. Current profit maximization: where the firm chooses the price that
produces maximum current profit, cash flow, or rate of return on
investment. In this strategy the company sacrifices long-run
profitability by ignoring customer’s perceptions and competitor’s
reactions.
Market share maximization: that is setting prices at a low level that
will maximize sales turnover. The company believes that a higher
sales volume will lead to lower unit costs (Economies of scale)
and higher long –run profit. This is also called market penetration
pricing and is possible only under the following conditions:
 Demand is fairly elastic, i.e. consumers are price sensitive.
 Where selling larger volumes results in lower costs because of
economies of scale which in turn results in the price being lowered
even further.
 Where the low price discourages actual and potential competitors.
3. Market skimming: where a firm sets a high price for a new product
to skim the market i.e. selling to the upper and middle class (or
cream) of a market at a high price before aiming at the more
price sensitive lower income groups. This makes sense under the
following conditions:
 There is currently high demand for the product
 There is currently little competition
 The high price communicates a superior product quality image.
4. Product quality leadership: a company may achieve this objective
by providing the best quality in the market at a premium price as
a basis of product differentiation.
Factors affecting price
1. Internal factors
a) Marketing objectives: price should be set with regard to market
targeting and positioning strategies e.g. product quality
leadership. It may be set low to prevent competition from
entering the market or set at competitor’s prices to stabilize the
market.
b)Marketing mix strategy: price must be set with regard to product
design, distribution and promotion (the price will strongly affect
or be affected by other elements of the marketing mix).
c) Costs: they set the floor (lowest limit) for the price that the
company can charge for its product. It wants to charge a price
that covers all costs for producing, distributing and promoting
the product.
2. External factors
a) Market demand: while costs set the (floor) lower limit of prices,
consumer value perceptions (market) and demand set the higher
limit. Pricing will be different in various types of economic
markets e.g. perfect competition and pure monopoly.
b) Competitor’s prices and offers: a consumer considering buying a
company’s product will evaluate its price and value against
competitor’s prices. Hence the firm should not ignore competitors’
prices.
c) Economic factors: economic conditions such as inflation,
boom, recession and variations in interest rates affect price
because they affect (both) the costs of producing the product
(and consumer perceptions of the product’s price and value)
d) Reseller considerations: the company should set prices that give
retailers a fair profit, encourage their support and help them to
sell the product effectively.
e) Government regulations: price should be set within the
legal framework provided by the government (e.g. it
should not be deceptive, discriminatory, or set below
cost of production). Methods of pricing
a) Mark up pricing/ cost–plus pricing: is a cost based pricing
method which involves adding a standard mark-up to the
product’s cost.
E.g. suppose a bread manufacturer has the following costs and
sales expectations
Variable cost per unit = Shs. 10.00
Fixed costs = Shs. 300,000.00
Expected unit sales = Shs. 50,000.00

Unit cost = VC + Fixed cost = 10 + 300,000 = Kshs.

16.00 Unit sales 50,000
If the manufacturer wants to earn a 20% mark-up, the selling
price will be;
Mark-up price = 16 ×120 = Kshs. 19.20
100
Advantages of mark up pricing
 It is easier to set the price of a product using this method.
 Where all the firms in the industry use this pricing method their
prices tend to be similar and price competition is therefore
minimized.
 Cost plus pricing is fairer to both buyers and sellers.
It has limitations in that it does not consider current demand
of the product, its perceived value and competitors’ prices.
b) Target return pricing/ target profit pricing (break even pricing)
 Where the company determines the price that yields a target
return on investment (ROI)
 It uses the concept of the break-even graph which shows the total
cost and total revenue expected at different sales volume levels.
 Fixed costs are the same regardless of sales volume. Variable
costs increase with sales volume and are added to fixed costs
to form total costs. The total revenue curve starts at zero and
rises with each unit sold.
 Using break- even analysis, the company must establish the
level of sales required to cover all costs. It must make a volume of
sales above the B.E.V. to achieve target profit.
c) Competitor based pricing/ going rate pricing
 In this case the firm bases its price largely on competitors’ prices. The
firm might charge the same, more or less than the major
competitor. This pricing method is popular because it is thought to
reflect the industry’s collective wisdom.
d) Demand based pricing
This is where prices are set and adjusted according to levels of
demand.
Pricing policies
1. One price policy: means offering the same price to all
customers who purchase the products under the same
conditions.
2. Flexible price policy/price discrimination: means offering the
same product to different customers at different prices. It may
take any of the following forms:
 Customer segment pricing: different customer groups are
charged different prices for the same product or service e.g.
museums and other entertainment places charge a lower price for
students.
 Product form pricing: different versions of the product are
priced differently but not proportionately to their respective
costs.
 Image pricing: pricing the product at two different levels based
on image differences of the package (e.g. perfumes)
 Channel pricing: setting a different price for the same
product depending on where it is bought, i.e. drinks.
 Location pricing: e.g. in a theatre or stadium where different prices
are charged for different locations.
 Time pricing: where prices are varied by season, day or hour i.e.
during peak and off-peak periods.
Conditions for price discrimination
 The market must be segmentable and the segments must
show different intensities of demand.
 Members in the lower price segment must not be able to
resell the product to the higher price segment.
 Competitors must not be able to undersell the product in the
 higher price segment.
 The cost of segmenting the market must not exceed the extra
revenue derived from price discrimination.
 The practice must not breed customer resentment and ill will.
 The particular form of price discrimination should not be illegal
e.g. (1) Predatory pricing i.e. selling below cost with the intention of
destroying competition (2) where the sellers offer different prices
to different people within the same segment.
3. Perceived value pricing
Potential customers place different weights on different elements
of perceived value (e.g. buyers’ image of perceived performance of
the product, product support services offered, the supplier’s
reputation) Some will be price buyers, while others will be value
buyers and loyal buyers. For price buyers, a company should offer
stripped down products and reduced services. For value buyers,
the firm must continue offering more value for the customer’s
money. For loyal buyers companies must invest in building closer
customer relationships.
4. Value pricing
-Refers to charging a fairly low price for a high quality product.
5. Promotional pricing
It may take the following forms;
a) Loss leader pricing: supermarkets often drop the price of well
known brands to induce more people to come in and in the
process buy other products.
b) Special event pricing: where sellers establish special prices in
certain seasons to draw in more customers e.g. back-to-school
offers.
c) Cash rebates; are offered to encourage the purchase of a
product within a specified period. The seller promises to refund
the buyer a certain percentage of the purchase price on proof
of purchase.
d) Longer payment terms.
e) Psychological discounting: involves setting an artificially high price
and then offering the product at a substantially reduced price e.g.
was shs 3590 now shs 2990.
6. Psychological pricing
This approach considers the psychology of prices where the
price is used to say something about the product. The
assumption is that customers perceive high quality in a highly
priced product. The price may also be set at a figure that
suggests the price falls within a certain price range, e.g. odd-
even pricing (4999.90)
 7. Geographical pricing
The company may charge different prices for the same product in
different parts of the country for the purpose of covering extra
transporting costs. It is a form of discriminatory pricing
Discount policies
Discounts are reductions from the list price given by a seller to
buyers. A list is the price final consumers are normally asked to
pay for a product.
 Quantity discounts are offered to encourage customers to buy in
larger amounts.
 Seasonal discounts are those offered to encourage buyers to
buy off season during off-peak demand.
 Cash discounts are reductions in price to encourage buyers to pay
their bills quickly or buy in cash.
 Trade discounts is a list price reduction given to channel
members for the job they are going to do e.g. a manufacturer
may allow retailers a 30% discount from the suggested retail
price to cover the cost of the retailing function (transport,
storage and risk taking) and their profit.
 Sale price/price offer is a temporary discount from the list price to
encourage immediate buying. To get the sale price, customers give
up the convenience of buying when they want to buy and
instead buy when the seller wants to sell.
Allowances
These are given to final consumers or channel members, for
doing something or accepting less of something.
a. Promotional allowances: are price reductions given to firms in
the channel to encourage them to stock and advertise the
supplier’s products.
b. Trade-in allowances: are price reductions given for returning an
old item when buying a new one e.g. a car
Product mix pricing
The price of a product must be modified when the product is
part of a product mix. Product mix pricing can take the following
forms;
 Product line pricing
 Optional feature pricing
 Captive product pricing
 Two part pricing
 By product pricing

1. Product line pricing

Sellers use different points for various products in a line. A
men’s clothing store might have men’s suits at different price
levels, e.g. shs 3000, shs 6000, and shs 15,000. Customers will
associate low medium and high quality suits with the three price
points.
2. Optional feature pricing
The seller offers optional products, features and services along with
the main product. The motor vehicle buyer can order light dimmers,
free delivery and an extended warranty or forego them for a lower
price.
3. Captive product pricing; Some products require the use of
additional or captive products. Sellers of razors, pens and cameras
often price them low and set higher prices for razor blades, pen
refills and films respectively.
4. By-product pricing
This is where the production of a product results in a by-product.
If the by-product has value to a customer group it should be
priced at its value. The income earned on the by-product will
make it easier for the company to charge a lower price on its
main product.
Pricing over the product life cycle
This takes the following forms;
1. Skimming price policy
This may be used to maximize profits in the market introduction stage.
The seller tries to sell to the top cream of a market at a high price
before aiming at more price sensitive low-end customers.
2. Penetration pricing
This is where a seller tries to sell to the whole market at one low
price. The policy is more attractive when selling larger quantities. It
results in lower costs because of economies of scale and when the
 firm expects strong competition soon after introduction.
3. Introductory price cuts
These are temporary price cuts to speed up new product
acceptance. The plan is to raise prices as soon as the introductory
offer is over. This strategy may also be used to attract customers
to a brand later in the life cycle.
 PROMOTION STRATEGY
It is communication with individuals, groups or organizations in order
to facilitate exchange by informing and persuading audiences to
accept a company’s products.
Communication is sharing of meaning through the transmission
of information. The components of the communication process
are illustrated below;

