At the end of the unit, you are expected to

1. Discuss the basic marketing principles and strategies

2. Discuss and define consumer buying behavior
3. Discuss market segmentation
4. Explain the Marketing Mix
5. Discuss branding, packaging, labelling and trademark

BIG PICTURE IN FOCUS

CF’s Voice: Hello future Marketers ! Welcome to this course

Marketing Presently, I am sure that you already made the career-
decision to become a Marketing Managers and that you are
enrolled in this course with the intention of enriching your
knowledge.

CO: Primarily, before becoming a successful Marketing Manager,

you have to deal with basic principles of marketing. Any
competent Marketing Manager needs the competency in
understanding the basic marketing concepts and developing a
marketing plan which starts in the skilful practice of strategic
marketing practices aligned to the firm’s competitive advantage.
Therefore, in this course you are expected to demonstrate
knowledge in strategic marketing which includes a competent
discussion of a written analysis of case.

Let’s get started

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 METALANGUAGE

In this section, the most vital terms relevant to the study of Principles of Marketing will be
operationally and conceptually defined to establish a common frame of reference as to
how the text work in your chosen business career. As you progress in this topic, there are
terms you will encounter. Please refer to these definitions in case you encounter difficulty
in understanding marketing concepts.

There are five (5) core concepts of marketing: the human needs, wants and demand;
products and services offered; value, satisfaction and quality; exchange, transactions,
and relationships; and market

ESSENTIAL KNOWLEDGE

Marketing is often performed by a department within the organization. This is both

good and bad. It’s good because it unites a group of trained people who focus on the
marketing task. It’s bad because marketing activities should not be carried out in a single
department but they should be manifest in all the activities of the organization Kotler
(2011).

Marketing Principles and Strategies

Marketing, more than any business function deals with customers. Creating
customer value and satisfaction are the very heart of modern marketing thinking and
practice. The two fold goal of marketing is to attract new customers by promising superior
value and to keep and grow current customers by delivering satisfaction (Kotler et al,
2011)

Definition of Marketing
Marketing is the science and art of exploring, creating, and delivering value to
satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and
desires. It defines measures and quantifies the size of the identified market and the profit
potential. It pinpoints which segments the company is capable of serving best and it
designs and promotes the appropriate products and services. (Kotler, 2011)

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 Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large (America Marketing Association, 2007)

Core Concepts of Marketing

Figure 1 – The Core Marketing Concepts

Source: Kotler et al, (2005): Principles of Marketing: An Asian Perspective

Needs, Wants, and Demands

Human needs- it is the most basic concept underlying the study of marketing. It is
the state of felt deprivation. These needs include physical (food, clothing, shelter and
safety), social (needs for belonging and affection); and individual needs (for knowledge
and self expression). These needs are basic part of human makeup and were never
created by marketers.
Wants- are the form taken by a human need as shaped by their culture and
individual personality. Wants are shaped by one’s society and are described in terms of
the objects that will satisfy needs. This can be exemplified by: all people need foods but
Filipinos would prefer rice, Chinese prefers noodles, Japanese would like to have sushi.
Demands- when backed by buying power, wants become demands. Given their
wants and resources, people demand products that will benefit and provide them the most
value and satisfaction. But what if there is only a strong want in buying a product, but your
buying power is weak? In other words you still don’t have enough money to buy the

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product. That product you would badly want to buy is still considered a desire since you
still do not have the power to buy because of lack of money to purchase the product.
Companies and marketers therefore, have to understand their customer needs,
wants, and demands and this can be done by conducting a marketing research

Marketing Offers (product/services)

These are the combined products offered by a certain company to their market to
satisfy their need or want. Products are classified into two the goods (tangible products)
and the services (intangible products)

• Goods- these are products which are considered to be tangible, meaning a

customer can hold them, and own them examples of goods are cellphones,
chairs, food, necklace, etc.
• Services- these are products which are considered to be intangible,
meaning you can’t hold, nor own it, but just experience the product.
Example of this are massage spa services; salon services; bank services;
education services, etc
Marketing Offers and Value Proposition

Marketing offers and value proposition are inseparable. Without a marketing offer
there would be no value proposition. We have defined the former marketing offer as the
products being offered by a company to a certain market for them to satisfy their needs
and wants, the latter (value proposition) is the benefits you will be receiving if you will be
consuming a certain product.
Example:
(1) Massage Spa Services
Marketing Offer: Swedish Massage
Value Proposition: During and after experiencing the Swedish Massage,
you would feel good and relaxed

(2) Cellular Phone

Marketing Offer: Smart Phone
Value Proposition: Unlike the old school phones in which you can only use
it for calling and texting; you can use a smart phone in downloading applications;
surfing the internet; checking your e-mail; downloading e-books; even watching
your favorite TV shows.