Source message medium

of receiver or
Transmission
audience

Feedback
Source: Is a person, group or organization that has an intended
meaning which it attempts to share with an audience.
Receiver: A person, group or organization that receives the message.
Medium of transmission: The tool used to carry the message from
source to receiver.
Feedback: The receiver’s response to the message.
Objectives of promotion
 It informs and makes potential customers aware of a firm’s
products.
 It attempts to persuade current and potential customers of
the desirability of buying and using a product.
 It reminds people of a need they might have or a problem that is
currently not satisfied or solved or reminds them of the benefits of
past transactions and so convince them that they should enter a
into a similar exchange.
 It acts as a basis of differentiation, especially in a market where
there is little to distinguish between competing products and
brands.
This can be summarized as DRIP i.e.
Differentiation
Reminding
Informing
 Persuading
The promotion-mix
It consists of a set of tools which can be used in different
combinations in order to communicate with target audiences.
There are four major promotional tools i.e. advertising, sales
promotion, publicity and public relations, and personal selling.
Others are; direct market and sponsorship.
Advertising
It is any form of non-personal communication about a firm and its
products that is transmitted through the mass media (television,
radio, newspaper, magazines, outdoor displays, the internet etc.)
Types of advertising:
1) Product advertising: Is the type that promotes goods and
services.
2) Institutional advertising: The type that promotes organizational
images and ideas.
3) Pioneer advertising: Tries to develop the primary demand for a
product category rather than a specific product. It is usually done
in the early stages of the product life-cycle to inform potential
customers about the new product.
4) Competitive advertising: Aims at offsetting the effects
of competitor’s promotion campaigns.
5) Reminder & reinforcement advertising: It targets at letting
consumers to know that an established brand still exists. Its
purpose is to assure current users of the product’s benefits.
Developing an advertising campaign
An advertising campaign involves designing a series of
advertisements and placing them in various advertising media to
reach a particular target market.
Developing and implementing the campaign consists the following
six major steps (the six Ms of advertising)
 Identifying and analyzing the target market.
 Defining the advertising objectives (mission)
 Developing the advertising budget (money)
 Developing the media plan (media)
 Developing the advertising message.
 Evaluating the effectiveness of the advertising (measure).
1) Identifying and analyzing the target market
This is the group at which advertisements are aimed. The analysis of
the group may include; the geographic distribution and the
location of the group, Age structure, Income, Gender, Educational
levels, and Consumer attitudes regarding the firm’s products.
2) Defining advertising objectives
The objectives should be stated clearly, precisely, in measurable
terms and should be realistic and specify a time frame within
which the objectives should be achieved e.g.
 Increase sales volume or market share
 Increase product or brand awareness
 Make consumers’ attitudes favourable, etc.
3) Developing the advertising budget
This is the total amount of money that a marketer allocates for
advertising over a period of time. Factors to consider are such as;
The geographic size of the market, Type of product, Business sales
volume relative to competitors, and Distribution of buyers within
the market. Methods used to determine the budget are;
a) Objective and task approach: A technique that involves
determining
advertising objectives and then attempting to list the tasks
required to accomplish objectives and how much each task will
cost.
b) Percentage of sales approach: Involves multiplying a firm’s
predicted sales by a standard percentage based on what the firm
traditionally spends on advertising.
c) Competition matching approach: Is where a firm either matches
its major competitors’ budget or allocates the same percentage of
sales for advertising as competitors.
d) Arbitrary/ affordable approach: Is an advertising budgeting
technique in which high level executives decides how much can
be spent on advertising over a certain product.
4) Developing the media plan
This is the process of establishing the exact media channels to be
used for advertising.
 The plan should determine how many people in the target
will be exposed to the message and the effects of the
messages on the individuals.
The aim is to reach the largest possible number of people in
the advertising target and achieve the appropriate message
reach and frequency for the target.
Reach: The percentage of consumers in the advertising target
actually exposed to a particular ad in a stated time period.
Frequency: The number of times target consumers are exposed to a
particular advertisement.
The plan must decide which media to use e.g. radio, television,
newspapers, magazines, outdoor displays, the internet etc
5) Creating the advertising message
The content and form of an advertising message depends on factors
such as the product’s features and benefits and characteristics of the
market such as sex, age, education etc.
Advertising objectives also determine the content of message e.g.
when the major objective is to increase brand awareness, the
message may use much repetition of the brand name. The
message should contain the following:
 Identify a specific need/ problem of consumers
 Suggest that the product is the best to solve the problem.
 State the advantages/ benefits of the product.
 Substantiate the claims/ advantages.
 Ask the buyer for action.
As a guide to the message development, most marketers use
the concept of A.I.D.A., i.e. advertising should aim at;
 Getting Attention (A)
 Holding Interest (I)
 Arousing Desire (D)
 Obtaining Action (A)
6) Measuring/ evaluating the effectiveness of advertising.
If the advertisement objective was in terms of product awareness,
brand awareness or attitude change, qualitative research (focus
group and depth interviews) is used during and after the
campaign to monitor
 shifts in consumer perceptions. Changes in demand of the product
may also be measured.
Advantages of advertising
 Advertising’s public nature suggests that the advertised product
is standard and legitimate.
 It lets the seller repeat a message many times.
 It helps build the long term image of the product and company.
 It can reach masses of geographically dispersed buyers at a low cost
per person.
Disadvantages
 It is impersonal and cannot be as persuasive as a salesperson.
 The audience may not feel obliged to pay attention or respond.
 It may unnecessarily increase the price of a product.
Personal Selling
It is the process of using personal communication in an
exchange situation to inform customers and persuade them
to purchase products. It is a process by which;
-one identifies the people, who have a need. [ PROSPECTING]
-one determines the needs of the people.[ NEEDS ]
-one determines a way of finding a solution to the
prospect's problem.[ PROPOSE]
-one determines the way of communicating your product as
a solution. [RECOMMENDING]
-one determines the value for the product for the prospect.
[ ADVOCATING YOUR PRODUCT].
-one determines / sells benefits of the product to the prospect.
[ SELLING BENEFITS]
and then creating a transaction for exchanging the product for a
value. [CLOSING THE SALE ] and thus creating a satisfaction to the
buyer's needs/wants [ CREATING CUSTOMER SATISFACTION].
While face to face with prospects, sales people can get more attention
than an advertisement.
The sales person is seen as a representative of the company,
responsible for explaining the company’s total effort to target
customers rather than just selling products.
The sales person is often the only link between the company and
customers. He/she may provide information about products, explain
and interpret the company’s policies, negotiate prices and identify
technical problems when a product does not work well.
Tasks of sales people
a) Prospecting; gathering information to gain sales and
prospective clients.
b) Communicating; providing information about the organization, its
products and after sales service.
c) Information gathering; collecting information about customers,
competitors and the general market situation.
d) Customer relationship building; i.e. developing and sustaining long-
term customer relationships.
e) Customer consultants; they help the customer to buy by
understanding the customer’s needs and presenting the merits
and demerits of their products.
Approaches to personal selling
1) Sales oriented approach;
It assumes that customers are not likely to buy except under
pressure, that they are influenced by a sleek and smart
representation. The sales person is only interested in achieving
high sales volume and does not care what happens when the deal
is through i.e. whether the customer is satisfied or not.
2) Customer oriented approach;
In this case the sales person learns how to listen and ask
questions in order to identify customer needs and come up with
solutions. This is a customer problem-solving approach which
assumes that customers appreciate suggestions and will be loyal to
sellers who have customers’ long term interests at heart.
Steps in the personal selling process

Prospecting & Preparation Approach Presentations

&
Overcoming Closing the Follow-up
Evaluating (pre-approach) (opening) demonstrations
objections sale
 Types of sales people
1) Order getters; are concerned with getting new businesses
through selling potential buyers with well organized presentations
designed to sell a product. They locate new customers, open new
accounts and seek new opportunities.
2) Order takers; they deal with regular customers by receiving their
orders at the place of supply or through telephone, fax, mail, e-
mail etc.
3) Support sales people; they facilitate the selling function by
locating prospects, educating the customer, building goodwill
and providing after-sales service.
Advantages of personal selling
 A sales person can observe a potential customer’s needs and
make adjustments in the sales presentation.
 Sales people help in market information gathering.
 The buyer usually feels a greater need to listen and respond.
 Helps build closer customer relationships.
Disadvantages
 It is expensive.
 It tends to be intrusive due to its personal nature.
Public Relations & Publicity
Definitions;
Publicity refers to communication in news story form about a firm
and its products that is transmitted through the mass media at no
charge. Public relations are a planned and sustained effort to
establish and maintain goodwill between a firm and its target publics
e.g. customers, employees, shareholders, suppliers, the government,
environmentalists and the public in general.
Objectives
 To create and maintain the corporate and brand image of the
firm i.e. to enhance the position and standing of the firm in the
eyes of the public.
 To disseminate information about the firm to the public.
 To undertake corrective measures to overcome bad publicity.
Public relations and publicity tools
 Press release; using various media channels to highlight on specific
information or events of the firm e.g. product launches, expansions
etc. Press conferences; meetings called by the firm to announce
major news events or to respond to a crisis.
Events; like trade shows, exhibitions, anniversaries etc. which may be
used to draw attention to the firms products.
Corporate social responsibility activities; i.e. building goodwill by
contributing money, time and other resources to good causes
Lobbying; Influencing people in government and other authority in
order to secure their support to achieve a desired action e.g. to
promote a legislation or regulation favourable to the firm’s
business. Feature articles; longer than press releases and usually
prepared for a certain publication.
Sponsorship; this refers to financial or material support of an
event, activity, person, organization or product by an unrelated
organization or donor. Resources are given to the recipient of the
sponsorship deal in return for the exposure of the sponsor’s name
or brands. The sponsorship of events also helps to improve the
firm’s corporate image. Identity media; refers to a firm’s visual
identity that the public recognizes and attributes to the firm. The
visual identity may be in the form of company logo, stationery,
brochures, signs, business cards etc. Sales Promotions
Definition:
It is an activity or material that acts as a direct inducement and
offers added value to buy the product. It is often a short-term
incentive to encourage purchase of the product.
Objectives of sales promotion
Sales promotion activities are designed to achieve the following
targets;
 To introduce new products
 To attract new customers
 To increase sales during periods of low demand
 To encourage intermediaries to carry large stocks
 To improve the public image of the firm
 To induce current customers to buy more
Sales promotion techniques
There are two types; 1; Consumer sales promotion, and 2; Trade
sales promotion
1. Consumer sales promotions:
These are often aimed at the final consumers. They include
the following;
Coupons: certificates entitling the bearer to a price reduction of a
product. The coupons are distributed through the print media, direct
mail and attached to other products.
Demonstrations: are occasions at which a manufacturer shows how a
product works in order to encourage trial use and purchase of the
product.
Loyalty cards: offer discounts or free merchandise to regular
customers. They are normally employed by supermarkets and are
mechanisms in which regular customers who remain loyal to a
particular outlet are rewarded with discounts or free merchandise (e.g.
Nakumatt smartcard)
Free samples: are give-away used to stimulate trial of a new product
or to induce brand switching.
Money/cash refund: a specific amount of money awarded to customers
after the purchase of a product after they submit a “proof of
purchase” to the manufacturer.
Premiums (gifts) are items offered free at a minimum cost or as a
bonus for purchasing a product.
Price-off deals: offering a certain reduction off the regular price
shown on the package for a limited period of time.
Price packs: Offering two similar or related products for the price
of one (e.g. toothpaste & tooth brush)
Consumer contests: Involves consumers submitting entries from which
a winner is selected by a panel of judges to win cash, trips or
merchandise based on his/her analytical or creative skills.
Consumer sweepstakes: consumers submit their names for inclusion in
a draw for prizes.
Product warranties: promises made by sellers that the product
will perform as specified or that the seller will repair it or
refund the customer’s money during a specified period.
 2. Trade sales promotions;
These are aimed at the resellers e.g., retailers, wholesalers, etc.
They include;
Buying allowance; a temporary price reduction to resellers for
purchasing specified quantities of a product.
Free merchandise: free items offered to resellers who purchase a
stated quantity of the same or different products.
Merchandise allowance; a manufacturer’s agreement to pay resellers a
certain amount of money to providing special promotional efforts such
as advertising or store displays.
Sales contests; are designed to motivate distributors and resellers by
recognizing and rewarding outstanding achievements.
Advantages of sales promotion
1. Low unit cost for selling
Sales promotion is always the outcome of large scale production.
Large scale production itself is meant for low cost. Sales promotion
assures of a low cost selling.
2. Effective sales support
Basically, sales promotion policies supplement the efforts of
personal and impersonal salesmanship (advertising). It is found
that good sales promotion materials make the salesman’s efforts
more productive.
3. Increased speed of product acceptance
Most of the sales promotion devices (contests, coupons) can be
used faster than the other promotion methods such as
advertisement.
Factors determining selection of the promotion mix
1) Promotional resources: If a company’s promotional budget
is extremely limited, it is likely to rely on personal selling
rather than advertising or sales promotion.
2) Promotional objectives, policies e.g. if the objective is to create
mass awareness of a new consumer product then advertising or
sales promotion can be used.
3) Characteristics of the target market:
If the size is limited, the promotional mix will emphasize personal
selling. But when markets are large, advertising and sales
promotion is
used because the methods can reach many people at low cost
per person.
Geographic distribution: Personal selling is more feasible if a
company’s customers are concentrated in small area than if
dispersed. If dispersed advertising would be used.
Socio-economic characteristics: Age, income, level of education.
4) Characteristic of the product: for industrial products personal
selling is used but advertising plays a major role for consumer
goods.
5) Price: high priced products call for more personal selling
because consumers associate greater risk with the purchase of
such products and want the advice of a sales person.
6) Stage of the PLC e.g. at introduction stage, advertising is
done to create awareness.
7) Cost of promotional methods.
8) Availability: e.g. a product may be banned from being
advertised on TV or radio e.g. cigarettes.
Promotional policies:
Push policy; A promotional policy in which the producer promotes
the product only to the next level down the marketing channel.
Pull policy; In which a business promotes directly to consumers in
order to create a strong consumer demand for its products.
DISTRIBUTION STRATEGY
Distribution involves the marketing tasks concerned with making
the product available and accessible to buyers. It ensures that
customers get their products at the right place and at the right
time. Distribution is about places i.e. places where the product will
be made, stored, bought or used.
Physical distribution refers to the marketing tasks concerned with
efficient physical movement of goods and services from the producer
and includes the tasks of transportation and storage.
A distribution channel consists of a group of individuals or
organizations that assist in getting the product to the right place and
time- just when and where the customer wants it.
Intermediaries/ middlemen are organizations such as
transport companies, agents, wholesalers and retailers.
 Types of intermediaries
7. Wholesalers: they buy goods from the manufacturer, store them
and sell to the retailers.
8. Retailers: are the final stopping points for the product prior to its
sale to the end user.
9. Distributors: these are the intermediaries who stock products for
manufacturers and sell them. In most cases they are appointed by
the manufacturer.
10. Dealers: they are those who specialize in selling one
particular brand e.g. motor vehicle dealers who are often
associated with the manufacturer, selling on his behalf,
including offering after-sales facilities. In most cases they sell
to end user.
11. Agents/brokers: they do not take physical possession of
the goods but act on behalf of the manufacturer to sell their
goods. Their role is to bring the buyer and seller together.
12. Franchise: this is a business relationship where the
franchisee holds a contract to market and supply a product or
service that has been very strictly designed and developed by
the franchiser. The franchisee must adhere to the strict terms
and conditions on store design, layout and contents sold within the
retail outlet e.g. Ken chick, Wimpey’s, Nandos, e.t.c.
13. Merchandisers: these are responsible for store displays,
relating to their products in various retail outlets. They manage
displays, implement sales promotions, check stock levels and
maintain relationships with store managers.
Types of distribution channels
1. Zero-level channel; this is where the producer sells directly to
the consumer i.e.
Producer final consumer/ end user
It is also called the direct distribution channel and is mainly used
in the sale of industrial products.
2. One level channel; this is where there is only one intermediary
i.e. Producer retailer consumer
3. Two level channel; it involves two intermediaries i.e.
Producer wholesaler retailer consumer
4. Three level channel; it involves three intermediaries
i.e. Producer agent or distributor wholesaler
retailer consumer
Most consumer products go through the longer channels.
Functions of middlemen
The basic role of middlemen is to make the product available and
accessible to customers in a more cost effective way than could
be achieved by the manufacturer alone. They do this by performing
some or all of the following functions;
1. Breaking bulk; they buy goods from the manufacturer in large
quantities and sell them in smaller quantities that end users
wish to buy.
2. Storage/warehousing; they store goods relieving manufacturers
of storage costs and at the same time increasing availability to
consumers.
3. Delivery; they buy products from manufacturers and deliver them
to many small customers with small vans, thus increasing
accessibility.
4. After-sales service; they offer operational instructions, warranties
and installation as in the case of electronic and industrial goods.
5. Price setting; they may have the authority to set prices.
6. Promotion; they undertake the activities of displaying,
demonstrating and developing persuasive communications
about a product.
7. Matching; i.e. shaping and fitting a product to the buyer’s needs
and specifications e.g. grading, assembling and packaging.
8. Information gathering; they gather and distribute marketing
information about the marketing environment needed for
marketing planning.
9. Extending credit; industrial distributors often sell on credit to
their customers thus removing a significant cash flow burden
from the manufacturer.
10. Risk taking; they assume the risks of damage through
fire, accidents, fall in prices etc.
11. Stock holding; they anticipate consumers’ demand and
stock enough products to meet the demand thereby reducing
the risk of stock-outs.
Reasons why producers use intermediaries
 There is a cost attached to using middlemen, i.e. they have to be
given their share of profits. The reasons why middlemen are
used relate to lower costs and higher sales.
1. Lower costs;
Fewer lines of contact; they reduce the lines of contact between
producers and end users i.e.