Value and Satisfaction

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 Customer Value – it is the difference between the values (importance) customer
gains from owning and using a product from the cost of obtaining the product. You would
either be satisfied, dissatisfied or delighted (Kotler & Amstrong, 2010)
Customer Satisfaction – this is a key influence on future buying behavior; thus
satisfied customers buy again and tell others about their good experiences. For people to
be satisfied with a product the establishment should make sure that they meet (satisfied)
or exceed (delighted) their customer’s expectations

Exchange, Transaction and Relationships in Marketing

According to Kotler & Armstrong (2010), marketing involves the following
processes: exchange, transactions, and relationship.
Exchange is the act of obtaining a desired object from someone by offering
something in return. Example, barter (exchange of good with another good); offer money
in return for a good/service.
Transaction on the other hand is a trade of values between two parties that
involves at least two things of value, agreed-upon conditions, a time of agreement, and a
place of agreement. It is the marketing unit of measurement. In a transaction you must
be able to say that one party gives X to another party and gets Y in return
Relationship marketing is the process of creating, maintaining, and enhancing
strong, value-laden relationship with customers and other stakeholders. The operating
assumption is: Build good relationships and profitable transactions will follow.
Market
Market is defined as the set of all actual and potential buyers of a product or
service. Market consists of buyers, and buyers differ in one or more ways. They may differ
in their wants, resources, locations, buying attitudes, and buying practices (Kotler et al.,
2007).
Market also refers to a group of consumers or organizations that is interested in a
particular product, has the resources to purchase the product and is permitted by law and
other regulations to acquire the product (NetMBA.com, 2010). These buyers share a
particular need or want that can be satisfied thorough exchange relationships.

The Goals of Marketing

In general, the goal of marketing is to satisfy target customer’s needs, wants, and
expectations more superiorly than competitors (Go, 1998). The two fold goal of marketing
as cited by Kotler et al in 2011 which is to attract new customers by promise of superior
value and to keep and grow current customer by delivering satisfaction can be achieved

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by increasing their market share, developing awareness on their product service offered,
creating a brand or improving distribution.
Increasing market share. One of the most common goals in marketing is to
increase market share. This means that you will have to take away customers from your
competitors by offering better product or services than your competitor. You must have
good product or service differentiation and these differentiation must be hard to imitate
thereby giving your product or service a competitive advantage over their rival. This can
be done by analyzing your competitor’s prices, distribution channels, promotional
strategies and their target markets.
Developing brand awareness. For new businesses, one of marketing goals is to
increase awareness of your product or service which can be done by aggressive
advertising, public relations and promotions. Awareness campaigns usually last for year
or less and expenses steadily decrease once product or service has been introduced to
your target customers.
Creating a brand. To improve sales with a specific target market, it is imperative
that you convince them that your business offers something specific with added value
rather than a generic benefit. This can be done by creating a brand or establishing an
image that makes your product or services desirable to a group of people sharing
similarities in age, taste, and other demographic characteristics. You must identify the
benefits that your target market wants, then position your product or service with good
promotions and advertisement.
Improving distribution. One of the key goals of marketing is to create a right
distribution mix that will not focus solely on sales. There is a need to examine the sales
volume, profit margins and brand impact that different distribution channels may offer your
business. One of the important aspects of the production of goods and services is the
proper distribution of the same in such a manner that it will reach the target consumers in
the most cost-effective and expeditious manner. The exact distribution mix that a
company will select depend the analysis of the environment in which it is operating, the
analysis of the target consumers, and the type of resources at its disposal. Manufacturers
and producers depend on the availability of products to those who wish to purchase them
in order for the products to move off the shelves and for the company to make profits,
which shows the importance of selecting the right distribution mix. For example, an
orange juice producer must select the most effective distribution mix to ensure that its
products get to the right places from where customers can purchase them, a factor that
is made more urgent by the short shelf life of such products (Wisegeek, 2015).

The Contemporary Approaches to Marketing

Recent approaches in marketing include relationship marketing,
business/industrial marketing, societal marketing and internet marketing

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 1. Relationship Marketing. Relationship marketing (RM) is a marketing philosophy of
building relationships between brands and customers that will last a significant
amount of time. To achieve this, companies should interact with customers on a
regular basis and continue to give them reasons to remain faithful customers of
the company (Solomon, 2006). Emphasis is placed on the whole relationship
between suppliers and customers. The aim is to provide the best possible
customer service and build customer loyalty (Adcock et al, 2001)

2. Business Marketing/Industrial Marketing. In this context, marketing takes place

between businesses or organizations and their product focuses on industrial goods
or capital goods rather than consumer goods. Most large companies sell their
products to other organizations. Manufacturing sell much of their products to other
businesses. Large consumer products, which make products used by final
consumers, must first sell their products to other businesses- wholesalers and
retailers that serve the consumer market