Producers

Middleman

End users

a) The cost of delivering goods to one middleman rather than several

end users will be much lower.
b) Lower stock holding costs; the manufacturer saves money because
he does not need to hold as much stock, a responsibility passed
on to middlemen.
c) Lower sales administration costs; if the manufacturer is dealing
with thousands of customers, his sales administration costs will
be high because he will need a large sales team, a lot of
paperwork i.e. order slips, delivery notes, invoices and
statements. Distributors often relief the manufacturer of such
tasks.
d) Lower sales force costs; distributors’ salespeople perform
personal selling to end-users,, leaving a smaller manufacturers’
sales force to sell to the distributors themselves and to a smaller
number of large customers.
2. Higher sales.
a) Being conveniently located to customers, middlemen make it easy
for customers to buy.
b) Knowledge of the local market; being locally based, the
distributor understands customers’ needs better than the
manufacturers.
c) Specialization; it allows manufacturers to specialize and focus
their resources more on manufacturing.
Factors to be considered in selecting channel members or
intermediaries/middlemen
1. Image of the product; the more exclusive and expensive the product
is, the more up-market the image of the distributor will be.
2. Product complexity; technical products such as machinery
or equipment demand a high level of knowledge on the
part of the distributor in order to provide after-sales
service.
3. Financial status of the intermediary; distributors buy products in
large volumes and the manufacturer must satisfy himself that the
distributor is of sound financial position to pay his debts.
4. Knowledge of the local market.
5. Appropriate premises and equipment i.e. products requiring
special equipment such as freezers for storage can only be
sold through distributors that possess such equipment.
6. Customer convenience; manufacturers will select more middlemen
in areas where customers are highly concentrated.
7. Efficient customer service capabilities; i.e. only those middlemen
capable of offering service e.g. installation, repair, maintenance may
be selected.
Channel of distribution strategies
Distribution networks can vary and a manufacturer needs to decide on
the type of network that best suits his product. There are three
broad choices;
a) Intensive distribution;
The aim of the strategy is to secure as many retail outlets as
possible in order to maximize product availability and
accessibility to potential buyers. This type is most suited to
products where convenience of purchase and impulse buying are
important factors influencing sales.
 The manufacturer wants his products on sale in every
imaginable outlet. The products are characterized by;
 Higher number of buyers
 Higher purchase frequency
 Impulsive purchase
 Low prices
b) Selective distribution
This refers to using a few selected retail outlets for a product.
The manufacturer may want the distribution to be as intensive as
possible but may also want to protect the image of the company
and its brands by exercising some control over the type of
retailers selling it. The strategy is used with shopping products like
electrical appliances. The characteristics are;
 Medium number of shoppers
 Occasional purchase
 The purchase is more likely to be planned i.e. not impulsive
c) Exclusive distribution
It is when one outlet in a certain geographical area supplies a product.
Prestige products which need to protect their image of up-market
exclusivity are sold with such strategy. The distributors are chosen
carefully because their image and competence must match up to
the high standards demanded by the manufacturer. The
characteristics of such products include;
 Relatively few customers
 Low frequency of purchase
 Closer customer/retailer relationship
 High involvement and planned purchase
 Highly priced product
Managing the distribution network
The aim of the manufacturer is to maximize cooperation and
minimize conflict among the channel members. Conflict is inherent in
the channel system because everyone in the channel wants to
maximize their profits often at the expense of other channel
members.
 Distributors in competition with each other will also inevitably come
into conflict. A certain amount of conflict is healthy as competing
retailers for example, seek to maximize their market share by
improving customer service. However, a tactic they often turn to is
price-cutting and this can have detrimental effects on the
manufacturer’s brand image and, in the long run, on the industry
as a whole.
Manufacturers must therefore attempt to manage their distributors.
Ideally they should be firm on pricing policies and the amount of
discount allowed by individual channel members, particularly if
discounting (cut price) is used to poach customers from other channel
members.
Manufacturers may also need to motivate distributors to sell their
brands. If a retailer stocks four similarly priced computers from
four rival manufacturers, why should he sell brand X rather than
brand Y? The manufacturer of brand Y will always want to
motivate distributors to sell his brand.
Techniques for Motivating Distributors
 Offering the distributor healthy profit margins through price
discounts.
 Offering support by way of display material, quality brochures.
 Advertising the retailers’ outlets.
 Building dealer loyalty by organizing conferences with
intermediaries.
 Running competitions for dealers with prizes for dealers who
meet certain sales targets.
 Providing a series of promotion offers to distributors.
Physical distribution
It is concerned with the physical movement of goods to the
consumers. It includes transportation, storage, warehousing,
packaging etc. and ensures availability of products at the right
time, at the right place and in the right form.
It ensures availability of products to customers and it can be a
costly task. Many companies have distribution managers
responsible for designing an efficient system concerned with the
movement of goods into and out of the company. The aim is to
achieve the highest level of customer service at the lowest cost.
The following factors will contribute to the achievement of this
aim;
a) Short time delivery i.e. ability to deliver on time and ensure
that distributors stocks don’t run out.
b) Condition of goods i.e. having strict control over packaging,
handling and distribution to ensure goods arrive in the right
conditions.
c) Prompt replacements of defective goods; if the products don’t
arrive in good condition, prompt replacement may at least mollify the
customer.
d) After sales service; for products such as machinery and equipment,
the customer is concerned that the product remains in the right
condition. The manufacturer has to therefore manage the
distribution of spare parts and servicing.
Choice of channel of distribution-Determining factors
The choice of a suitable channel of distribution is one of the most
important decisions in marketing of products because a channel
affects the time and cost of distribution as well as the volume of
sales. The choice of a channel of distribution involves the selection
of the best possible combination of middle men or intermediaries.
The factors affecting the choice of distribution channels may be
classified as follows;
1. Product considerations: The nature and type of product have
an important bearing on the choice of distribution channels. The
main characteristics of a product are;
a. Unit value: Products of low unit value and common use are
generally sold through middlemen as they cannot bear the cost of
direct selling. Low prized and high turnover articles like
cosmetics and stationery usually flow through long channels.
b. Perishability: Perishable products like vegetables, fruits and
bakery items have relatively short channels as they cannot bear
repeated handling.
c. Bulk and weight: Heavy and bulky products are distributed
directly to minimize handling costs. Examples are coal, bricks,
stones etc.
d. Technical nature: Products that require demonstration, installation and
after sales services are often sold directly. The producer appoints
sales engineers to sell and service industrial equipment.
e. Product line: A firm producing a wide range of products may
find it economical to set up its own retail outlets. On the other
hand, firms
 with one or two products find it profitable to distribute
through wholesalers and retailers.
2. Market considerations: The nature and type of consumers is
an important consideration in the choice of a channel of
distribution.
a. Consumer of industrial market: The purpose of buying has an
important influence on the channel. Goods purchased for industrial
or commercial use are usually sold directly or through agents.
This is because industrial users buy in large quantity and the
producer can easily establish a direct contact with them.
b. Number and location of buyers: When the number of potential
customers is small or the market is geographically located in a
limited area, direct selling is easier and economical.
c. Size and frequency of order: Direct selling is convenient and
economical in case of large and infrequent orders. When articles
are purchased very frequently and each purchase order is small,
middlemen may have to be used.
d. Customer’s buying habits: The amount of time and effort which
customers are willing to spend in shopping is an important
consideration. Customer expectation like desire for one-stop
shopping, need for personal attachment, preference for self
service etc. may influence the choice of trade channel.
3. Company considerations: The nature, size and objective of the
firm play an important role in channel decisions.
a. Market standing/reputation: Well established companies with good
reputation in the market are in a better position to eliminate
middlemen than new and less known firms.
b. Financial resources: A large firm with sufficient funds can establish
its own retail shops to sell directly to consumers. But a weak or
small enterprise which cannot invest money in distribution has to
depend on middlemen for the marketing of its products.
c. Management: If the management of a firm has sufficient
knowledge and experience of distribution, it may prefer direct selling.
Firms whose management lack marketing know-how have to depend
on middlemen.
4. Middlemen considerations
a. Availability
When desired types of middlemen are not available, a
manufacturer may have to establish his own distribution network.
Non- availability of middlemen may arise when they are handling
competitive products as they do not like to handle more brands.
b. Attitude: Middlemen who do not like a firm’s marketing policies
may refuse to handle its products. For instance, some
wholesalers and retailers demand sole selling rights or a guarantee
against fall in prices.
c. Service: Use of middlemen is desirable when they provide
financing, storage, promotion and after sales service.
d. Costs: Choice of a channel should be made after comparing the costs
of distribution through alternative channels.