3. Societal Marketing. It holds that organization should determine the needs, wants,
and interests of their target markets and delivered the desired satisfactions more
effectively and efficiently than do competitors in a way that maintains or improves
the consumers’ and society’s well-being (Kotler & Armstrong, 2010)

4. Internet Marketing. In the advent of technology, new forms of marketing have

emerged and made use of internet and are sometimes called as online marketing,
-e-marketing, digital marketing or desktop advertising

Customer Behavior and Characteristics

To better understand why consumers buy as they do, many marketers turn to the
behavioral sciences for help. Specific consumer behaviors vary a great deal for different
products and from one target to the next. In today’s global markets, the variations are
countless. That makes it impractical to try to catalog all the detailed possibilities for every
different market situation (Perreault &McCarthy, 2005)

Consumer Buying Behavior and Consumer Market

Consumer buyer behavior is the buying behavior of final consumers- individuals
and households- who buys goods and services for personal consumption.
Consumer market is composed of all individuals and households who buy or
acquire goods and services for personal consumption

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Marketing and other stimuli Buyer’s black box Buyer responses

Marketing Other Buyer Buyer Product choice

character- decision Brand choice
Product Economic istics process Dealer choice
Price Technological Purchase timing
Place Political Purchase amount
Promotion Cultural

Figure 1- Model of Consumer Buying Behavior

Source: Kotler et al., (2005), Principles of Marketing: An Asian Perspective

Consumers make buying decisions everyday. Marketers must have knowledge on

what consumers buy, where they buy, how and how much they buy, when they buy, and
why they buy. Figure above reflects the model of consumer buying behavior. The model
shows that marketing and other stimuli enter the consumer’s black box and produce
certain responses. Marketers must figure out what is in the buyer’s black box. The
marketing stimuli consist of the 4Ps – product, price, place and promotions. The other
stimuli consist of other forces and events in the buyer’s environment- economic,
technological, political and cultural. All these inputs enter the buyer’s black box, where
they are turned into a set of observable buyer responses: product choice, brand choice,
dealer choice, purchase timing, and purchase amount (Kotler et al, 2005).
The marketer wants to understand how the stimuli are changed into responses
inside the consumer’s black box which is composed of two parts: the buyer’s
characteristics which influences on how the buyer perceives and reacts to stimuli, and the
buyer’s decision process which affects the buyer’s behavior.

Factors Affecting Consumer Buying Behavior

Consumer purchases are highly influenced by external and internal factors.
External factors include cultural, social, and situational factors

1. Cultural factors – it exerts a broad and deep influence on consumer behavior.

Culture is the set of basic values, perception, wants, and behaviors learned by a
member of a society from family and other important institutions. It represents the
behavior, beliefs and, in many cases, the way we act learned by interacting or
observing other members of society Subculture is a group of people with shared
value systems based on common life experiences and situations. It includes
nationalities, religions, racial groups, and geographic regions. Sub-cultures also
have shared values but this occurs within a smaller groups Social class – are
society’s relatively permanent and ordered divisions in a society whose members
share common values, interests, and behaviors. These classes are the lower
class, middle class, and upper classes.

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 2. Social factors- in addition to cultural influences, consumers purchasing decisions
may also be influenced other social factors with which they share certain
characteristics. These social factors may include:

• Social Class – represents the social standing one has within a society based
on such factors as income level, education, occupation
• Family – one’s family situation can have a strong effect on how purchase
decisions are made
• Reference groups – most consumers simultaneously belong to many other
groups with which they associate or, in some cases, feel the need to
disassociate
• Roles and status- a role consists of the activities that people are expected to
perform according to the persons around them. Each role on the other hand
carries a status reflecting the general esteem given to it by the society. People
often choose products that show their status in the society..

Internal factors consist of personal and psychological factors.

1. Personal factors- the buyer’s decision is also influenced by personal

characteristics such as the buyer’s age and life cycle, occupation, economic
situation, lifestyle, and personality, and self-concept (Kotler et al, 2005).

• Age and life cycle stage of people change the goods and services they buy
over their lifetimes. Taste in foods, clothes, furniture, and recreation are
often age related. Buying is also shaped by the stage of family life cycle-
the stages through which families might pass as they mature over time.
• Occupation affects the goods and services bought. Marketers try to identify
the occupational groups that have an above average interest in their
products and services.
• Urbanization makes people find more opportunity to work and more
comfortable life thus, can buy more goods and services.
• Lifestyle is a person’s pattern of living as expressed in his or her activities,
interests, and opinions. Depending on the person’s lifestyle is his or her
demand for products and services. In simple terms it is what we value out
of life. Lifestyle is often determined by how we spend our time and money .
• Personality and self- concept – each person’s distinct personality
characterizes his or her buying behavior. Personality is the person’s unique
psychological characteristics that lead to relatively consistent and lasting
responses in one’s own environment. It is usually described in terms of traits
such as self-confidence, dominance, sociability, autonomy, defensiveness,
adaptability and aggressiveness

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2. Psychological factors- a person’s buying behavior may also be influenced by four
major psychological factors: motivation, perception, learning, and beliefs and
attitudes.