MARKET SEGMENTATION STRATEGY

What is a market?
A market is an aggregate of people who, as individuals or
organizations, have needs for products in a product class and who
have the ability, willingness and authority to purchase such
products.
Types of markets;
Consumer market; It is made up of individuals and households that
purchase products for their own personal consumption.
Organizational/ Business market; It is made up of the following sub-
sectors;
The industrial market;
It is made up of manufacturing concerns that purchase products to
create their own finished products.
The resellers market;
It consists of wholesalers, retailers, distributors, and dealers etc. that
purchase products for resale to make a profit.
The government market;
It consists of government departments and ministries that purchase
products in order to offer government services.
The institutional market;
 It is made up of hotels, hospitals, schools, colleges and other
institutions that also buy goods and services.
Approaches to selecting markets
Undifferentiated Approach (Total Market Approach)
It uses single marketing mix for the entire market. All consumers
have similar needs for a specific kind of product (Homogeneous
market).
Single marketing mix consists of;
 1 pricing strategy
 1 promotional program aimed at everybody
 1 type of product with little/ no variation
 1 distribution system aimed at entire market
The elements of the marketing mix do not change for different
consumers; all elements are developed for all consumers.
Examples include staple foods, sugar, salt and farm produce. It
was popular during the production- oriented era of marketing
evolution. It is not so popular now due to competition, improved
marketing research capabilities and total production and marketing
costs can be reduced by segmentation. An organization must be able
to develop and maintain a single marketing mix for all its customers.
Market segmentation (Differentiated) approach
Individuals with diverse product needs have heterogeneous
needs. Definition; Market segmentation is the process of
dividing a total market into market groups consisting of people
who have relatively similar product needs.
The purpose is to design a marketing mix strategy that more precisely
matches the needs of individuals in a selected market segment(s).
A market segment consists of individuals, groups or organizations
with one or more characteristics that cause them to have
relatively similar product needs. There are two market
segmentation strategies: Concentration strategy
It involves approaching and concentrating in one market segment
with
one marketing mix strategy.
Merits
 It allows a firm to specialize
 It can focus all energies on satisfying one group’s needs
 A firm with limited resources can compete with larger organizations
Demerits
 Puts all eggs in one basket
 Small shift in the population or consumer tastes can greatly affect
the firm.
 May have trouble expanding into new markets (especially up-
market).
Multi-segment strategy
Two or more segments are sought with a marketing mix strategy for
each segment. This approach combines the best attributes of
undifferentiated and concentrated marketing.
Market
MM market segment A
MM market segment B
MM market segment C
MM market segment D
Merits
 Shift excess production capacity
 Can achieve same market coverage as with mass marketing
 Price differentials among different brands can be maintained
 Consumers in each segment may be willing to pay a premium for
the tailor-made product
 Less risk, not relying on one market.
Demerits
 Demand a greater number of production process
 Increased marketing costs through selling through different
channels and promoting more brands, using different
packaging etc.
 Must be careful to maintain the product distinctiveness in
each consumer group and guard its overall image.
 The core product is the same but different packaging, brand name
and price is used to differentiate and create a different marketing
mix Requirements for effective segmentation
Not all segmentation is useful. Buyers of a product can be said to
be
tall, short or of medium height. Such segmentation may not make
sense from a marketing point of view since buyers with the different
characteristics may react in the same way to similar marketing
strategy. To be useful, market segments should have the following
characteristics;
Measurable; The size, purchasing power and characteristics of the
market should be measurable.
Substantial; The segment should be large and profitable enough to
serve.
Accessible; The segment should be effectively reached and served.
Differentiable; The segment should be distinguishable.
Actionable; Effective programs can be formulated for attracting and
serving the segments.
Bases for segmenting markets
1) Geographic segmentation
It involves dividing the market into different geographic units such
as nations, regions, provinces or cities. The company can operate in
all but pay attention to local variations. The basis for segmentation is
location. A national chain of supermarkets, e.g., will use
geographic segmentation because it interacts closely with the
chain’s outlet strategy.
Each branch or group of retail outlets could be given mutually
exclusive areas to serve. The supermarket chain can then make
more effective use of target marketing to cover the market
available. The obvious advantage to customers is ease of
accessibility of retail outlets. This customer benefit needs to be
considered against the cost of provision of retail branches.
Research has shown that one of the major reasons why customers
choose particular stores in which to shop is convenience of access.
2) Demographic segmentation
The market is divided into groups on the basis of variables such as
age, family size, family life cycle, gender, occupation, education,
religion, race, nationality and social class.
Consumer wants and usage rates are often associated with
demographic variables hence they are the most popular bases
for distinguishing customer groups. Demographic variables are also
easier to measure.
3) Psychographic segmentation
Psychographics or lifestyle segmentation seeks to classify people
according to the values, opinions, personality, characteristics and
interests. It involves dividing buyers into different groups based on
personality and life style.
a) Lifestyle; People differ in attitudes, interests and activities and
these affect the goods and services they consume. For instance
some are tradition- oriented while others are sports or religious
oriented.
b) Personality; One’s personality can be said to be aggressive,
ambitious, polite etc. Marketers can endow their products with a
brand personality that corresponds to a target consumer
personality. A company uses product features, services, and
promotion to transmit
the product’s personality. Tommy Hilfiger for instance
suggests a personality that is youthful and exciting.
Lifestyle segmentation deals with the person as opposed to the
product and attempts to discover the particular lifestyle patterns of
customers. This offers a richer insight into their preferences for
various products and services. Lifestyle refers to distinctive ways
of living adopted by particular communities or subsections of
society. Lifestyle involves combining a number of behavioural
factors, such as motivation, personality and culture. Effective use in
marketing depends on accurate description, and the numbers of
people following a particular lifestyle must be quantified. Then
marketers can assign and target products and promotion at particular
target lifestyle groups. Lifestyle can be generalized in terms of four
categories as follows;
Upwardly mobile, ambitious: these individuals seek a better and
more affluent lifestyle, principally through better paid and more
interesting work, and a higher material standard of living. A
customer with such a lifestyle will be prepared to try new
products.
Traditional and sociable; here, compliance and conformity to
group norms brings social approval and reassurance to the
individual.
Purchasing patterns will therefore be ‘conformist’.
Security and status seeking; this group stresses ‘safety’ and
‘ego- defensive’ needs. This lifestyle links status, income and
security. It encourages the purchase of strong and well known
products and
 brands, and emphasizes those products and services which
confer status and make life as secure and predictable as possible.
These would include insurance, membership of the AA, AAR etc.
Products that are well established and familiar inspire more
confidence than new products, which will be avoided.
Hedonistic preference; this lifestyle places emphasis on ‘enjoying life
now’ and the immediate satisfaction of wants and needs. They seek
instant gratification and little thought is given to the future.
4) Behaviour segmentation
Buyers are divided into groups based on their knowledge of, attitude
toward, use of, response to a product, e.t.c.
a) Occasions; Buyers can be distinguished according to the
occasions when they develop a need, purchase a product or use
it. This may be on regular occasions e.g. holidays or special
occasions like wedding days, childbirth etc.
b) Benefits; Buyers vary in the benefits they seek from the
same product. Some may seek safety, speed, economy,
performance etc.
c) User status; Markets can be segmented into non-users, ex-
users, potential users, first-time users and regular users. Each
of these requires a different marketing strategy.
d) Usage rate; Markets can be segmented into light, medium and
heavy product users. The heavy users may be a small percentage
of the market but account for a high percentage of total
consumption. Therefore a marketer would rather attract one heavy
user than several light users.
e) Buyer readiness stage; A market consists of people in
different stages of readiness to buy a product. There are six
such stages;
 Awareness
 Knowledge
 Liking
 Preference
 Conviction
 Intention to buy and actual purchase action.
The different stages can help the marketer in designing the
appropriate marketing program for people at different stages.
5) Socio-economic segmentation
It involves segmenting the
market based on variables such as income, occupation,
education and social class.
Income determines people’s ability to buy and their aspirations for a
certain style of living. Products in this category include housing,
furniture, clothing, cars, food, and leisure activities.
Segmentation variables for Business markets
Business markets can be segmented with some of the same
variables used in consumer markets. Major variables are;
a) Demographic
-Type of industry i.e. the industry to serve.
-Company size; the company can decide to serve small,
medium or large customers.
-Location; the company may pick on limited geographical areas
to serve.
b) Operating variables
-Technology
-User (or non-user) status; the company can decide to serve the
light, medium or heavy users.
c) Situational factors
-Urgency; the company may serve customers that need quick
delivery or service.
-Specific application; the company may focus on certain applications
of its product rather than all applications e.g. steel manufacturer.
-Size of order; the company may focus on large or small orders.
Single variable vs. Multi-variable segmentation
Single variable—achieved by using only one variable to segment a
market e.g., geography
Multi-variable—where more than one characteristic is used to divide
the market
The demerit is that more variables create more segments reducing the
sales potential in each segment. The question to ask is; will
additional variables help improve the firms marketing mix strategy? If
not, there is
little reason to spend more money to gain information from
extra variables.
Benefits of market segmentation
Apart from improved contribution to profits, other benefits from
successful market segmentation include the following:
1) The organization may be able to identify new marketing
opportunities, because it will have a better understanding of
customer needs in each segment, with the possibility of spotting
further sub- groups.
2) Specialists can be used for each of the organization’s major
segments. For example, small business counsellors can be
employed by banks to deal effectively with small firms and a
computer consultancy can have specialist sales staff for say
shops, manufacturers, service industries and local authorities. This
builds competency and establishes effective marketing systems.
3) The total marketing budget can be allocated proportionately to
each segment and the likely return from each segment. This
optimizes return on investment.
4) The organization can make fine adjustments to the product
and service offerings and to the marketing appeals used for each
segment. This again promotes efficient use of resources.
5) The organization can try to dominate particular segments thus
gaining competitive advantage. Advantages accrued function
synergistically to promote improved competitive ability; in other
words, the outcome is more than the sum of its parts.
6) The product range can more closely reflect differences in
customer needs. All modern marketing relies on responsiveness to
the consumer. When this is improved, benefits flow.
Market targeting
After a firm has identified its market segment opportunities, it must
decide which ones to target. Market targeting is the selection of a
set of buyers sharing common needs or characteristics that the
company decides to serve. The company should then consider six
patterns of target market selection;
1) Market atomization; is a strategy that treats each consumer
uniquely. The approach is popular among firms that make
industrial goods.
2) Single segment concentration; involves concentrating in one
market segment. The firm gains a strong knowledge of the
segment’s needs and achieves a strong market presence. It may
also enjoy operating economies through specializing its
production, distribution and promotion. The disadvantage is that
a competitor may invade the
segment or customer’s tastes may change.
3) Selective specialization; the firm may select a number of
attractive segments which are potentially profitable. Such a
strategy has the advantage of diversifying a firm’s risks.
4) Product specialization; The firm makes a certain product
which it sells to several segments e.g. a paper manufacturer
who sells to schools, the government and commercial dealers.
5) Market specialization; the firm concentrates on serving many
needs of a particular customer group e.g. a firm that sells an
assortment of products only to hospitals.
6) Full market coverage; the firm attempts to serve all customer
groups with the products they might need. A company can do this
by covering a whole market in two broad ways:
Undifferentiated marketing; in this approach the firm ignores
segment differences and goes after the market with one offer.
The company designs a product that appeals to a majority of
buyers and relies on mass distribution and advertising.
Differentiated marketing; the firm operates in several
market segments and designs different products for each
segment.
Factors that determine choice between differentiated and
undifferentiated marketing
Company resources; when resources are limited, concentrated
marketing is more sensible.
Product variability; undifferentiated marketing is more suitable
with uniform products but differentiated marketing is more
suited with products with varying design such as vehicles.
 Product life cycle stage; when a firm introduces a new product, only
one version may be launched and undifferentiated or concentrated
marketing may be more appropriate.
Market variability; if most buyers have the same tastes, buy the
same amounts and have other similar characteristics (react in the
same way to marketing effort), then undifferentiated marketing
makes more sense.
Competitor’s strategies; when competitors use segmentation, the
company should follow suit.
Market positioning
Consumers organize products into categories i.e. they
position products, services and companies in their minds.