• Motivation – a need becomes a motive when it is aroused arising from the

need for recognition, esteem, or belonging. A motive or drive is a need that
is sufficiently pressing to direct the person to seek satisfaction.

• Perception – a person’s act is influenced by his or her own perception of

the situation. Perception is the process by which people select, organize,
and interpret information to form a meaningful picture of the world.
Perception has several steps.
• Exposure – sensing a stimuli (e.g. seeing an ad)
• Attention – an effort to recognize the nature of a stimuli (e.g.
recognizing it is an ad)
• Awareness – assigning meaning to a stimuli (e.g., humorous ad for
particular product)
• Retention – adding the meaning to one’s internal makeup (i.e., product
has fun ads)

• Learning – By learning we mean how someone changes what they know,

which in turn may affect how they act. It describes changes in an
individual’s behavior arising from experience. Learning occurs through the
interplay of drives, stimuli, cues, responses, and reinforcement. People are
likely to learn in different ways. For instance, one person may be able to
focus very strongly on a certain advertisement and be able to retain the
information after being exposed only one time while another person may
need to be exposed to the same advertisement many times before he/she
even recognizes what it is. Consumers are also more likely to retain
information if a person has a strong interest in the stimuli. If a person is in
need of new car they are more likely to pay attention to a new
advertisement for a car while someone who does not need a car may need
to see the advertisement many times before they recognize the brand of
automobile.

• Attitudes and beliefs - In simple terms attitude refers to what a person feels
or believes about something. Additionally, attitude may be reflected in how
an individual acts based on his or her beliefs. Once formed, attitudes can
be very difficult to change. Thus, if a consumer has a negative attitude
toward a particular issue it will take considerable effort to change what they
believe to be true.

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THE BUYER DECISION PROCESS

Need Information Evaluation of Purchase Post purchased

Recognition search alternatives decision decision

Figure 3 - Buyer Decision Process

Source: Kotler et al., (2005), Principles of Marketing: An Asian Perspective

Need recognition- this is the first stage of the buyer decision process, in which the
consumer recognized a problem or need. The need can be triggered by an internal stimuli,
when one of the person’s normal needs- hunger, thirst, sex- rises to a level high enough
to become a drive. A need can also be triggered by an external stimuli, an outsider who
can influence the buyer.
Information search – is the stage of the buyer decision process in which the
consumer is aroused to search for more information: the consumer may simply have
heightened attention or may go into active information search. Buyer can obtain
information search from may sources which include personal source (family, friends,
neighbors and acquaintances), commercial source (advertising, sales people, dealers,
packaging, displays), public sources (mass media, consumer-rating organizations)
experiental sources (handling, examining, using the product)The relative influence of
these information sources varies with the product and the buyer.
Evaluation of alternatives- the stage of the buyer decision process in which the
consumer uses information to evaluate alternative brands in the choice set. The
consumer arrives at attitudes toward the different brands through some evaluative
procedure.
Purchase decision- this is the stage where the consumer will decide as what brand
of product he/she prefers to buy.
Post purchase decision- after purchasing the product, the consumer will be
satisfied or dissatisfied and will engage in post purchase behavior. What determines
whether the buyer is satisfied or dissatisfied with a purchase? The answer lies in the
relationship between the consumer’s expectations and the products perceived
performance. If the product falls short of expectations, the consumer is disappointed, if it
meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer
is delighted.
Definition of Market Segmentation

Market segmentation is dividing the market into smaller groups with distinct needs,
characteristics, or behaviors who might require separate products or marketing mixes.

11
The company identifies different ways to segment the market and develop profiles of the
resulting market segments (Kotler et al, 2007).
Market segment is a group of consumers who respond in a similar way to a given
set of marketing efforts.
According to Grewal and Levy (2012), there are six (6) methods of segmenting
market, namely: 1) geographic segmentation, 2) demographic segmentation, 3)
psychographic segmentation, 4) geo-demographic segmentation, 5) benefits
segmentation, and 6) behavioral segmentation. Their discussions of the above methods
of segmentation are as follows:
1. Geographic segmentation organizes customers into groups on the basis of where
they live. Thus, market can be grouped by country, region, or areas within a region.
It is most useful for companies whose products satisfy needs that vary by region.
Also, a company may decide to operate in one or few geographical areas, or to
operate in all areas but pay attention to geographical differences in needs and
wants. Many companies today are localizing their products, advertising, promotion,
and sales effort to fit the needs of individual regions, cities and even
neighborhoods.
2. Demographic segmentation groups consumers according to easily measured ,
objective characteristics such as age, gender, family size, occupation, religion,
race generation, income, education and nationality. These variables represent the
most common means to define segments because they are easy to identify and
because demographically segmented markets are easy to reach. Also,
demographic variables are easier to measure than most other types of variables.
3. Psychographic segmentation divides buyers into different groups based on
lifestyle characteristics. Psychographics studies how people select, as it where,
based on the characteristics of how they choose to occupy their time (behavior)
and what underlying psychological reasons determine those choices (Mittal, 2008).
Determining psychographics involves knowing and understanding three
components: self values, self concept, and lifestyles. Self values are goals for life
and not just the goals one wants to accomplish in a day. They are overriding
desires that drive how a person lives his or her life (e.g. need for self respect, self
fulfillment. Self concept or “people’s self image” is the image people ideally have
for themselves (Chi Kin Yim et. Al., (2007). Lifestyles are the way people live>
Lifestyles are how we live our lives to achieve goals. As a result, marketers often
segment their markets by consumer life styles
4. Geo-demographic segmentation uses a combination of geographic, demographic,
and lifestyle characteristics to classify consumers. Consumers in the same
neighborhood tend to buy the same type of cars, appliances, apparels, and shop
at the same types of retailers. This type of segmentation can be particularly useful
for retailers because customers typically patronize stores close to their
neighborhood. Thus, retailers can use geo-demographic segmentation to tailor
each store’s assortment to the preferences of the local community.

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 5. Benefit segmentation group consumers on the basis of the benefits they derive
from products or services. Dividing the market into segments whose needs and
wants are best satisfied by the product benefits can be a powerful marketing tool.
It is effective and also relatively easy to portray a product or service’s benefits in
the firm’s communications strategy. Example is the toothpaste “Colgate” of Proctor
and Gamble whose benefit is it prevents tooth decay. “Pepsodent” of Unilever
offers fluoride to keep teeth clean and healthy
6. Behavioral segmentation divides customers into groups based on consumer’s
knowledge, attitude, use or response to a product or service. Some common
behavioral measures include occasion and loyalty. Occasion segmentation is
dividing the market into groups according to occasions when buyers get the idea
to buy, actually make their purchase, or used the purchased item. It can help firms
build up product usage. Example is during Christmas season, wherein marketers
prepare special offers and ads for the holiday seasons. Loyalty segmentation is
retaining loyal customers. Companies invest in retention and loyalty activities to
retain their most profitable customers. Example is issuance of SM Advantage card,
the rewards card of NCCC, and the Mabuhay Miles rewards of Philippine Airlines.
Issuance of such cards increases usage or patronage of the stores, products, and
services.

The Marketing Mix

The marketing mix is one of the most famous marketing terms. The marketing mix
is the tactical or operational part of a marketing plan.(Marketing Teacher, 2010) To be
truly successful all areas of the marketing mix need to be pre planned and then executed
in a timely and disciplined fashion (Grant, 1999)

Definition of Marketing Mix

Marketing mix is the set of controllable tactical marketing tools – product, price,
place, and promotion – that the firm blends to produce the response it wants in the target
market. The marketing mix consists of everything the firm can do to influence the demand
for its product or service (Kotler and Armstrong, 2010).
Elements of Marketing Mix
The marketing mix is also called the 4Ps and the 7Ps. The 4Ps are
price, place, product and promotion. The services marketing mix is also called the 7Ps
and includes the addition of process, people and physical evidence (Marketing Teacher,
2010)
• Product means the goods-and-services combination the company offers to the
target market (Kotler and Armstrong, 2010). Product is the total package a
company offers to its customers. It is the physical features of the product, or
the intangible aspects of the service, it covers things a company do to make
the product more attractive to buy (Panagar, 2010).

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• Price is the amount the consumer must exchange to receive the offering
(Solomon et al, 2009). The money which a buyer pays for a product is called
as price of the product. The price of a product is indirectly proportional to its
availability in the market. Lesser its availability, more would be its price and
vice a versa (Management Study Guide.com, 2011). The company’s goal in
terms of price is really to reduce costs through improving manufacturing and
efficiency, and most importantly the marketer needs to increase the perceived
value of the benefits of its products and services to the buyer or consumer
(Marketing Teacher, 2010).