Definition; A product positioning is the way the product is defined

by consumers on important attributes i.e. the place the product
occupies in consumer’s minds relative to competing products.
It is the complex set of perceptions, impressions and feelings
that consumers hold for the product in comparison with
competing products.
A marketer should therefore plan a position that gives the greatest
advantage to a product in its target market.
Positioning bases;
 Product attributes i.e. positioning based on a product’s low
price, performance, safety features etc.
 Benefits; based on the needs they satisfy or benefits they offer.
 Positioning directly against a competitor by comparing or away
from competitors by claiming that the product is different from
competitor’s products.
Steps in market positioning
1) Identifying competitive advantages
2) Selecting the right competitive advantage
3) Effectively communicating the chosen
position The steps are explained below;
1) Identifying competitive advantages.
 A competitive advantage is an advantage over competitors gained by
offering consumers greater value either through lower prices or by
providing more benefits that justify higher prices. This can be achieved
through various forms of differentiation.
Product differentiation; This is based on dimensions such as;
 Product features not provided by competitors (e.g. safety features
and design of Volvo).
 Product performance e.g. cleaner, faster etc.
 Style; such as the extra-ordinary look of the jaguar car, etc.
 Product durability, reliability etc.
Service differentiation; (delivery, installation, repair, etc) i.e.
differentiating the services that accompany a product- gaining
competitive advantage through speedy, reliable or careful
delivery. Personnel differentiation; gaining competitive advantage by
hiring and training better people than competitors and by having
customer- contact people who are competent in the following
areas;
- possess the required skills & knowledge
-courteous, friendly and considerate
-understand customers, communicate clearly with them and respond
quickly to customer requests and problems.
Image differentiation; even when companies offer the same
products and accompanying services, buyers may perceive a
difference based on company or brand images established through
a company’s public relations and social responsibility activities.
This is common in the service industry.
2) Selecting the right competitive advantage.
A company must decide how many differences to promote of its
product or brands. It may aggressively promote only one or a
combination of benefits to the target market. Each of the company’s
brands may promote itself as “number one” on an attribute such
as; Best price, best service, lowest price, best value, e.t.c.
A competitive advantage on which the company bases
its differentiation should have the following
characteristics;
-Important; the difference should deliver an important benefit to
target buyers. -Distinctive;
 competitors should not be offering the difference.
-Superior; the difference should be superior to other alternatives.
-Communicable.
-Pre-emptive; competitors should not be able to easily copy
the difference. -
Affordable; buyers should afford to pay the difference.
-Profitable.
3) Communicating and delivering the chosen position.
The company must deliver and communicate the desired position
to target consumers through the marketing mix. Hence a firm that
desires to position on high quality must produce high quality products,
charge a high price, distribute through high class dealers and
advertise in high quality media.

MARKETING RESEARCH
Definitions;
a. “It is the systematic gathering, recording, and analysis about
problems relating to marketing of goods and services”
b. “A systematic objective approach to the development and provision
of information for marketing decision making”
c. “A systematic problem analysis model for building and fact finding
for the purposes of improved decision making in the marketing of
goods and services”
d. “The thorough and objective gathering and analysis of data that
pertain to a given problem in marketing”
The definitions emphasize the following aspects that are vital for
anybody undertaking marketing research;
 Marketing research is a planned, well organized process. It does not
call for haphazard activities that are undertaken without much
planning.
 There has to be the motive of gathering unbiased data
from the interviewing process.
 The information gathered is for the purpose of helping
marketing managers make better decisions.
The purposes of Marketing Research (Aims and objectives)
a) To meet the customer’s needs and improve the business’ chances of
survival.
This is through providing customers with what they want, at the
right price and quality. It requires knowledge of;
 The number of customers.
 The amount they are willing to pay including their buying
habits and patterns of spending.
 What their needs, desires, expectations, likes and dislikes, attitudes
and prejudices are.
 How a firm can best inform, persuade and convince customers
to purchase its products.
 What motivates customers and what attracts them to particular
brands.
b) To research competitor’s products.
This is to enable a business to develop and market its products or
brands more successfully. It needs to find out;
 Whether competitors have similar products.
 What their prices are.
 How they will react to a firm’s strategy, e.g. cutting prices,
discounts, offers, e.t.c.
 How competitors produce, sell and distribute their products.
c) To provide information for better decision making
This is to assist in eliminating decisions made on guesswork
basis or feelings.
d) To estimate potential buying power
It assists in knowing the size of the probable market and
enables adequate preparation to meet demand.
e) To indicate the distribution methods best suited for the
product and market.
It helps to identify the best possible means through which the
product can be passed on to the consumers effectively.
f) To assess the probable volume of future sales.
 It assists in predicting how much the firm will be able to sell in
future making it possible to plan for production to ensure the
market is well supplied with goods and services.
g) To know customer’s acceptance of the product marketed.
The firm will be able to evaluate its acceptance and that of its
product in the market. This is to prevent unnecessary production of
goods that will not be bought and to enable the firm develop
strategies that will make it and its products popular amongst the
customers.
Marketing research is therefore a vehicle or a means through
which information on present and potential customers, their
reactions to present and prospective marketing mixes, the changing
character of the external environment and degree to which existing
marketing programs are achieving their goals.
Functions of marketing research
Marketing research functions include;
1. Market identification; This function stresses the need to identify
places where and people who have the potential to consume a
product. Market research enables a marketer to find or identify
the market.
2. Market size; Market research enables a marketer to find out the
size of a market. The marketer is able to gauge the market
potential through research.
3. Market share; The marketer will be able to compare the
consumers using his products with those using those of his
competitors.
4. Market segmentation; This is the division of the whole market into
distinct different groups. Marketing research enables effective market
segmentation as details about the market and sectors for
segmentation can be identified.
5. Market trends; Research can help in identifying the current
trends favoured by the market with a view of making the firm
adopt these trends.

Advantages of marketing research

 It discloses the position of the company in a specific industry
through identifying its market share.
 It indicates the present and future trends of the industry,
hence enabling the company to be proactive.
 It helps in the development and introduction of new products.
 It offers guidance for improving the current products of the
company. It helps in assessing and enhancing the effectiveness
of sales management strategy.
 It helps reduce the risks or loses involved in marketing as a
result of poor marketing decision making.
Elements of marketing research
These are the areas covered in marketing research.
1. Market research; It involves investigating the size and nature of
the market, segmenting the consumers (in terms of age, sex, and
income), market trends, market share and potential markets.
2. Sales research; This relates to the issues of regional variation in
sales, fixing sales territories, measuring of the effectiveness of a
sales person, evaluation of impact of sales methods and
incentives.
3. Product research; It investigates the strengths and weaknesses of
an existing product in the market and product testing problems
relating to diversification and innovation.
4. Packaging research; This is part of product research. It is however
isolated from product research by emphasizing on the most
appropriate and appealing package colour and design.
5. Advertising research; This studies the preparation of the
advertisement copy, media used (media research) and the
measurement of advertising effectiveness.
6. Business economics research; This investigates problems relating to
input-output analysis, forecasting, prices and profit analysis.
7. Export market research; This investigates the export potential of
the product.
Types of Research
1.) Quantitative research; This is where techniques and sample
sizes used lead to the collection of data that can be statistically
analyzed and whose results can be expressed numerically.
2.) Qualitative research; Deals with information that cannot be
quantified, i.e., subjective opinions and value judgments that cannot
be statistically analyzed.
3.) Ad hoc research; Refers to situations where the identified
research problem leads to a specific information requirement,
e.g., where a product is performing poorly hence calling for a
specific study which is not recurrent or permanent in nature.
4.) Continuous research; Is on a permanent, on-going basis
where information is collected on the problem, e.g., a
product’s life cycle performance.
Characteristics of a Good Marketing Research
1) It should be relevant i.e. it should fit and serve research problem
needs.
2) Should be accurate i.e. should be reliably collected and reported.
3) Should be current i.e. up to date enough for current decisions.
4) Should be impartial i.e. objectively collected and reported without
any bias.
5) The research must be efficient in cost in relation to the quality
of information to be obtained i.e. the study should be
expensive only when the decision is important and the
research information will be helpful and profitable.
6) Timely research; information is needed promptly to make decisions
and the failure to take corrective action or pursue an opportunity
as quickly as possible may result in loss of opportunity.
7) Ethical research; ethical conduct in research concerns the rights
and responsibilities of four parties; society, research client,
researcher, and the respondent.
The Marketing Research Process
Marketing research is undertaken to understand a marketing problem
better. A hospital wants to know whether people in its service
area have a positive attitude toward the hospital and its services.
A college wants to determine what kind of image it has among
high school counsellors. A political organization wants to find out
what voters think of the candidates.
Effective marketing research involves five major steps;
1. Defining the problem and research objectives,
2. Developing the research plan,
3. Collecting the information,
4. Analyzing the information,
5. Presenting the findings, conclusions and recommendations to
decision makers.
The Marketing research

Defining the developing the collecting the

analyzing the presenting the Problem and
research plan information information
findings.
Objectives
1 2 3
4 5

We will illustrate these steps with the following situation:

Kenya Airways, one of the most vibrant of Africa’s air carriers is
constantly looking for new ways to serve the needs of air
travellers. Management would like to offer some new service that
will give it a competitive advantage. Toward this end, a few
managers convened in a brainstorming session and generated a
number of ideas revolving around better food service, in-flight
entertainment, newspaper and magazine availability, and so on.
In other major airlines which offer in- flight telephone services
thirty thousand feet and plus above the earth, it is conceivable that
in such a brainstorming session, a manager came up with the idea
of offering such a service. The other managers got excited about
this service and agreed that it should be researched further. The
marketing manager who had suggested the idea volunteered to
do some preliminary research. He contacted a major
telecommunications company to find out the cost of providing this
service on a Jumbo jet flying from say, Europe to Africa. The
Telecommunications Company said that the service would cost
the airline about Kshs 60,000 a flight. The airline could break
even if it charged Kshs 1,500 per phone call and if at least forty
passengers made
 calls during the flight. The marketing manager then asked the
company’s research manager to find out how air travellers would
respond to this service.
Step 1; Defining the problem and research objectives.
The first step in research calls for the marketing manager and
marketing researcher to define the problem carefully and agree on
the research objectives. Unless the problem is well defined, the
cost of information gathering may exceed the value of the findings.
Management must weigh between defining the problem too
broadly and defining it too narrowly. The marketing manager and
the researcher agreed to define the problem as follows: Will
offering an in- flight phone service, create enough incremental
preference and profit for KQ to justify its cost against other
possible investments that Kenya Airways might make? Then they
agreed on the following research objectives:
a. What are the main reasons why airline passengers might place
phone
calls while flying instead of after landing?
b. What kinds of passengers would be the most likely to make phone
calls during a flight?
c. How many passengers on a typical long-distance B-747 flight are
likely to make phone calls, and how will this number be affected
by price. What would be the best price to charge?
d. How many extra passengers might choose the KQ flight because of
this new service?
e. How much long-term goodwill will this service add to Kenya
Airways’ image?
Not all research projects can be made this specific in its
objectives. Three types of research projects can be distinguished.
Some research is exploratory – that is to gather preliminary data to
shed light on the real nature of the problem and possibly suggest
some hypotheses or new ideas. Some research is descriptive –
that is to describe certain magnitudes, such as how many people
would make an in-flight call at Shs 1,500 a call. Some research is
causal- that is to test a cause- and- effect relationship, such as if
Shs 1,200 is charged as opposed to Shs 1,500 charge would
increase the number of phone calls by at least 20%.
 Step 2; Developing the research plan/design/methodology
The second stage of marketing research calls for developing the
most efficient plan for gathering the needed information. The
marketing manager needs a cost estimate of the research plan
before approving it. Designing a research requires decisions on the
data sources, research approaches, research instruments, sampling
plan and contact methods.
Data sources:
The research plan calls for gathering secondary data, primary data, or
both. Secondary data consists of information that already exists
somewhere, having been collected for other purposes. Primary data
consists of original information gathered for the specific purpose at
hand.
Secondary data:
Researchers usually start investigation by examining secondary
data to see whether their problem can partly or wholly be solved
without collecting costly primary data.
Secondary Data Sources
 Internal sources: these include company profit and loss
statements, balance sheets, sales figures, sales-call reports,
invoices, inventory records, and prior research reports.
 Government publications: statistical abstracts of the Kenya
government, usually updated annually, provide data on
demographic, economic, social, and other aspects of the Kenyan
economy, Kenya population census, etc.
 Periodicals and Books: marketing journals by Marketing Society of
Kenya, The Kenyan Advertiser, publications of The Kenya
Manufacturers Association, Central Bank of Kenya quarterly reports,
useful business
magazines like, Tuesday’s issues of the Daily Nation and the
E.A. Standard.
 Commercial data: some advertising companies provide information
regarding annual television coverage in Kenya. Other commercial
research houses like the Research International sell data to
willing buyers. Similar information can also be obtained from the
Audit Bureau of Circulation, the Auditor General, etc.
 In the Kenya airways case, the researchers will find plenty of
secondary data on the air travel market. The airline publishes in its
annual report data concerning the number of passengers carried in
any one year. In addition, information could be sourced from the
IATA. Similarly, various travel agents would provide data on the
type of tickets they have sold on behalf of the airline.
Advantages of secondary data
 It can be obtained more quickly and cheaply
 It provides information which a single company cannot collect on
its own because it would be too expensive and time
consuming. Disadvantages of secondary data
 The needed information may not exist.
 It may be out-of-date.
 It may be irrelevant.
Primary data
 This is information collected for the specific purpose at hand.
 It has the advantage of currency and relevance to a specific
research problem at hand; the disadvantage is that it is costly
and time- consuming.
Primary data collection methods/Research approaches.
They include;
 Focus groups/brainstorming
 Telephone surveys
 Mail surveys
 Personal interviews
1) Focus groups interviews; This is an exploratory research method
in which a researcher/ moderator leads 6-10 people in a focused, in-
depth discussion on a specific topic e.g. a product, service or
organization.
The interviewer focuses the group discussion on important
issues. The interview is best suited for examining new product
concepts, advertising themes and investigating the criteria
underlying purchase decisions.
Advantages
 Depth of information collected.
 Relatively low cost.
 Data is collected quickly.
Disadvantages
 Requires expert/trained moderator or interviewer.
 Questions arise of group size and acquaintanceships of
participants.
2) Telephone surveys; Respondent’s answers to a questionnaire
are recorded by interviewers on the phone.
Advantages
 The rate of response is higher.
 It is quicker.
 Interviewer can explain questions that are not understood.
 Can cover a large geographical area.
Disadvantages
 They are limited to oral communication.
 The cost per respondent is higher than mail survey.
 Interviewer bias is higher.
3) Mail surveys; Questions are sent by mail or e-mail to
respondents who are encouraged to complete and return.