Figure- The 7 Ps of Marketing

Source: Panagar (2010),

• Place includes company activities that make the product available to target
consumers (Kotler and Armstrong, 2010). Place is also known as channel,
distribution, or intermediary. It is the mechanism through which goods and/or
services are moved from the manufacturer/ service provider to the user or
consumer (Marketing Teacher, 2010)

• Promotion includes all of the activities marketers undertake to inform

consumers about their products and to encourage potential customers to
buy these products (Solomon et al. 2009). Promotion includes all of the tools

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 available to the marketer for marketing communication. Promotion includes
all the ways you tell your customers about your products or services and
how you then market and sell to them. Large and small companies in every
industry continually experiment with different ways of advertising,
promoting, and selling their products and services. The elements of
promotion mix are: personal selling, sales promotion, public relations, direct
mail, trade fairs and exhibitions, advertising, sponsorship (Panagar, 2010)

• Process is the actual procedures, mechanisms, and flow of activities by which

the service is delivered – this service delivery and operating systems (Zeithaml
et al., 2008). It is the method and process of providing a service and is hence
essential to have a thorough knowledge on whether the services are helpful to
the customers. It refers to systems used to assist the organization in delivering
the service. Marketing has a number of processes that integrate together to
create an overall marketing process. For the purposes of the marketing mix,
process is an element of service that sees the customer experiencing an
organization’s offering. It’s best viewed as something that your customer
participates in at different points in time (Panagar, 2010).

• People compose all human actors who play a part in service delivery and thus
influence the buyers' perceptions; namely, the firm's personnel, the customer,
and other customers in the service environment (Zeithaml et al., 2008). People
are the most important element of any service or experience. An essential
ingredient to any service provision is the use of appropriate staff and people.
People buy from people that they like, so the attitude, skills and appearance of
all staff need to be first class. Consumers make judgments and deliver
perceptions of the service based on the employees they interact with. Staff
should have the appropriate interpersonal skills, aptitude, and service
knowledge to provide the service that consumers are paying for (Panagar,
2010)

• Physical evidence is the environment in which the service is delivered, and

where the firm and customer interact, and any tangible components that
facilitate performance or communication of the service (Zeithaml et al., 2008).
Physical evidence is the material part of a service. It is the element of the
service mix which allows the consumer again to make judgments on the
organization. Physical evidence refers to the environment in which the service
is assembled and in which the seller and customer interact, combined with
tangible commodities that facilitate performance or communication of the
service. Because of the simultaneous production and consumption of most
services, the physical facility can play an important role in the service
experience. As services are intangible, customers are searching for any
tangible cues to help them understand the nature of the service experience.
The more intangible-dominant the service, the greater the need to make the
service tangible. The physical environment is part of the product itself. Physical
evidence is an essential ingredient of the service mix, consumers will make
perceptions based on their sight of the service provision which will have an

15
 impact on the organizations perceptual plan of the service. Example, Internet
Web pages, brochures, business cards (Panagar, 2010)

Four C’s of Marketing Mix

R.F. Lauterborn (1993) proposed a 4 Cs classification to address the growing
focus of marketing strategist on the consumer. The traditional marketing mix is a 4 P’s
model and is business oriented. The 4 C’s model of marketing on the other hand is more
consumer oriented. Because of its focus on consumers, the 4 C’s model is mainly used
for niche marketing. However, just like the traditional marketing mix, it can also be used
for mass markets (Bhasin, 2011)
.
The 4 Cs consists of consumer, cost, convenience and communication. The roots
of the 4 Cs of marketing can be traced back to the classical 4 Ps marketing mix. However,
with the onset of database marketing, the focus has shifted in marketing from a consumer
transactional view-point to a consumer relationship viewpoint (and very
recently consumer engagement)

4 Ps Marketing Mix Conversion Focus 4 Cs Marketing Mix

Product Consumer
Price Cost
Place Convenience
Promotion Communication

Figure - The Four C’s of Marketing Mix

Bhasin (2011) discussed the 4C’s of marketing mix as follows:

Consumer – The principle of four C’s of marketing states that your customer
should be your prime focus. If the traditional marketing mix focuses on products, the 4C’s
model is focused on the customer. Thus companies following this model make products
that will satisfy their customers. These companies offer customize products for their set
of target customers which are generally small in segment. Thus, this principle is only
applicable to small market segments and not for mass market. For mass markets, the
traditional marketing mix is to be used.

Cost – Cost is equivalent to pricing in the traditional marketing mix. Cost is a very
important factor influencing consumer’s buying decision and therefore must be given
attention. The 4C model specifically focuses on the customer rather than products.
Therefore, companies must project the cost of their product on the basis of their target
customer’s capacity to purchase. If their target market are those belonging to Class A
socio-economic status, then the costing of their product needs to be premium to have
psychological positioning. In contrast, if their targets are those from the lower class

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bracket, then costing must be lower. Costing of products therefore, depends on type of
target customer’s capacity to buy.