Advantages
 Can cover a wide geographical area.
 Is the least expensive method.
 No interviewer bias.
Disadvantages
 Low response rate.
 Lack of control of who actually answers the questionnaire.
4) Personal interviews; This involves one-on-one interactions
between a respondent and researcher in which the researcher
poses questions to the respondent about specific topic e.g. a
consumer’s views about a product in detail.
Advantages
 High response rate.
 Audio-visual aids e.g. pictures; products can be incorporated in
the interview.
 It is more flexible.
Disadvantages
 It is costly
 Inability to cover a wide area.
 Subject to interviewer bias
5) Experimental research; It is the most scientifically valid
research. Its purpose is to capture the cause-and-effect relationship
by eliminating the competing explanations of the observed
findings. It calls for selecting matched groups of subjects,
subjecting them to different treatments, controlling non-essential
variables and checking whether observed response differences
are statistically significant.
An experiment is a type of investigation used to determine
whether and in what manner variables are related to each other.
Experimental designs are those which allow for manipulation of
independent variable(s) and subsequent assignment of its or their
impact, if any, on the dependant variable of interest. E.g. the
impact of change in price (independent variable) on sales
(dependent variable), and whether price is the only variable that
affects sales
c) Research instruments
Market researchers have a choice of two main research instruments
in collecting primary data: questionnaires and mechanical
devices.
 Questionnaires:
A questionnaire consists of a set of questions presented to
respondents for their answers. Because of its flexibility, the
questionnaire is the far most common instrument used to collect
primary data..
In preparing a questionnaire, a professional marketing
researcher carefully chooses the questions and their form, wording
and sequence. The form of the question asked can influence the
response. Marketing researchers distinguish between close-
ended and open-ended questions. Close-ended questions pre-
specify all the possible answers. Open-end questions allow
respondents to answer in their own words. Close end questions
provide answers that are easy to interpreted and tabulate. Open-end
questions often reveal more because they do not
 hinder respondents’ answers. Open-end questions are especially
useful in exploratory research, where the research is looking for
insight into how people think rather than in measuring how many
people think in a certain way.
Finally the questionnaire designer should exercise care in wording and
sequencing of questions. The questionnaire should use simple, direct
unbiased wording and should be tested with a sample of respondents
before it is used. The lead question should try and create interest
and the questions should flow in a logical order.
 Mechanical instruments:
 Galvanometers measure the interest or emotions aroused by
exposure to a specific advert or picture.
 An audiometer is attached to the television sets in participating
homes to record when the set is on and to which channel it is
tuned.
 Traffic counters may be used to count the number of people that
use a library, restaurant, supermarket or the number of vehicles
using a road.
 Video cameras can be installed to make observations instead of
human beings.
Step 3; Collecting the information
It’s usually impossible for marketing managers to collect all the
information they want about everyone in a population- the total
group they are interested in. Marketing researchers typically
study only a sample, a part of the relevant population. How well a
sample represents the total population affects the results.
Results from a sample that is not representative may not give a
true picture.
Example;
The manager of a retail store might want to make a phone survey
to learn what consumers think about the store’s open hours. The
sample
will not be representative because consumers who do not have
phones won’t have an equal chance of being included in the
survey. Those interviewed might say the limited store hours are
“satisfactory”, yet it would be a mistake to assume that all
consumers are satisfied.
Marketing managers must be aware of how representative a
sample really is.
Basic concepts
 A sample; it is a subset of the population of interest which is
used for making inferences about the whole population.
 Population; the entire group under study as defined by the
research objectives.
 Sampling unit; refers to the basic unit as defined by the
research objectives e.g. consumers, teens, store
managers.
 Census; an accounting of the complete population.
 Sampling frame; a master list of the entire population.
Reasons for sampling
a. Cost; i.e. the cost of interviewing a sample is lower than
that of interviewing the entire population.
b. Time/speed; i.e. decision makers have a timeframe in which to
make a decision based on whatever information can be obtained in
that period.
c. Accuracy; more accurate and truthful information can be obtained
from a sample than the entire population because of more in-depth,
detailed interviews.
d. When the whole population is not available for study.
The sampling process
1. Defining the universe/population i.e. the target population from
which data is to be drawn.
2. Establishing the sampling frame; the frame is a list of all the
elements in the population from which a sample may be drawn
e.g. a telephone directory, club membership, student enrolment
list, etc.
3. Determining the sampling method/procedure. This step specifies
the method under which the sample elements are to be
selected. A decision is made on whether to use probability or
non-probability sampling techniques.
4. Determining the appropriate sampling size. This is determined by
the funds and time available, extent of homogeneity of the
population, etc. Sample size determination
The size of the sample will depend on;
1. Nature of the research i.e. whether exploratory or
 descriptive. Exploratory research may use a small
sample size.
2. Statistical analysis to use i.e. if computers are available, a large
sample can be selected.
3. Mode of data collection e.g. for mail surveys, the sample needs to
be larger due to low response rate.
4. Number of traits to be measured. If they are many, a large
sample is used.
5. Budgetary considerations-money and time.
6. Population characteristics; if homogenous, a smaller sample may
be used.
7. Population size; if small and manageable, then do a census
instead of sampling.
Sampling error is the difference between the sample result and
the result of a census conducted using similar procedures. As
sample size increases, sampling error decreases.
Step 4; Data analysis and interpretation
Data refers to a collection of facts and figures relating to a
particular activity under study. The process of data analysis includes
data sorting, data editing, data coding, data cleaning, processing and
interpretation of the results.
1. Data sorting; Involves the rearrangement of the collected data to
bring about order allowing systematic handling and storing of raw
data.
2. Editing; Is the process of ascertaining that questionnaires were
filled out properly and completely. It’s purpose is for detecting and
correcting errors. Attention is paid to the following;
 Missing data-which could result from failure by the interviewer to
ask some questions or failure by a respondent to answer the
questionnaire.
 Consistency in responses.
 Illegible responses.
3. Coding; Is the process of assigning numerical scores to the
various responses to questions. It allows transfer of data from
the questionnaire to the computer. The codes must allow easy
interpretation of results. E.g. ‘how do you rank the performance
of our product?’
Responses; 1. Excellent 2. Very good 3. Good 4.Fairly good 5.
Fair 6. Bad
4. Data entry; Refers to the process of physically entering numeric
values into the computer. Data entry requires a high degree of
keenness in order to get representative and relevant results at
the end.
5. Cleaning of data; Involves conducting a final check on a data
file for accuracy, erroneous data, completeness and consistency.
This final check of the data is necessary to avoid having to
come back to the original questionnaire or raw data to correct
the errors.
6. Data processing; It involves the proper selection of the analytic
procedure to be used, selection of the final versions of the
variables to be used, making decisions about what statistics are
to be calculated (mean, mode etc.) and submitting the data to
the computer for processing.
7. Interpretation of results; This involves deriving some
understanding from the output data relative to the subject
matter of the research, and, based on the derived
understanding, make conclusions.
This stage involves extracting pertinent information from the collected
data. The researcher tabulates the data and develops frequency
distributions. Averages and measures of dispersion are computed for
major variables.
Step 5; Writing a report on Research Findings, Conclusions and
Recommendations
The researcher should write a report making conclusions on the
results. Recommendations should then be made based on
conclusions which should be based on research findings.
Conclusions should focus on answering research objectives and
each research objective should have a conclusion and
recommendation. The researcher must translate the results into a
language that makes sense to management. The researcher
should remember that the study is only useful if it helps in solving
the initial research problem.
Marketing Information Systems (MkIS)
A market information system (MkIS) is an ongoing, future oriented
structure designed to generate, process, store and later retrieve
information to assist in decision making in an organization’s marketing
program. It must include all facts, estimate opinions and other
information used in the marketing of goods.
 A marketing information system will resemble a military or
diplomatic intelligence operation that gathers, processes, and stores
potentially useful information that exists in open and available
form from several locations inside and outside the company.
Practices of industrial
espionage and the employment of competitors’ personnel to learn
their secrets need not be employed to learn about one’s
competitors. The gathering of this information can be done in a
socially acceptable manner if the firm establishes a Marketing
Information System. Hence MkIS involves:-
 Determines what data is needed for decision making.
A firm may require data on; Sales, prices, market demand, sources of
input, government regulations on their activities etc. All these pieces of
information may not be necessary to a company at all times and
the choice of information that will aid in arriving at a particular
decision need to be made.
 Where the information will be gathered;
Information will have various sources. These sources will include both
internal and external means. These include quotations, receipts,
vouchers etc. as the internal source and newspapers, magazines,
libraries, the national Archives etc. as the external sources. The
information is gathered in a scientific manner that constitutes
marketing research.
 Processing the information;
The information once gathered has to be analyzed to make more
meaningful pieces of data. There are various statistical and other
methods employed in the processing of data. However, whichever the
system, the contribution of computers in processing this data cannot
be appreciated enough. Modern MkIS is not possible without a
computer due to the masses of data being handled.
 Providing for storage and future retrieval of data;
The data gathered needs to be stored for future reference. This
saves the marketer the cost of carrying out similar researches to
collect the same information previously obtained. The most common
and maybe the best storage and retrieval equipment is a
computer. Computers hence become necessary equipments for
market intelligence.
 Need for a marketing information system.
Many environmental forces necessitate the management of marketing
information by every firm serious with competing effectively in the
present marketing system. These forces include;
 Short time span for executive decision making;
Product life cycles are now shorter than they were previously.
Firms now also need to develop new products and market new
products more quickly than ever before.
 Complexity and broadness of the current marketing activity;
Markets are expanding to world markets through
multinational corporations set up by companies. This implies
that a company will
have branches in foreign countries. This complicates the behavioural
data that is needed to enable the marketer succeed in his endeavours.
 Shortage of energy and other production resources;
The firm needs to identify products that it can sell economically. Those
that will lead to resource wastage could be eliminated. The firm
also needs to ensure better use of its resources and manpower.
 Increased consumer discontent;
The firm needs to know the performance of its products in the
market. Satisfaction of the consumer should be its prime
objective. It has to have a means of telling when its products do
not meet the expectations of consumers, and make the necessary
changes to make the consumers accommodate it.
 Information explosion;
 There is actually an excess supply of information. What needs to
be done is to find out what to do with it i.e. how to manage it.
Computers and other data processing equipments have made this
easier and less expensive. A lot of information can now be
obtained from the internet through computers.
Benefits and uses of an MkIS
 From its day-to-day operations, an organization will gather a lot of
information. The company has to develop a system to retrieve
and process this information. Without this system, information flowing
from these sources is frequently lost, distorted or delayed.
 A well designed MkIS can provide a fast, less expensive and
more complete information flow for management decision
making.
 The storage and retrieval capability of an MkIS allows a wider variety
of data to be collected and used. Managers can continually
monitor the performance of their products, markets, sales people
and other marketing units in greater details.
 Marketing information links the producers with the customers. It
is the system that is put in place to co-ordinate and re-unites the
producers and the customers. It narrows down the area of
uncertainty and the risks attached to the marketing of products.
Relationship between Marketing Information Systems and Marketing
Research
Marketing research is the thorough and objective gathering
and analysis of data that pertains to a given problem in
marketing.
Marketing research is about 40 years older than marketing
information systems which was developed in the 1960’s. The two
are often seen by many people as being one and the same thing.
Others see the two as distinct functional entities, related only to
the extent that they deal with the management of information. The
contrasting characteristics between marketing research and
marketing information systems are given below;
Marketing research Marketing Information
Systems
-Emphasizes the handling of -Handles both internal and
external external data
information -Concerned with
)-Is concerned with solving problems preventing as well as
-Operates in a fragmented, solving problems
intermittent fashion on a project- -Operates continuously-is a
to- project basis system
)-Tends to focus on past -Tends to be future oriented
information -Is a computer based
-Needs not be computer based process
-Is one source of information -Includes other systems
input for a Marketing Information besides marketing research.
System
Components of an MkIS
 Consists of three major components;
a) Internal records
b) Marketing research
c) Marketing intelligence
Internal records include quotations, receipts, vouchers, and
financial statements.
The marketing intelligence sub-system supplies marketing decision
makers with everyday information about developments in the internal
marketing environment. Such information may be collected from
customers, suppliers, intermediaries, competitors, and by monitoring
the P.E.S.T. variables.

CONSUMER BEHAVIOUR-CUSTOMER ANALYSIS

It is a segment or part of human behaviour. Human behaviour
refers to the total process whereby the individual interacts with
the environment. Every thought, feeling, or action that we have
as individuals is part of human behaviour.
Consumer behaviour refers to the behavioural dimensions and
related activities of persons involved specifically in buying and using
products. It includes both mental decisions and physical actions that
result from these decisions.
Importance;
It seeks to understand the consumer buying decision process and to
answer the following questions;
 Who makes the market?
 Who do they buy from?
 What does the market buy?
 When do consumers buy?
 Why do they buy?
 How do they buy?
The marketer wants to know how consumers respond to various
marketing strategy the company might use. It helps the firm to
find better ways to satisfy consumers through creating a suitable
marketing mix that will meet customer’s needs and requirements
better than competitors.
Participants in the buying process (The D.M.U.-Decision Making Unit)
The marketer needs to know which people are involved in the
buying decision. People might play any of several roles in the
buying decision process;
 Initiator: the person who first suggests or thinks of an idea of
buying a particular product or service i.e. who initiates the
buying decision.
 Influencer: a person whose views or advices carries some weight
in making the final decision.
 Decider: is the one who ultimately makes a buying decision or any
part of it, i.e. whether to buy, what to buy, where to buy. One or
more people may be a decider.
 Buyer: the person who makes the actual purchase.
 User: the person who uses or consumes the product.
A company needs to identify who occupies these roles because they
affect product design, promotion, and other marketing strategy.
The Buyer Decision Process
It is made up of the following five steps;

1) Problem recognition; It is the stage when the individual

recognizes a need or problem to be satisfied or solved.
The need can be triggered by either an internal stimulus (hunger,
thirst, or sex), or external stimulus (bread, car, or ad)
 Marketing strategy; The marketer should identify circumstances
that trigger a particular need, and then develop marketing
strategies that trigger consumer interest in his product.
2) Information research; Of key interest to the marketer are the
major information sources:
 Personal source- family neighbours, acquaintances
 Commercial sources- sales persons, dealers , packaging displays
 Public sources- mass media, consumer-rating organizations
 Experiential sources- handling, examining, or using the product
The relative amount and influence of these information sources
vary with the product category and buyer’s characteristics.
Marketing strategy
 To get the brand into the prospect’s awareness set
through promotional activities.
 The company should identify the consumer’s information sources
and evaluate their relative importance.
3) Evaluation of alternatives; The consumer develops a set of
brand beliefs about a brand, which make up the brand
image.
The brand image will vary with his/her experiences as filtered by the
effects of selective perception, selective distortion and selective
retention. The consumer may evaluate brands on the basis of price,
product design, colour, packaging, after-sales service, etc.
Marketing strategy
 Redesign the product
 Alter beliefs about the brand- psychological repositioning
 Alter beliefs about competitor brands-competitive positioning
4) Purchase decision; Having evaluated various solutions, the buyer
may develop a predisposition to make a purchase.
However, two factors can intervene between the purchase
intention and the purchase decision that may change the purchase
intention, e.g.
 The attitude of others
 Unanticipated situational factors
In executing a purchase intention, the consumer may take up to five
purchase sub-decisions;
 A brand decision (brand A)
 Vendor decision (dealer 2)
 Quantity decision (1 computer)
 Timing decision (weekend)
 Payment method decision (cash/credit)
Marketing strategy; Marketers should provide information
to customers to reduce perceived risk of buying a brand.
5) Post purchase behaviour; The consumer will experience some level
of satisfaction or dissatisfaction.
Buyers do not follow the general decision sequence at all times. The
procedure may vary depending upon;
 The time available
 Levels of perceived risk
 The degree of involvement a buyer has with a product.
Marketers should provide after sales service and support to
assure customer satisfaction.
Involvement
Involvement may be in terms of relevance and importance and is
of two types;
a) High involvement; This occurs when a consumer perceives an
expected purchase which is not only of high personal relevance
but also represents a high level of perceived risk. Cars, washing
machines, houses and insurance policies fall in this category.
b)Low involvement; This suggests little threat or risk to the
consumer. Low priced items such as washing soap, cooking oil,
and breakfast products are bought frequently, and past
experience of the product class and the brand cues the consumer
into a purchase that require little information or support.
Types of consumer problem solving behaviour
Consumer decision-making varies with the type of buying
decision. More complex decisions are likely to involve more buying
participants and more buyer deliberations. There are three types
of consumer problem-solving behaviour:
1) Routine response behaviour; This occurs when consumers buy low
cost, frequently purchased items. The buyers have very few
decisions to
 make. They know a lot about the product class and the major brands
available and they have fairly clear preference among the brands. In
general, consumers do not give much thought, search or time to
the purchase. Marketers must satisfy current consumers by
maintaining sufficient quality service and value. They must also try to
attract new buyers by introducing new features and using point of
purchase displays and price deals.
2) Limited problem solving; Buying is more complex when buyers
confront an unfamiliar brand in a familiar product class (e.g. a
new brand of radio or toothpaste). E.g. people thinking about
buying new music equipment may be shown a new brand with a
new shape and new features. They may ask questions and watch
adverts to learn more about the new brand. This is described as
limited problem-solving because buyers are fully aware of the
product class but are not familiar with all the brands available and
their features.
3) Extensive problem solving; Sometimes buyers face complex buying
decisions for more expensive, less frequently purchased products in
a less familiar product class. For these products buyers do not often
know what brands are available and what factors to consider in
choosing between brands. E.g. suppose you want to buy an
expensive stereo component system, you would probably spend
time visiting several shops collecting information and comparing
various brands before making the final decision.
Types of consumer buying behaviour
From the understanding of general decision making process,
perceived risk and involvement theory, it is possible to identify
the following buying behaviours;

High involvement Low

involvement
 Significant difference omplex buying variety

c seeking buying
between brands behaviour
behaviour

Few differences dissonance reducing habitual

buying
between brands buying behaviour behaviour

1) Complex buying behaviour; It involves three- step process;

 The buyer develops beliefs about a product,
 Then develops attitude,
 Then makes thoughtful choice
Consumers are highly involved in a purchase and are
aware of significant differences among brands.
Products are highly expensive, bought infrequently, risky and
highly self-expressive e.g. automobiles.
Marketing strategy
 Understanding consumers’ information gathering and
evaluation behaviour
 Assist buyers in learning about the product’s attributes and
their relative importance through salespeople, sales
literature, etc.
 Differentiate the brand’s features- use print media to describe
the brand’s benefits.
 Motivate sales personnel and the buyer’s acquaintances to
influence the final brand choice.
2) Dissonance-reducing buyer behaviour; where the consumer is
highly involved in a purchase but sees little difference in
brands.
Purchase is expensive, infrequent and risky.
If the consumer finds quality differences in the brands, he might
go for the higher price.
If he finds little difference, he might buy simply on
price or convenience.
 Marketing strategy involved;
 Use of price and sales promotions to stimulate product trial
 Television advertising is more effective than print as it involves
passive learning.
3) Habitual buying behaviour; Is characteristic with low involvement
and the absence of significant brand differences
Common with low cost, frequently purchased products e.g. salt
Consumers reach for the same brand out of habit but there is no
strong brand loyalty.
Marketing strategy
 Use repetitive advertising to create brand familiarity.
 Effective use of price and sales promotions to stimulate product
trial.
4) Variety seeking behaviour; Low involvement but significant
brand differences
A lot of brand switching
Marketing strategy
 Encouraging habitual brand behaviour by dominating shelf-
space, avoiding out-of-stock conditions and frequent reminder
advertising.
 Encourage variety seeking by offering lower prices, deals, coupons,
free samples, and advertising.
 Marketers must monitor post-purchase satisfaction, post
purchase actions and post purchase product use.
 Marketing communication should reinforce past decisions by
stressing the positive features of the product or by providing
more information to assist its use and application.
 Organizational/ Industrial Buyer Behaviour
Businesses ask themselves the same questions as consumer
marketers
i.e. who are our buyers and what are their needs. How do buyers
make their buying decisions and what factors influence these
decisions? What marketing programs will be most effective?
Definition: industrial buying is the decision making process by
which formal organizations establish the need to purchase
products and identify, evaluate and choose among alternative brands
and suppliers. Types of organizational markets;
1) The industrial market; It consists of all organizations acquiring
goods
and services that enter into the production of other goods and services
that are sold or supplied to others. It is the largest organizational
market.
2) Reseller market; It consists of all individuals and organizations
that acquire goods for the purpose of reselling them to others
for a profit. Resellers buy products for resale and for conducting
their operations
e.g. wholesalers.
3) Government market; It consists of government units from
central and local government that purchase or rent goods and
services for carrying out their main functions.
4) The institutional market; It is made up of hotels, hospitals,
schools, colleges and other institutions that also buy goods and
services. Differences between Organizational and Consumer
markets
In some ways organizational markets are similar to consumer
markets- both involve people who assume buying roles and make
purchase decisions to satisfy needs.
But there are differences stemming from market structure,
demand, product characteristics, promotion, distribution channels,
price, nature of buying unit, and the decision process.
1. Market characteristics
(a) Size: usually industrial consumers are few in number but
 purchase larger volumes on a repeat basis.
(b) Geographic concentration: industrial consumers tend
to concentrate in specific areas especially urban areas.
(c) Competition: industrial organizations are more directly involved
in international purchasing.
2. Product characteristics; In industrial markets products are purchased
as component parts of other products. More emphasis is given to
the technical aspect of the product. Purchases of industrial
products are usually governed by customer specifications.
3. Buyer characteristics; Typical consumer buyers have little knowledge
of the product they purchase as contrasted with industrial buyers who
are professionally and technically trained. Many industrial
purchases involve large sums of money; technically complex
products and decisions to purchase take longer and involve
several people.
4. Reciprocity; Industrial buyers often select suppliers who may also
buy from them e.g. a paper company that buys needed
chemicals from a chemical company that in turn buy’s the
company’s paper.
5. Channel characteristics; In industrial markets, channels are direct
where buyers often buy from producers rather than through
middlemen.
6. Promotional characteristics; Personal selling is the dominant mode
of promotion in industrial markets and advertising may only be used
to lay a foundation for personal selling. Sales people act as
consultants.
7. Price; Generally in industrial buying, price takes less
prominence. Factors of interest are quality, product
consistency, certainty and timeless of delivery, service and
technical support.
8. Demand; Demand for industrial products is derived demand. It
ultimately comes from demand for consumer goods. A cloth
manufacturer buys cotton because consumers buy cloth. If
consumers demand for cloths declines, so will the demand for
cotton and all other products used to make cloth.
The demand is also inelastic in organizational markets i.e. total
demand is not much affected by price changes especially in the
short-run e.g. a drop in the price of leather will not cause shoe
manufacturers to buy more leather unless it results in lower shoe
prices that in turn would increase customer demand for shoes.
Participants in the industrial buying process- The buying centre
 This is the group of people who make the buying decision. The group
consists of all people who influence, whether positive or negative, at
one or more stages of the purchasing process. The Decision
Making Unit (D.M.U) has people playing the following roles;
1. The gate keeper: he controls the flow of information, ideas and
instructions. Such roles may be played by the receptionist/secretary
who controls the buying organization’s diary. A gate keeper could
also be a specialist who can feed relevant information to the rest
of the D.M.U.
2. Influencers: are people such as engineers, accountants or the board
of directors. They help define product specifications and provide
information for evaluating alternatives. Technical personnel are
particularly important influencers.
3. Users: are members of the organization who will use the
product. In many cases they initiate the buying proposal and help
define product specifications.
4. Buyers: they are people with formal authority to select the supplier
and arrange terms of purchase. They negotiate with the selected
supplier on issues such as price, delivery time, mode of delivery,
etc.
5. Deciders: are people who have formal or informal power to select
or approve the final suppliers. In routine or straight buying, the
buyers are often the deciders.
The buying centre concept presents a challenge to the
industrial marketer who must learn the following;
 Who is involved in the decision?
 What decisions do they make?
 What is their relative degree of influence?
 What evaluative criteria does each participant use?
Only when the above questions have been answered can the supplier
plan the campaign to inform the key persons within the D.M.U. A
multi- faceted attack may be necessary, involving direct mail,
personal contact, as well as the use of advertising.
Industrial Buying Situations (classes)
1. Straight re-buy; it is where the buyer knows his own requirements
and the products on offer. The items tend to be regular
purchases and the
 process is in most cases repeated frequently. A buyer would most
likely purchase from the same supplier and it is often hard for
another supplier to break into such a market.
2. Modified re-buy; in this category would fall the purchase of either
a new product from an existing or known supplier, or the
purchase of an existing product from a new supplier. It usually
involves more decision participants.
3. New task; involves the purchase of new unfamiliar products from
previously unknown suppliers. In this situation the buyer must obtain
a lot of information about alternative products and suppliers. He
must determine the following;
Product specifications, price limits, delivery times and terms,
service terms, payment terms, order quantities, etc.
The buyer makes the fewest decisions in the straight re-buy and most
in the new task situation. The new task situation is the marketer’s
greatest opportunity. He tries to reach as many people with key
buying influences as possible, and providing useful product
information.
Industrial Buyer Decision Making Process
In the industrial buyer decision making process, buyers facing a
new task buyer situation will usually go through all stages of the
buying process and those making straight or modified re-buys may
skip some of the stages. They are;