Communication – The concept of communication remains same for both, the

traditional marketing mix and the 4 C’s of marketing. However, the marketing
communications for a company following the 4C model is entirely different since the
model is intended only for niche products. The media vehicles used for a mass product
is different from those being used by niche product. A niche marketing company might
use more of Below the Line (BTL) rather than Above the Line (ATL) whereas in a mass
marketing company, ATL communications are very important.

Convenience – Convenience is equivalent of distribution or placement of the

traditional marketing mix. When you have a niche customer base, the convenience of the
customer in acquiring your product plays a critical role. Some customers will not buy
products like bulky and heavy home appliances such as refrigerators if it will not be
delivered to their homes. They are after for their convenience.

All in all, the traditional marketing mix model helps a company define its strategy
more efficiently but the 4 C’s model, although not much different, really helps for a
customer oriented firm.

The Product Life Cycle

After launching the new product, management wants the product to enjoy a long
and happy life. Although, it does not expect the product to sell forever, the company wants
to earn a decent profit to cover all the effort and risk that went into launching it.
Management is aware that each product will have a life cycle, although its exact shape
and length is not known in advance (Kotler et al, 2005)

Philip Kotler (2009) breaks the product life cycle has five distinct stages: 1) product
development, 2) introduction stage, 3) growth stage, 4) maturity stage, and 5) decline
stage

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Figure - Typical Product Life Cycle
Source: New-Product Development and Product Life-Cycle Strategies MOGHIMI

1. Product development. The phase when a company looks for a new product.
During this stage, sales are zero and the company’s investment cost mounts.

2. Introduction. The product's costs rise sharply as the heavy expense of advertising
and marketing any new product begins to take its toll. The company experiences
low sales, high cost per customer acquired, negative profits, innovators are
targeted, and little competition

3. Growth. As the product begins to be accepted by the market, the company starts
to recoup the costs of the first two phases. The company starts to experience
rapidly rising sales, average cost per customer, rising profits, early adopters are
targeted, and growing competition

4. Maturity. By now the product is widely accepted and growth slows down. Before
long, however, a successful product in this phase will come under pressure from
competitors. The producer will have to start spending again in order to defend the
product's market position. The company now experience sales peak, low cost per
customer, high profits, middle majority are targeted, and competition begins to
decline

5. Decline. A company will no longer be able to fend off the competition or a change
in consumer tastes or lifestyle will render the product redundant. At this point the
company has to decide how to bring the product's life to an end—what is the best
end-game that it can play? The company now experiences declining sales, low
cost per customer, declining profits, laggards are targeted, and declining
competition
Product Life Cycle Strategies

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 Moghini (2012) suggested the following strategies for Product Life Cycle

Strategies Introduction Growth Maturity Decline

Product Offer basic product Offer product Diversify brands and Phase out weak items
extensions, service, models
warranty

Price Use cost-plus Price to penetrate Price to match or best Cut price
market competitors

Distribution Build selective Build intensive Build more intensive Go selective, phase
out unprofitable outlets

Advertising Build product Build awareness and Stress brand Reduce to level
awareness among interest in the mass differences and needed to retain hard
early adopters and market benefits core loyals
dealers

Sales Promotion Use heavy sales Reduce to take Increase to encourage Reduce to minimal
promotion to entice advantage of heavy brand switching level
trial consumer demand

Branding, Packaging and Labels

Definition of Brand
Brand is a name, term, design, symbol, or any other feature that identifies one
seller's good or service as distinct from those of other sellers. The legal term for brand is
trademark. A brand may identify one item, a family of items, or all items of that seller
(Lake, 2012). It is a trademark or distinctive name identifying a product or a manufacturer
(Free Dictionary, 2012).

Characteristics of a Brand

What Makes a Brand

Brand Element Description

The spoken component of branding, it can describe the product or

Brand name service/ product characteristics and/or be composed of words
invented or derived from colloquial or contemporary language.
Examples include Kraft Cheese, Lady’s Choice, Coke

URLs (uniform resource locators) or The location of pages on the internet, which often substitutes for
domain names the firm’s name, such as Yahoo, Google, and Amazon

Logos are visual branding elements that stand for corporate

Logos and symbols names or trademarks. Symbols are logos without words.
Examples include Nike swoosh and Mercedes Car star

Characters Brand symbols that could be human, animal, or animated.

Example is Kentucky Fried Chicken, Jollibee and La Coste shirt
alligator

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 Slogans Short phrases used to describe the brand or persuade consumers
about some characteristics of brand. Examples include BDO’s
“We Find Ways” and ABS CBN “ 168 Bantay Bata”

Jingles/Sounds Audio messages about the brand that are composed of words or
distinctive music. Examples are3 Intel four note sound signature
that accompanies the “Intel Inside” slogan, The “Nokia tune” of
Nokia cell phones

Source: Adapted from Kevin Lane Keller, Strategic Brand Management, 3rd ed. (Upper Saddle River, NJ: Prentice Hall,
2007)

PACKAGING

An important part of the product decision making process is the design of the
packaging for your product. An effective packaging strategy can contribute to the firm’s
competitive advantage.