Problem General Product Supplier Proposal

need
Supplier Order routine Performance
Recognition description specification search solicitation
selection specification review

1. Problem recognition; The process begins when someone in the

firm recognizes a problem or need that can be solved by acquiring a
specific product. The company may decide to launch a new
product and need new equipment and materials to produce it or
a machine may break down and need new parts etc.
2. General need description; This is description of the general
characteristics and quantity of the needed item. Emphasis here is
on reliability, durability, price and other attributes desired in the
item.
3. Product specification; The item’s product specifications are
analyzed and the purchasing team (D.M.U.) decides on the best
product characteristics and specify them accordingly.
4. Supplier search; This is carried out to find the best suppliers.
Some suppliers may not be considered because they are not large
enough to supply the needed quantity or because they have poor
reputation. The supplier’s task is to get listed in major directories
and build reputation in the marketplace. Salespeople should
watch for companies in the process of searching for suppliers and
ensure their firm is considered.
5. Proposal solicitation; The buyer invites qualified suppliers to
submit proposals. When the item is complex or expensive, the
buyer will need detailed written proposals from each potential
supplier.
6. Supplier selection; The buying centre (D.M.U.) reviews the
proposals and selects a supplier. They will consider the technical
competence of various suppliers, their ability to deliver the item
on time and also deliver the necessary services. The following
attributes have a strong influence on the relationship between the
supplier and customer; Quality of products, on time delivery,
competitive prices, and delivery terms.
7. Order routine specification; This involves preparing the final order
with the chosen supplier, listing the technical specifications,
quantity needed, expected time of delivery, e.t.c.
8. Performance review; Here the buyer reviews the performance of
the supplier. The buyer may retain, modify, or drop the supplier
in future hence the supplier should ensure that he is giving the
expected satisfaction.

Personal Determinants of Consumer Behaviour

These are needs, motivation, perception, learning, beliefs,
 and attitudes.
1. Needs and Motivation
 A motive is a need that is sufficiently pressing to drive a person to
act.
 Needs are either physiological-(hunger, thirst, comfort),
or psychological-(recognition, self-esteem, etc.).
 Marketers study motivation theories for consumer analysis
and marketing strategy. Three of the best known theories are
those of Sigmund Freud, Abraham Maslow and Fredrick
Herzberg.
Freud’s theory
2. Assumes that the psychological forces shaping people’s behaviour
are largely unconscious, and that a person cannot fully understand
his/her own motivation.
3. When a person examines specific brands, he/she will react not only
to their stated capabilities, but also to other less conscious cues.
4. Shape, size, weight, colour and brand can all trigger certain
associations and emotions in the consumer.
5. Motivation researchers often collect “in-depth interviews” to
uncover deeper motives that trigger the purchase of a product.
Maslow’s theory
 Sought to explain why people are driven by particular needs
at particular times. He states that human needs are
arranged in a hierarchy, from the most pressing to the
least pressing.
 In order of importance, they are physiological needs, safety
needs, social needs, esteem needs and self- actualization.
A person will try to satisfy their most important needs first, after
which he will then try to satisfy the next higher need.
The theory helps marketers to understand how various products fit
into the plans, goals, and lives of consumers.
Herzberg’s theory
He developed a two- factor theory that distinguishes dissatisfiers
(factors that cause dissatisfaction) and
satisfiers (factors that cause satisfaction).Satisfiers must be actively
present to motivate a purchase.
The implications are that sellers must do their best to avoid
dissatisfiers
e.g. poor instructions manual.
The manufacturers should identify the major satisfiers and motivators
and supply them to buyers.
2. Perception
 Perception is a process by which an individual selects, organizes
and interprets stimuli into a meaningful, coherent image or
picture of the world.
A motivated person is ready to act and how he acts is influenced
by his or her perception of the situation.
Two people in the same motivated state and objective situation may
act quite differently because they perceive the situation differently.
People can emerge with different perceptions of the same
object because of three perceptual processes: selective attention,
selective distortion, and selective retention.
3. Learning
Learning can be defined as ‘a relatively permanent change in
behaviour that occurs as a result of experience or reinforced
practice’.
Most human behaviour is learned.
Two main approaches to learning
are:
 Behavioural-association, reinforcement and motivation.
 Cognitive-processing information in order that problems can
be resolved.
Learning theory teaches marketers that they can build up demand
for a product by associating it with strong drives, using motivating
cues, and reinforcement.
4. Personality
Personality is, essentially, concerned with the inner properties of
each individual, those characteristics that differentiate each of
us.
Freudian theory of personality; psychoanalytic theory
It assumes that the needs which motivate human behaviour are
driven by primary instincts- life and death. The life instincts are
considered to be predominantly sexual in nature, whereas the
death instincts are believed to be manifested through self-
destructive and/or aggressive behaviour.
The personality of an individual is assumed to have developed in
an attempt to gratify these needs, and consists of the id
(pleasure seeking), super ego (acts within the rule of the
society) and ego.
 Trait theory
Traits are distinguishing, relatively enduring ways in which one
individual differs from another. Personality is measured and quantified
e.g. the degree of assertiveness, responsiveness to change or
level of sociability.
Marketers identify specific traits and then develop consumer
profiles which enable a distinct market segment to be
determined.
For example, Aspirers seek status and self- esteem (materialism)
and are targeted with products which act as symbols of
achievement e.g. designer clothes, latest hi-fi etc.
Consumers are likely to choose brands whose personalities match
their own. For example; Tommy Hilfiger-‘youthfulness’, Levi’s-
‘ruggedness’ Brand personalities can attract consumers with the
same self-concept (how somebody views himself).
5. Beliefs and attitudes
An attitude is a learned predisposition to behave in a consistently
favourable or unfavourable way with respect to a given object.
Through doing and learning, people acquire beliefs and attitudes.
Attitudes relevant to purchase behaviour are formed as a result of
direct experience with the product, word of mouth information
acquired from others, or exposure to mass media advertising.
A company can fit its products into existing attitudes rather than
trying to changing them.
Attitude change strategies include:
 Changing the consumer’s basic motivational function, i.e.,
making particular needs prominent.
 Associating the product with an admired group or event e.g.
social support events, celebrities, e.t.c.
 Resolving two ‘conflicting attitudes’ e.g. moving from negative
to positive.
 Altering components of a multi –attribute product e.g.
toothpaste (regular and herbal, etc.).
 Changing consumer belief about competitors’ brands.
External Determinants of Consumer Behaviour
 Consumers are social and cultural human beings. Their
behaviour is affected by the social setting they find
themselves in as well as the cultural practices of the
community they live in.
1) Culture.
It refers to the ways of life of a people. It is the learned
behaviour and results of behaviour whose component elements
are shared and transmitted by members of a particular society.
Culture is learned through patterned instructions from parents,
teachers, and society in general.
Culture describes the prescribed acceptable behaviours and norms
of a society.
Marketers who wish to avoid costly mistakes must be familiar
with the culture of the people they wish to sell to.
2) Social classes
This is the division of the society into groups. It is also known as
social stratification. Social functions have to be performed by a
society for it to survive. Some of these functions have a higher value
than the others, and are therefore of a higher status. Status
systems in the world are based on considerations such as age, sex,
occupation, economic and political station.
A social class is an open aggregate of people with a similar social
ranking. It is open since people can move in and out of the group.
Mobility may take the form of education, occupation, talent, marriage,
etc. Within a social class, people will to a certain extent have the
same patterns of behaviour, similar attitudes, values, possessions,
etc.
Characteristics of social classes;
People within the same social class exhibit similar behaviour.
People are ranked as occupying an inferior or superior social
position according to their social class.
A social class is not indicated by any single variable, but is as a
result of the weighed function of an individual’s occupation, place of
residence, wealth, education, values, e.t.c.
The marketer has to identify the class differences due to the
following reasons;
 Each class will have certain products that appeal to them and
others that do not appeal to them. The marketer has to
concentrate their marketing effort on specific social classes.
 In the same social class, there may be individual tastes that the
marketer needs to take into consideration. The kind and quality
of the product selected may vary from one consumer to another.
 Difference in classes may also show in marketing areas the
consumers frequent. Certain classes may have a preference for a
given shop, club, restaurant etc.
 The media habits of different classes will also differ. Some members
of a class may read different newspapers and listen to different
programs or watch different stations on T.V.

3) Reference groups
Are groups that serve as a model for an individual’s behaviour and
as a frame of reference for decision making.
Types of reference groups include:-
Primary groups: - these are groups that are small and very close
to the consumer. The consumer has direct contact with group
members and often has face-to-face communication with them.
They include the family, co-workers and those one spends his
leisure time with.
Secondary groups: - are larger and less intimate than the primary
group. The consumer contact with this group may not be as frequent
as those of the primary groups. They include religious
organizations, professional organizations, etc.
Rationale groups; - these are membership groups that a person
may join. They engage in activities which interest the consumer to
express his idea, be guided and influenced in the type of goods
consumed. They include YMCA, YWCA, scouting movement, etc.
The reference group has norms that the members abide by. These
norms promote conformity within the reference group. A reference
group may influence the decision to buy in two ways;
 Being a member of a group, a person may buy a product or
service since all those in the group have done so.
 A person may buy a product or service for the reason of
wanting to belong to or be associated with the group.
 Some products can be sold by appealing them to a reference group.
The consumer will use others as a point of reference;
 If he lacks specific experience in the purchase or use of a
product, service or idea.
 When available sources of marketing information are judged as
biased or inadequate.
 When the outcome of a consumer’s decision is highly visible
and therefore open to disapproval from others.
 When the products are in high risk category e.g. are expensive.
4) Role of Opinion leaders
These are the pace setters or trend setters. They are the
people who will first venture into sampling a new product before
the others. They would then give information to the others
before they commit themselves to buy the product or service.
The opinion leaders or the pace setters are respected and serve
as a source of advice to the rest. Characteristics of opinion
leaders are;
 They are more interested and better read in areas they influence.
 They are more self confident and sociable.
 They are slightly more innovative i.e., they take risks but cautiously
so. The word of mouth becomes an important tool for the spread
of information here. The opinion leaders are the first to receive
advertising messages and then pass them on to the others.
Marketers should identify the opinion leaders first and focus
information on them so that they can then influence others.
5) The Family
This has the most important influence on an individual. The family
structure suggests that we are all members of two families;
 The family of orientation; this is where we are born into.
 The family of procreation; established through marriage.
This results in a nuclear family consisting of parents and children living
together and also an extended family, including aunts, uncles,
grandparents and in-laws.
 All members of a nuclear family have a role in the buying process
and the roles will depend on the product purchased. These roles
may be grouped as;
 Wife dominated decisions.
 Husband dominated decisions.
 Joint decisions.