Packaging is an activity which involves the designing and producing the container
or wrapper for a product. Its main function is to contain and protect the product. The
package includes a product’s primary container (the bottle containing the product). It may
also include a secondary package that is thrown away when the product is to be used
(the card board box containing the bottled product). And lastly, it can include a shipping
package necessary to store, identify, and shipped the product (a corrugated box carrying
about 72 bottles of the product. Labeling, the printed information appearing on or with the
package is also a part of packaging (Kotler et al, 2005).

LABELING

Labels are simple tags to complex graphics attached to products that are part of
the package. They perform several functions such as 1) it identifies the product or brand;
2) it also describe several things about the product- who made it, where and when it was
made, its contents, how it is to be used, and how to use it safely; and 3) it might promote
the products through attractive graphics (Kotler et al, 2005).
TRADEMARK

A trademark is a brand name. A trademark or service mark includes any word,

name, symbol, device, or any combination, used or intended to be used to identify and
distinguish the goods/services of one seller or provider from those of others, and to
indicate the source of the goods/services. it has several advantages, including notice to
the public of the registrant's claim of ownership of the mark, legal presumption of
ownership nationwide, and exclusive right to use the mark on or in connection with the
goods/services listed in the registration (USPTO, 2013). An example id “IBM” which is the
trademark of International Business Machine Corporation

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Chapter Activities

Marketing Activities

1. Identify and describe the four social factors that influence the consumer decision
process. Give an example of how each might influence the purchase of the
necessary products and services for a family vacation in Boracay.
2. Companies that provide cellular telephone services in the Philippines are now
marketing telephones with the latest features which include digital camera and
audio recorder. The owner can take pictures, record a short message and send
them on to one or more recipients. However, to use the new features, the customer
must subscribe to an expensive wireless plan. Many customers like the new
features but not the expensive plan.
If you are the marketing personnel of one of these cell phone service providers,
identify a new target for these cell phones and service. Describe also the consumer
decision making process customers would follow and the buying motives to which
you would appeal.
3. Think about a very good or very bad experience you have had with a product.
Discuss how the experience shaped your beliefs about the product, the purchasing
process, or shopping in stores. How long do you think these beliefs would last?
What could change these beliefs
Case Study
It is Seriously Casual…The Starbucks Way
Expanding into Asia, Starbucks found that it’s brand name is already well known
and appeals to many Asian consumers, especially the professionals. Over the past five
years, Starbucks has successfully positioned itself in Asia using a combination of
strategies- the central focus is in offering popular and exotic coffee, providing ambience
using American made furniture designed for casual conversation, and employing young
service staff who can multi task, and preferably with foreign looking features. These
strategies are strictly enforced when Starbucks expand across Asia.
But an interesting by-product is that Starbucks core consumers have “created” a
culture of their own. Their culture is complete with objects (such as dress codes), actions
(the language used), and the values (likes and dislikes).
Starbucks is the preferred place for the technocrats to unwind. The dress code is
observed strictly- absolutely casual, no ties, no flares, and subtle make up for the ladies.
Only the latest model of lap tops that are slim and high performance can do. Inside the
restaurant, the spoken language is intentionally not local- American English, accent
included, is preferred. Cell phones are “must haves” for everyone because public phones
are intolerably outdated. One also needs to “hold’ the cell phone appropriately. Stringing
it across the neck means you are old (above 30) because the in-thing is to have a wireless
ear pieces inconspicuously attached. Ringing is allowed only for soft tones: otherwise you

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will be stared at. When you wait to order your coffee, you have to stand casually away
from the counter, waiting to be asked: pressing your body on the counter is not acceptable
here. Inside Starbucks, you are “peer evaluated” with your high tech gadgets and your
behavior put under close scrutiny.
To Asia’s young professionals, it is cool to hold a Starbucks coffee cup in the hand
(versus a cup with the golden arch); it is cool to be seen inside a Starbucks coffee house;
it is respectful to date there (we have grown out of the KFC or McDonald’s age)- after all,
it is Starbucks, it is seriously casual
Questions:
1. How has Starbucks positioned its image to fit new generation of young
professionals in Asia?
2. How can Starbucks turn the customer-created culture into a long term advantage?
What are the pros and cons to follow the culture created by the customers?
3. Assume that Starbucks has hired you to recommend the next generation of it’s
restaurant’s interior design. Whom would you survey your design? What would you
ask? How would you measure the impact of lifestyles and culture on the
restaurant’s interior design
Source: Adapted from Kotler et al, (2005), Principle of marketing: An Asian Perspective. Strictly intended
for class discussion only

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